An Overview of Research on Auditor’s Responsibility to Detect Fraud on Financial Statements

Researchers and practitioners have made many attempts to identify fraud indicators and to build fraud prediction procedures. Fraud is a beg subject and causes tremendous loss to the business world and creates morale problems in the workplace. It represents a critical issue for the accounting profession, in devolved and non-developed countries. Numerous surveys in the 1980s have served to underline the significance and extent of fraudulent activities within profit and non-profit organisations. Then, the need to fight fraud has exerted strong pressure for auditors to assume this role. In this respect, the auditor‘s role to prevent and detect fraud is a very important part of his/her job because of the use of advanced and complex computer systems. As a consequence, this paper is concerned about fraud, based on the primary responsibility for prevention and/or detection of fraud rests upon management to develop adequate accounting systems with appropriate internal controls. This paper discusses the various facets of financial fraud, what constitutes auditors' breach of duties to their clients and reporting of fraud. Overall, this paper highlights certain weaknesses present in prior fraud detection studies. These studies reveal that because of the use of more advanced technology, the amount of fraud that is detected appears to have declined. In addition to this, auditors have limited legal expertise and do not have the training needed to identify all illegal activities.