Postulates of Auditing

Question (a)
Auditing has been defined as “the independent examination of financial information of any entity, whether profit-oriented or not, and irrespective of its size or legal form, when such an examination is conducted with a view to expressing an opinion thereon” (Puttick & Esch, 2003) In simpler terms, auditing can be viewed as the independent examination of and expression of an opinion on the financial statements of an entity by a jury appointed auditor in pursuit of that appointment.
As can be seen from the definition, the auditors’ main responsibility is to form an opinion on whether the company’s financial statements give a true and fair view. Auditors are not responsible for establishing the mechanisms for ensuring that good standards of corporate governance are maintained.
The Companies Act chapter 24: 03, Section 153(1) a, states that the auditor is responsible for expressing an opinion on whether the financial statements of an entity are drawn up in accordance with the requirements of the Act and that they give a true and fair view of the state of the company’s affairs as at the date of presenting such statements. The Act does not include the detection of risk as one of the auditors’ responsibility as might be expected by the civil society pressure groups.
ISA 240 - The auditor’s responsibilities relating to fraud in an audit of financial statements states that the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management. It is important that management, with the oversight of those charged with governance, place a strong emphasis on fraud prevention, which may reduce opportunities for fraud to take place, and fraud deterrence, which could persuade individuals not to commit fraud because of the likelihood of detection and punishment. This involves a commitment to creating a culture of honesty and ethical behavior which can be reinforced by an active oversight by...