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Failure to Detect Theft and Fraud: It’s Not just an Audit Issue

Commonly referred to as the “expectation gap”, a disconnect sometimes exists between an auditor’s professional responsibility for detecting theft and fraud and the general public’s perception of an auditor’s duties. The Singapore Standard on Auditing 240 Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements includes a responsibility to communicate to the appropriate level of management on a timely basis if any information or evidence comes to the auditor’s attention indicating the occurrence of fraud. However, claims made against professional firms for alleged failure to detect theft and fraud could emanate from all types of engagements, including those generally regarded by practitioners as low risk, such as bookkeeping, tax compliance and compilation services.

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