Background
At
one time the audit was conducted primarily to inform management of
irregularities and inefficiencies in the business. Due to which the world’s
conception for the auditor was developed as bloodhound who is responsible to
detect and prevent fraud and irregularities. Later on the concept was gradually
changed as the auditor’s role as a watchdog more than the bloodhound due to
inherent limitations of audit. The audit was intended only for a limited number
of business which gradually was broadened to a wide range of business. The need
for independent audits was generated by public ownership of business
enterprises and by the requirements of the investors, investment specialists,
stockholders and lenders demanded more reliable information. It is now well
recognized that the audited financial statements are even intended for the use
of third parties who have no contractual relationship with the auditor. The auditor's function has expanded from that of a
watchdog for management to an independent evaluator of the adequacy of
disclosures and fairness of results depicted by the financial statements issued
by management to stockholders, creditors and others.
It
is the responsibility of auditor to provide independent opinion on the truthfulness
and fairness of the financial statements during the course of audit, the
auditor may also provide the details (error and irregularities either
intentional or unintentional). In case of any abnormal situation, the remedial
action has to come from the owner of the entity. He has to discharge his
responsibility by informing about the irregularity found in the normal course
of audit.
