Responsibilities of The Manager

Running head: CORPORATE AUDIT
Corporate Audit
Name of Student
Name of University
Author’s Note

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Table of Contents
Part 1................................................................................................................................................2
Answer to Question 1......................................................................................................................2
Part 2................................................................................................................................................6
Reference.......................................................................................................................................11

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Part 1
Answer to Question 1
To Audit Manager
Mrs. Williams
Sub: Responsibilities of the manager and the auditor for the detection of the fraud and
their difference
Respected Madam,
I want to convey about the reasons of the material misstatement and the fraud which are
present in the financial statement of company which are analysed by the mangers and the
auditors. ISA/ASA 240 states about the detection and prevention of the fraud which are made by
the mangers and the auditor of the company during the checking of the financial statement of the
company.
Managers:
The managers of the company who hails from the executive position of the company are
responsible for the detection of the fraud and also implementing the corporate governance in a
way to prevent the fraudulency which occurs during the process of creation of the financial
statement of the company. The management of the company has the full power to penalize the
responsible individual for the alteration in the financial statement of the company. It is also
responsible for managers to create the culture of following ethical practice in the daily work of
the company. The management must dedicate a specific department for identifying the
fraudulency act which may occur in the company. These members must possess skills which will

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help the company to detect the unethical practice especially when the financial statement is being
formed for the auditing purpose and also for the forecasting purpose. This procedure will also
help to increase the performance and profitability of the company.
Auditor:
The auditor must perform auditing while following the rules and regulations which are
present in the Australian Auditing Standard. The auditors are responsible to identify whether the
financial statement of the company are having the material misstatement or not. In some cases it
can be seen that the company might have some of the risk though the auditor has conducted with
full might. As per Australian Auditing Standard the auditor has the liability to omit such risk
which is specifically unavoidable. As stated in ASA 200, the risk for not detecting the fraud from
the financial statement of the company is much higher than risk for not detecting the risk due to
error. This fraud is mainly done by the management of the company as they have full authority
over the working pattern of the company. It is often observed that management of the company
deliberately involve in the alteration in the financial statement of the company. The auditor must
possess the ability and skills to detect the fraud which are related with the financial statement of
the company. The auditor really needs to be skilled to search for the alteration which is present in
the financial statement of the company. As per the trend goes, it is observed that maximum
misstatement which occurs in the financial statement of the company are being done by
management of the company is more than the alteration made by the employees of the company.
The alteration in the financial statement of the company made by the management of the
company is done in a very efficient manner which is hard to scrutinize. This is done because the
management of the company has the total control over the company’s day to day operation and
hence it is easy for them to manipulate. To deal with such situation the auditor must keep the