An Assesment of the Role of the Auditor in Fighting Corruption in an Organization

Topics: Auditing, Audit, Financial audit Pages: 9 (2849 words) Published: September 11, 2013
2.1 Introduction
Reliable accounting and financial reporting issued by auditors help organisations in allocating resources from the society in an efficient manner. Although the primary goal of an organisation is profit making and to allocate limited capital resources to the production of goods and services for which society’s demand is great, a highly complex phenomenon which is corruption poses a threat to those goals and services. However, most organisations spend huge sums of money adopting strategies to fight corruption (Whittington et al., 2004). 2.2 History of Auditing

The word “Audit” originated from the Latin word 'auditus' which means, 'a hearing'.  In the earlier days, whenever there was suspected corruption in a business organization, the owner of the business would appoint a person to check the accounts and require hearing the explanations given by the person responsible for keeping the accounts and funds.  In those days, the audit was done to find out whether the payments and receipts were properly accounted or not accounted for ( During the advent of the Industrial Revolution, from 1750 to 1850, auditing evolved into a field of fraud detection and financial accountability. Until then, Auditing existed primarily as a method to maintain governmental accountancy and record-keeping. The incidence of the revolution resulted in businesses expanding thereby resulting in increased job positions between owners to customers. Resultantly, management was hired to operate businesses in the owners' absences, and owners found an increasing need to monitor their financial activities both for accuracy and fraud prevention. ( In the early 20th century, the reporting practice of auditors, which involved submitting reports of their duties and findings, was standardized as the "Independent Auditor's Report." The increase in demand for auditors led to the development of the testing process for accuracy and fraud prevention. Auditors developed a way to strategically selecting key cases as representative of the company's performance. This was an affordable alternative to examining every case in detail, required less time and a good tool for reducing fraud ( 2.3 Overview of Auditing

"Auditing is a systematic examination of the books and records of a business or the organization in order to ascertain or verify and to report upon the facts regarding the financial operation and the result thereof” (Montgomery, 2010,p.6). Again, Loughran (2010, p.5), defines auditing as, the process of investigating information that is prepared by someone else to determine whether the information is fairly stated. On the other hand, Arens et al. (2006, p.7), defines auditing as the accumulation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. “Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to interested users”(Robertson et al., 2002,p.7).According to Knechel (2001,p.42), “auditing is the process of providing assurance about the reliability of the information contained in the financial statements prepared in accordance with Generally Accepted Accounting Principles.” 2.4 Types of Audit

There are various ways in which the work performed by the auditor has been classified or categorized. Each classification or type of audit is unique in that, each type of audit has its own perspective, objective and business organisation. Irrespective of the type of audit being conducted, the basic processes, guidelines and standards are basically the same. However, Hall (2005) classifies the types of audits that auditors perform into four; 2.4.1 Internal Audit

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