Ethical Obligations and Decision-Making in Accounting 2nd Edition by Steven Mintz, Roselyn Morris

Exercise 9

Distinguish between an auditor’s responsibilities to detect errors, illegal acts and fraud. What role does materiality have in determining the proper reporting and disclosure of such events?

Step 1 of 2

Audit:

The audit is the process of checking the financial statements of a company `to ensure that it is 100% authentic and free from any kind of bias or fraud.

Fraud:

Fraud means the willingly wrong representation of something, to hide some material facts from outsiders or mislead them about some facts.

Error:

An error means mistakes. Error in auditing means that representation of wrong facts about the company by mistake. This happens when the accountant used the wrong accounting standard or assumption in the recording process of accounting transactions.