Risk of Material Misstatement and Risk of Fraud

Risk of Material Misstatement and Risk of Fraud

Will we chartered accountants now place a greater priority on the ROF (Risk of Fraud) than the ROMM (Risk of Material Misstatement)? While both are essential and sometimes compliment or complement each other, we need ferocious bloodhounds to protect for larger participation of both public & Foreign Institutional Investor in Indian market

According to top official of the National Financial Reporting Authority, many financial frauds/misdoings could have been identified and stopped in their tracks if the concerned auditors had informed stakeholders to the circumstances in question in a timely manner.

“Not only in hindsight but otherwise also, I believe that had many of the violations that we observe in our proceedings been pointed out by the auditors to the shareholders and other stakeholders in time, many of the financial frauds/misdoings could have been detected &  averted at an early stage,” National Financial Reporting Authority Chairperson Ajay Bhushan Prasad Pandey told The Press Trust of India Ltd in an interview.

He was responding to a question regarding corporate misdoings in the nation throughout the years/time. Auditors have frequently been the target of regulatory scrutiny. The regulatory body has been taking action to further tighten the methods and auditing system. It has taken any action against certain negligent auditors and issued numerous audit quality as well as acted against some erring auditors.

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