What is the major purpose of an independent audit?
The major purpose of an independent audit is to investigate and determine objectively if the financial statements submitted for audit by a corporation have been prepared in accordance with the appropriate financial reporting practices of private entities.The relationship that arises therefrom is both legal and moral. It begins with the execution of the engagement letter that embodies the terms and conditions of the audit and ends with the fulfilled expectation of the auditor’s ethical and competent performance in all aspects of the audit.
The financial statements are representations of the client; but it is the auditor who has the responsibility for the accuracy in the recording of data that underlies their preparation, their form of presentation, and the opinion expressed therein. The auditor does not assume the role of employee or of management in the client’s conduct of operations and is never under the control or supervision of the client.
Did Yabut do his responsibility as independent auditor?
Yabut did not do his responsibility. He was an independent auditor hired by CASA; he handled its monthly bank reconciliations and had access to all relevant documents and checkbooks. In him was reposed the client’s trust and confidence that he would perform precisely those functions and apply the appropriate procedures in accordance with generally accepted auditing standards. Yet he did not meet these expectations. Nothing could be more horrible to a client than to discover later on that the person tasked to detect fraud was the same one who perpetrated it.
By analogy, an accountant’s responsibility can be compared to that of a doctor of medicine. When a doctor is negligent, his patient may die; when an accountant is negligent, his client and other users of financial information may suffer heavy losses that could lead them to bankruptcy – the death of a business.