The detection of financial irregularities in US corporations

Abstract

Analyses US auditors’ responsibility for detecting accounting errors, fraud and irregularities, noting the traditional view that ordinary examination of financial statements cannot be relied on to disclose deliberate deception; in 1977 the GAAP standard was revised so auditors were made responsible for detecting error or fraud. Discusses Standard Auditing Statements, the audit plan, the engagement letter, the management letter, and the National Commission on Fraudulent Reporting. Moves on to judicial attitudes, expressed in the cases of Craig v Anyon, International Laboratories Ltd v Dewar, National Surety Corporation v Lybrand, United States v White, United States v Benjamin, Dominion Freeholders v Aird, United States v Simon, Delmar Vineyard v Timmons, Shapiro v Glekel, Citizen National Bank of Wisner v Kennedy and Coe, Robin v Young & Company, Mocatta Metals Corporation v Peat, Marwick Main & Co. Concludes that courts seem divided on liability for auditors who fail to detect fraud.

Citation

Hemraj, M.B. (2002), "The detection of financial irregularities in US corporations", Journal of Financial Crime, Vol. 10 No. 1, pp. 85-90. https://doi.org/10.1108/13590790310808655