Auditors do not prepare books. They are watchdogs not bloodhoods.

C&P from isaca.org....

More than 100 years have elapsed since the Court of Appeal in England delivered a landmark judgment in the Kingston Cotton Mills case.

The facts were reasonably simple and not contended by the parties. The company's managing director, who subsequently confessed the frauds he committed, had falsified its accounts.

In particular, the quantities and value of the company's stock had been falsified for many years but there was nothing on the face of the accounts to excite suspicion. It was suggested to the court that the auditor should not have relied solely on the representation of the managing director and should have further investigated the matter.

In a unanimous judgment, the three Lord Justices reversed the decision of the lower court and found in favor of the auditor:


"It is the duty of an auditor to bring to bear on the work he has to perform that skill, care, and caution which a reasonably competent, careful, and cautious auditor would use.
An auditor is not bound to be a detective, or, as was said, to approach his work with suspicion, or with a foregone conclusion that there is something wrong. He is a watchdog, but not a bloodhound.
Auditors must not be made liable for not tracking out ingenious and carefully laid schemes of fraud, when there is nothing to arouse their suspicion ...So to hold would make the position of an auditor intolerable."

—Lord Justice Lopes

Regarding Kingston Cotton Mills (1896) 1

Any auditors in the house,please justify your work

So what is the work of the auditor? To rubber-stamp results and then to change the headline of company's colorful financial statement from "Unaudited results" to "Audited results"? Even me with no accounting, I can do that with MS Word. Just tell me where to rubber stamp and I will charge only half price.

seems like in kenya we then need both 'audited returns' and 'forensic-audited returns'.

Britam are hiring:
Forensic Auditor

Please look at the auditors' report page of any audited financial statements and read out the responsibilities of an auditor. and those of management. Very clear.

ION.... going forward year ending 2016... management will be required to disclose very specific management and director details. Salaries and also key matters affecting the business during the year ended and future outlook. e.t.c Auditors will also have to comment on the same.. so expect a 4 or 5 page report.... reference changes in ISA 701 (and ISA 700) together with the changes in the companies act.

Auditors in the house, let us agree that the young audit boys/girls ... Audit whatever sent to carry out the actual audit normally unearth these thieving, frauds and cookings.

But when they raise the issues, the matters are taken over by the overall wadosi who meet in some cafe somewhere with management and agree to relax as the matter is being looked into. That is the sad reality and many here know that!!!!

Simply put,Auditors work is to express an opinion(true or false) on the financial statements presented by the management.That opinion should be based on some audit procedures

Each party has his responsilibility outlined. From the times of Enron et al, every failure is routed to the auditor 1st before the truth is revealed simply because its expected he will give an opinion of the corporates financials health and truthfulness. His opinion is purely based on information provided by the management and where in his professional view the materiality of the information not provided which he states.
Management (executive) read in conjunction with directors are the main teams behind the organizations financial health.

That notwithstanding, its very critical nowadays for any independent party (read auditors) to understand the business of the client and the risks universe of such business. This will go along way in enhancing effectiveness.

Applies to many professions! Folks are afraid to ask questions lest they appear stupid.