The Blame Game with Auditors

The so called blame game will always exist so long as management attempt to protect themselves from accusations. A common instance of finger pointing is when a fraud is detected in the company. But prior to such an event, auditors are blamed for taking too long to perform an audit, they’re blamed for delays in the company being unable to publish their financial performance on time, they’re blamed for not trusting the directors or management during an audit, they’re blamed for unnecessarily raising concerns about weak internal controls and sometimes of being petty in reporting weaknesses in key controls in the management letter.

Companies that uncover fraud are often surprised that the incident occurred in the first place. They would’ve missed all the red flags. When issues are raised by the auditor, the management does not hesitate to sweep it under the carpet, with a view to expediting the audit. When issues are raised at the audit committee, those members pay lip service to protect their appointment to the board and the resultant income. But, they’re quick to blame the external auditors the moment a fraudulent activity is uncovered, for not detecting it.

Should responsibility be shared between the stakeholders, who facilitated the fraudulent transactions, intentionally or unintentionally? Why does the finger always point to external auditors?

To prevent or mitigate the risk of non detection of frauds, the auditors should conduct their audit whilst keeping an eye out for fraudulent activity by being skeptical. This entails investigating further any warning signs and red flags that may appear during the course of the audit. This will obviously result in delay of the audit. If delays are used as a threat on the auditor by management, would they have to risk the account to do a better job?

As long as there is a gap between the expectations of stakeholders and the role of an auditor, the blame game will continue. It’s the independent directors who should prevail in such situations to reduce the impact of expectation gap. Something to remember is: “When you point your finger at someone, you simultaneously point three fingers at yourself.”

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About surenraj

“Views expressed are my own”
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