Ms. Bolanle Onawumi, a partner at one of the “Big 4” accounting firms, has clarified that auditors are not primarily responsible for detecting and preventing fraud.
Onawumi while speaking as a lead facilitator at the fourth Audit Reporting Workshop of FrontFoot Media Initiative held in Lagos, said governments and private sector organisations engage independent external auditors to inspire confidence in their financial statements.
According to her, the need for companies’ financial statements to be audited by an independent external auditor has been a cornerstone of confidence in the world’s financial systems, adding that an audit helps assure users of the financial statements whether or not the financial statements as presented are free from material misstatements and reflects a ‘true and fair’ view of an entity’s financial performance, financial position, and cash flows.’
While underlining the significance of auditing, she also clarified some misconceptions about an audit. “The purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. This is achieved by the expression of an opinion by the auditor on whether the financial statements are prepared, in all material respects, by an applicable financial reporting framework.”
She identified three core misconceptions of what the audit is not. According to her, auditors are not detectives, anti-fraud experts, or a clearing house.
In her words, “The auditor is not primarily responsible for detecting and preventing fraud; this is the responsibility of the Management of the Company, although the auditor may detect fraud in the process of performing its audit procedures.
Auditors are not expected to be preparers of the financial statements as presumed by many.” She added,
“The audit opinion in the auditor’s report does not amount to a ‘certificate’ that the financial statements for a period are sufficient for all decision-making purposes, including decisions about takeovers.”
She asked users of audit reports to pay attention and understand the importance and differences of the audit opinion.
“The outcome of the statutory audit is an opinion on the truth and fairness of the financial statements. The word ‘opinion’ implies that the auditor has applied his professional judgment to reach his conclusion”.