In Quotes. Auditors are watchdogs, not bloodhounds. He is entitled to assume that they are honest, and to rely upon their representations, provided he takes reasonable care. The duty of the auditor is to be honest i.e., he must not certify what he does not believe to be true, and he must take reasonable care and skill before he believes that what he certifies is true. Bernard Agulhas, Independent Regulatory Board For Auditors Click here (then “like” the page) to follow Bruce on Facebook. “Auditor is a watchdog but not a bloodhound”- if auditor discovers something suspicious, he should probe. Unlike a bloodhound the duty of the auditor is verification and not detection. It follows from this that developments in the use of financial information that the importance of accounts is such that this view of accountants in their role is inappropriate and that the auditor should now be regarded as a bloodhound given the impact which defective accounts can have for investors, creditors and users of accountants. 3. The company’s internal auditor is a watchdog, making sure rules are being followed. He is justified in believing tried servants of the company in whom confidence is placed by the company. What is reasonable skill, care and caution must depend on the particular circumstances of each case. In this vein, the European Securities & Markets Authority has criticised the German regulators for their ‘deficient’ handling of the Wirecard accounting scandal. This has been recognised by the profession, which now requires the larger firms to split off their audit function from their other activities. A few years ago, in 2015, the Royal Bank of Scotland warned that accountancy firms were ‘quietly’ starting to take market share from established mid-market law firms that were not able to invest in the technology required to compete. More Details. We need to forget the watchdog and not the bloodhound description,” Sridharan said. It was noted that the auditors were to be appointed by the shareholders, and were to report to them directly, and not to or through the directors. They were also echoed before the importance of the stock market in allocating resources in a capitalist economy. These developments have spurred a growth in the possibilities of conflicts. He is expected to play the role of a watchdog on their behalf and should look after their interests. However, parallel to this development the larger accountancy firms are becoming more like ‘bloodhounds’ by growing their management consultant arms but more particularly their legal capabilities. In absence of such suspicious circumstances, he should rely on representations made by tried servants of co.(Important) Auditor has duty of “reasonable care” The kind of stringent measures prescribed against auditors gives the picture that the Act indeed expects the auditors to be bloodhounds in discharging their duties and not merely be watch dogs. The separation of audit and non-audit services being undertaken in developed countries is expected to boost auditor independence around the world. NFRA “Auditor is a watchdog and not a bloodhound” is a serious misconception. The dod do not start biting the stranger. Companies Act, 2013 does not seem to echo this thought! When any person starts the business then various transactions which are related to cash and “If this is not taken care of, any talk of nuanced professional judgments in arcane business and financial matters would have to be regarded only as smokescreens meant to mislead. The auditor is a watchdog and not a bloodhound. In the early 1970s there were only two routes for newly qualified accountants – audit and tax. He is a watchdog, but not a bloodhound. “If this is not taken care of, any talk of nuanced professional judgments in arcane business and financial matters would have to be regarded only as smokescreens meant to mislead. It has been observed in the case of Kingston Cotton Mills Co. (1896) case that an auditor is a watchdog and not a bloodhound. However auditor needs to be cautious over the possibilities of fraud that may occur and if ever any frauds are found by the auditor, it is important that the fraud is address properly by the auditor. This is to be welcomed to say the least. Recommended Jobs. Go to www.guernseypress.com/gponline to subscribe to our discounted online edition. The word Audit is derived from the Latin word ‘Audire’ which means to hear. SA 240 says that when obtaining reasonable assurance, the auditor is responsible for maintaining professional skepticism throughout the audit, considering the potential for management override of controls and recognizing the fact that audit procedures that are effective for detecting error may not be effective in detecting fraud.