Communications to Regulatory and Enforcement Authorities

The auditor’s professional responsibility to sustain the confidentiality of client information ordinarily prevents reporting fraud and error to a party exterior the client entity. The auditor believes seeking legal advice in such situations.

Errors can be explained as an intentional mistake and they can happen at any stage in a business transaction and they can be of any kind. Auditors would principally be fascinated in the prevention, discovery and disclosure of errors for the following causes:

(a) Existence of errors might indicate that accounting records are untrustworthy and are thus not a satisfactory basis from which to organize financial statements. The auditor could thus conclude that appropriate books of accounts have not been kept where there are so many material faults. This is a basis for qualification of an auditor's report.

(b) Too many faults might also point out that the system of internal control is not consistent, and hence the auditor wishing to place any reliance on a system of internal control might not be capable to do so.

(c) When errors are of adequate magnitude, they might be sufficient to affect the correct and fair view specified by the accounts.