Preventing corporate scandals

Defines fraud as deliberate deception to obtain illicit material gain, and includes embezzlement and asset misappropriation in the definition. Assesses what constitutes auditors’ breach of duty to clients, and who is responsible for fraud monitoring and reporting, and refers to the UK Auditing Practices Committee guidelines. Analyses some causes of failure to prevent fraud; these include lack of clear responsibility for preventing it, and regarding security as too expensive. Argues that it is the responsibility of company management to prevent fraud by maintaining proper accounting records, rather than relying on auditors to detect it, although in the UK auditors are responsible for detecting material fraud. Considers auditing an art rather than a science, and opposes suggestions that auditors should assess the financial viability of a company; auditors’ responsibilities already tend to exceed their powers as whistleblowers.