RESPONSIBLE ENTREPRENEURSHIP VISION DEVELOPMENT AND ETHICS

Ethical aspects of accountancy and audit professions 287
Responsibility for the prevention and detection of fraud and error rests with both those charged
with governance and management of an organization.
The management, with the oversight of those charged with governance, must establish a
suitable climate to create and maintain a culture of honesty and high ethics, and establish
appropriate controls to prevent and detect fraud and error within the organization. The management
of an organization is responsible to establish a control environment and maintain
policies and procedures to help achieve the objective of ensuring, as best as possible, the orderly
and efficient conduct of the organization’s activities .
This responsibility includes implementing and ensuring the continued operation of accounting
and internal control systems which are designed to prevent and detect fraud and error.
Such systems reduce but cannot eliminate the risk of misstatements, whether caused by fraud
or error. Accordingly, management assumes responsibility for any remaining risk.
An auditor cannot obtain absolute assurance that material misstatements in the financial
statements will be detected. Due to the inherent limitations of an audit, there is an unavoidable
risk that some material misstatements of the financial statements or other auditable areas
will not be detected, even though the audit is properly planned and performed in accordance
with international auditing standards. An audit does not guarantee that all material misstatements
will be detected because of such factors as: the use of judgment, the use of testing, the
inherent limitations of internal control and that many of the available evidence in nature auditor
is persuasive rather than conclusive.
The fraud character of a transaction can be resolved in the court. Thus, since the auditor
has no responsibility to prove fraud in legal terms, his concern is directed to discover any
proof that is suspected to be a fraud. Therefore, the auditor must distinguish between fraud
and presumed fraud.
Regulations in the European Union and the USA
In the European Union, the Directive 2006/43 / EC state that “Statutory auditors and audit
firms should be independent when carrying out statutory audits. They may inform the audited
entity of matters arising from the audit, but should abstain from the internal decision processes
of the audited entity. If they find themselves in a situation where the significance of
the threats to their independence, even after application of safeguards to mitigate those threats,
is too high, they should resign or abstain from the audit engagement. The conclusion that
there is a relationship which compromises the auditor’s independence may be different as
regards the relationship between the auditor and the audited entity from that in respect of the
relationship between the network and the audited entity.”
The Directive 2014/95/EU on disclosure of non-financial and diversity information require
around 6,000 large European companies to disclose information at least on environmental,
social, and employee-related matters, as well as on the respect for human rights, anti-corruption,
and bribery issues. The Federation of European Accountants (FEE) has just issued a position
paper on this Directive, which should be transposed into Member States’ national laws
by 6 December 2016. The Federation of European Accountants is an international non-profit
organisation grounded in Brussels that represents 50 institutes of professional accountants
and auditors from 36 European countries, including all of the 28 European Union (EU) Member
States.