Errors and Frauds in Financial Transactions: Auditors Opinion

Scams like WorldCom and Enron diverted the attention of the whole world towards the auditing problem why errors and frauds remain undetected in spite of auditing books, accounts and records of a business enterprise. The Satyam scandal has further made the lawkeepers more vigilant and cautious. Occurrence of errors and frauds in the financial statements has become a persistent problem for the regulating bodies such as SEBI, ICAI, etc. However, there is no dearth of rules and regulations in form of standards on Auditing and accounting at the national as well as international level. It is becoming difficult to put a full stop on the existence of incidences entailing errors and frauds. The objective of this paper is to identify the transactions which are more prone to errors and frauds and to locate the type of errors and frauds which are frequently discovered by auditors while conducting the audit and identifying error or fraud that is most difficult to detect. Moreover, the paper also attempts to determine the suitable action to be takenby auditors in case of critical or awkward situations. This has been done with the help of a structured questionnaire sent to 200 members of the Institute of Chartered Accountants of India.