Auditors Forget Discovering Fraud is Their Reason for Existing
In theory, accounting firms focus on ensuring their clients’ financial statements are both accurate and assembled based on generally accepted accounting principles. This is no longer true.
How do we know this?
The head of Grant Thornton, a very large accounting firm, told us so.
David Dunckley, chief executive of Grant Thornton, … told MPs on the business, energy and industrial strategy committee that there was an “expectation gap” that “needs to be fixed”.
“We’re not looking for fraud, we’re not looking at the future, we’re not giving a statement that the accounts are correct,” he said, adding that his firm audits 7,000 companies. “We are saying [the accounts are] reasonable, we are looking in the past and we are not set up to look for fraud.”
In a heated exchange with Rachel Reeves, the Labour MP and committee chair, Dunckley reiterated: “If people are colluding and there is a sophisticated fraud that may not be caught by normal audit procedures.”
Clearly, if the auditors don’t look for fraud they are unlikely to find it.
This raises the obvious question: what use does anyone have for auditors if they are not looking for fraud?
Investors would have no use for them. Not checking for fraud undermines the trust the investors place in the auditor’s statement that a company’s financial statement is both accurate and has been assembled according to generally accepted accounting principles.
Boards of Directors would have no use for them. After all, boards want to be sure there is no fraud going on.
So why have accountants forgotten their core reason for existing? Perhaps because business and tax avoidance consulting are far more lucrative?
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