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What characteristics define the behavior of a 'watchdog' auditor?
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A 'watchdog' auditor carefully observes and checks accounts and transactions, reports findings neutrally and honestly, and does not engage in deep investigations or conflicts.
According to the case study, what kind of behavior is expected from an auditor?
An auditor is expected to behave neutrally and honestly, avoiding involvement in conflicts or company politics.
In the context of SA 240, what is the minimum responsibility of an auditor?
The minimum responsibility of an auditor under SA 240 is to inform the client about any frauds detected during the audit of financial statements.
What are the main responsibilities of an auditor regarding the detection of errors and frauds?
An auditor’s main responsibilities regarding the detection of errors and frauds include identifying and noting these issues and alerting the business owners about them.
What is meant by the statement 'An auditor is a watchdog, not a bloodhound'?
It means an auditor's role is to observe and check the transactions and accounts honestly, alerting the owner about any frauds or mistakes, rather than actively seeking out and investigating issues like a detective.
What should be discussed in the second paragraph when explaining why an auditor is not a bloodhound?
In the second paragraph, explain that an auditor is not required to behave like a detective by engaging in deep investigative activities or involving in disputes.
Why is it important for auditors to avoid situations of personal conflict or revenge while performing their duties?
Avoiding personal conflict or revenge ensures that auditors can remain objective and professional in their work, preserving the integrity and accuracy of their audit reports.
Who appoints an auditor and what are their initial responsibilities?
An auditor is appointed by the company owner or client. Their initial responsibilities include observing transactions honestly and making notes for an audit report.
What is expected in the first paragraph when explaining the auditor's role in an exam?
In the first paragraph, explain that an auditor acts as a watchdog, observing and checking transactions, and reporting frauds and mistakes neutrally and honestly.
What kind of preventative measures should auditors suggest to management?
Auditors should suggest measures that help in preventing errors and frauds, ensuring that controls are in place to avoid such occurrences in future transactions.
Why should an auditor maintain neutrality and honesty in their work?
Maintaining neutrality and honesty ensures that the auditor’s findings are trustworthy and unbiased, and it helps avoid conflicts or political involvements within the company.
What are the key duties of an auditor?
Key duties include finding and preventing frauds and mistakes, checking transactions, accounts, final accounts, ledgers, and trial balances, making notes, and reporting findings to the owner.
Can an auditor’s role be equated to challenging heroism or detective work?
No, an auditor’s role does not involve challenging heroism or detective work. Their primary responsibility is to review and report on financial statements neutrally and avoid in-depth chasing or conflict involvement.
What does Standard of Auditing 240 (SA 240) relate to concerning the responsibilities of an auditor?
SA 240 relates to the responsibilities of the auditor regarding fraud in the audit of financial statements. Auditors must inform the client about any fraud identified, specifying the department or person responsible, and avoid personal conflicts or acts of revenge.
What case established the principle that 'An auditor is a watchdog, not a bloodhound'?
The principle was established in the case of Kingston Cotton Mills Company in 1986 by Lopes LJ.
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