General Auditing Principles and Responsibilities of Auditors

Objective:
To identify and assess the risks of material misstatement in the financial statements due to fraud and to respond appropriately.

Key Points:

• Distinguishes fraud from error (intentional vs. unintentional).
• Auditor’s responsibility is not to prevent fraud but to obtain reasonable assurance that the FS are free from material misstatement due to fraud.
• Two types of fraud relevant:
• Fraudulent financial reporting.
• Misappropriation of assets.
• Requires professional skepticism and discussion among the audit team.
• Specific procedures include inquiries of management, analytical procedures, evaluation of unusual transactions, and responses to identified fraud risk.