In the context of ISA 240 (The Auditor‘s Responsibility to Consider Fraud and Error in, an Audit of Financial Statements): Outline the respective responsibilities of an entity‘s management and the external auditor with respect to the prevention and detection of fraud and error

– The primary responsibility for prevention and detection of errors and irregularities rests with management
– This responsibility arises out of a contractual duty of care by directors and managers and also because directors and other managers act as stewards with regard to property entrusted to them by the shareholders.
– This duty may be discharged by them by instituting and maintaining a strong system of internal controls.
– The auditor is not required to assist the directors in the task the draft guideline does suggest that an auditor should remind the directors of their responsibility through an engagement letter or other means, and the need to have a system of internal controls as a deterrent to errors and irregularities.
– In regard to errors and irregularities, the auditor should have sufficient, relevant and reliable audit evidence to support his opinion or to conclude that no material errors and irregularities have occurred or if they have occurred, then they have either been corrected or properly disclosed in the financial statements.

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