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Saturday, 4 April 2009
Auditors going the extra mile, says Deloitte chief
Recent cases of corporate fraud have triggered the age-old question about the role of auditors and whether the scope of their work includes the onerous responsibility of detecting and deterring fraud.
Auditors going the extra mile, says Deloitte chief
By LYNETTE KHOO 3 April 2009
Recent cases of corporate fraud have triggered the age-old question about the role of auditors and whether the scope of their work includes the onerous responsibility of detecting and deterring fraud.
President of CPA Australia Singapore division Chaly Mah, who is also regional managing partner and chief executive of Deloitte Asia Pacific, noted that audit procedures are robust and auditors are already going beyond normal audit procedures in some cases.
For instance, to verify a company’s cash balances, auditors are now making random checks by going down to banks in countries such as China and asking the teller to confirm the balance on the spot. In the past, auditors would have accepted at face value confirmations sent by banks via mail or electronic format.
‘Accounting standards these days require auditors to also consider if there is a risk of fraud during the course of audit,’ he said. ‘Where we suspect something is amiss, it requires us to extend our procedures by looking at more samples or taking more steps to come to some conclusion.’
If there is a significant risk of fraud, auditors will extend their normal audit procedures into an investigative type of audit. Auditors are also turning to other evidence to ascertain if there is anything amiss in a company’s financial statements.
This includes comparing the company’s performance against its peers in the same industry. If the industry is not doing well but that one company is doing exceptionally well, auditors will be more sceptical of the numbers and increase the scope of their audit.
But public misconception remains and after a fraud is uncovered fingers are pointed at all parties, including auditors, noted Mr. Mah.
‘When you are faced with a situation where bank statements can be forged and bank officers can be bought to authenticate them, the audit procedure becomes very challenging,’ he said.
When fraud is committed by the most senior management coupled with collusion by other employees, it becomes very difficult for auditors to detect.
Given the limitations of the normal audit procedure, one needs to be mindful that an auditor’s primary role is to examine a company’s financial statements and give an opinion on whether it is true and fair, he said.
Mr. Mah does not think that setting up a central fund to pay auditors would be practical.
‘The audit profession is one with very high standards,’ he said. ‘I would expect auditors to differentiate between what is right and what is wrong - even though the clients are paying the fees - and be prepared to qualify their opinion if they don’t agree with their clients, which is happening more frequently now.
‘Because auditors do not agree with their clients, they either qualify their opinion or they choose to resign,’ he said.
Auditors can also report to the Minister for Finance if they have reason to believe that a serious offence involving fraud or other dishonesty is being committed against the company by its officers or employees, under Section 207 (9A) of the Companies Act.
Auditors are very careful when doing so and want to be certain there is reason to suspect fraud has been committed. This requires fine judgment, Mr. Mah said.
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Auditors going the extra mile, says Deloitte chief
By LYNETTE KHOO
3 April 2009
Recent cases of corporate fraud have triggered the age-old question about the role of auditors and whether the scope of their work includes the onerous responsibility of detecting and deterring fraud.
President of CPA Australia Singapore division Chaly Mah, who is also regional managing partner and chief executive of Deloitte Asia Pacific, noted that audit procedures are robust and auditors are already going beyond normal audit procedures in some cases.
For instance, to verify a company’s cash balances, auditors are now making random checks by going down to banks in countries such as China and asking the teller to confirm the balance on the spot. In the past, auditors would have accepted at face value confirmations sent by banks via mail or electronic format.
‘Accounting standards these days require auditors to also consider if there is a risk of fraud during the course of audit,’ he said. ‘Where we suspect something is amiss, it requires us to extend our procedures by looking at more samples or taking more steps to come to some conclusion.’
If there is a significant risk of fraud, auditors will extend their normal audit procedures into an investigative type of audit. Auditors are also turning to other evidence to ascertain if there is anything amiss in a company’s financial statements.
This includes comparing the company’s performance against its peers in the same industry. If the industry is not doing well but that one company is doing exceptionally well, auditors will be more sceptical of the numbers and increase the scope of their audit.
But public misconception remains and after a fraud is uncovered fingers are pointed at all parties, including auditors, noted Mr. Mah.
‘When you are faced with a situation where bank statements can be forged and bank officers can be bought to authenticate them, the audit procedure becomes very challenging,’ he said.
When fraud is committed by the most senior management coupled with collusion by other employees, it becomes very difficult for auditors to detect.
Given the limitations of the normal audit procedure, one needs to be mindful that an auditor’s primary role is to examine a company’s financial statements and give an opinion on whether it is true and fair, he said.
Mr. Mah does not think that setting up a central fund to pay auditors would be practical.
‘The audit profession is one with very high standards,’ he said. ‘I would expect auditors to differentiate between what is right and what is wrong - even though the clients are paying the fees - and be prepared to qualify their opinion if they don’t agree with their clients, which is happening more frequently now.
‘Because auditors do not agree with their clients, they either qualify their opinion or they choose to resign,’ he said.
Auditors can also report to the Minister for Finance if they have reason to believe that a serious offence involving fraud or other dishonesty is being committed against the company by its officers or employees, under Section 207 (9A) of the Companies Act.
Auditors are very careful when doing so and want to be certain there is reason to suspect fraud has been committed. This requires fine judgment, Mr. Mah said.
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