Question

do you think that management should be responsible for internal controls to prevent fraud or should that be the responsibility of the auditor? Provide examples to back up your ideas.

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Answer 1

Internal control is the standard set of policies established by the management in order to carry on the business of the enterprise in an orderly and efficient manner. Since these control standards are formulated and implemented by the management, they should be responsible for any incident occurring due to such controls. The auditors are responsible for verifying to what extent these controls have been practically implemented and efficient or whether these controls comply with the regulatory standards of the state.

For example, the management implemented the controls in the accounts payables system that for the payment of any invoice, the invoice must be approved by the person maintaining the invoice. In such case, there will be chances of fraud in invoice payment as sufficient authority is given to a person to manipulate an invoice and its payment.