One of the earliest cases concerning auditors' duties to detect fraud was Re Kingston Cotton Mills Co. (No. 2) (1896), in which Lopes L.J. stated the role of the auditor is that of "a watch-dog not a bloodhound". This dictum is seen to be just as relevant today. Which of the following best describes this dictum?
A) The auditor should act as though the directors of the company are trying to defraud the shareholders.
B) While the auditor should be vigilant to the possibility of fraud, they do not need to actively seek it out.
C) The auditor is responsible for protecting the company against external frauds.
D) The auditor is responsible for taking action against companies that commit fraud.

Question

Quizplus · Accepted Answer

The dictum suggests that auditors should be alert to signs of fraud but are not required to actively search for it, reflecting a more passive role.

One of the Earliest Cases Concerning Auditors' Duties to Detect