Role of Public Auditors in Fraud Detection: A Critical Review

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

The need for independent audit goes back to the agency theory, the theory
of delegation of power and the issue of trust. Stakeholders delegate power to
management to manage the business on their behalf, yet they face the risk of
information asymmetry and management motivations to commit fraud. The
main aim of having an independent auditor was therefore to reduce the risk of
information asymmetry and fraudulent behaviour by management. Auditors are
required by the International Auditing Standards to detect material fraud and
error, and they are expected to have a duty of care for stakeholders. However,
recently independent auditors, whether conducting private or public audit, have
been scrutinised for failing to detect material fraud. There have been a lot of
discussions in the literature about the role of private auditors in detecting fraud,
but very little discussions about the role of public auditors in detecting fraud.
This chapter will outline the difference between private audit and public audit;
explain the legal liability of public auditors in relation to fraud detection; the
role of public auditors in detecting fraud; and will critically review the root
causes for auditors’ failure to detect fraud.
Original languageEnglish
Title of host publicationContemporary Studies in Economic and Financial Analysis
EditorsSimon Grima, Engin Boztepe
PublisherEmerald Group Publishing Ltd.
Chapter3
Volume105
ISBN (Print)9781839095092
Publication statusPublished - 18 Jan 2021

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  • Cite this

    Kassem, R., & Turksen, U. (2021). Role of Public Auditors in Fraud Detection: A Critical Review. In S. Grima, & E. Boztepe (Eds.), Contemporary Studies in Economic and Financial Analysis (Vol. 105). Emerald Group Publishing Ltd..