Page 23 - Auditors Article

Perhaps a simple two-step process (See Diagram 4) for the

auditor to follow would have allowed some measure of
analysis to take place given the reported thousands of

misstatements found by KMPG. Chairperson Reeves of the

BEIS noted that according to the Financial Reporting Council’s

ISA (international standard on auditing) rules, auditors must
pick up material misstatements where they are due to fraud or

error.

In an industry beset by scandals over the past 18 months MPs
of the BEIS had a rich hunting ground when they also

questioned audit quality, lack of competition and auditor

scrutiny of corporate dividends. But this could pale into

insignificance in terms of the damage Dunckley’s “car-crash”
testimony had done to the auditing profession.

Management has the responsibility for financial statements

not auditors. But auditors do not have the responsibility to

detect all fraud so perhaps a more rigorous following by
auditors of the detection process such as the Two Step model

should be followed and acted upon.

Audit fees comprise approximately twenty-five percent of the
Big Four revenue stream whilst seventy-five percent comes

from consultancy (See Table 2 ref: 27). A not inconsequential

portion of their own business model. [Stittle, J., 2018]