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The value of audits in preventing fraud

There are growing calls for auditors to do more to detect and prevent fraud within the organisations that they audit.  

This has particularly been the case following the very public scandals that have rocked the audit industry in the last few years. 

In fact, in July the Financial Reporting Council (FRC) reported that it had issued a record £46.5 million in fines during the past year following a series of significant penalties issued to Britain’s top accounting firms as a result of audit failings.  

Auditors are not the only professionals within the financial reporting process who affect the reliability of financial reporting, and by doing so prevent and detect fraud. 

However, they do play an important role in this process which is sometimes undervalued by the businesses that use their services and so it is important to retain public trust in their work.  

The Institute for Chartered Accountants in England and Wales (ICAEW) has just released a new report – Sharpening the Focus on Corporate Fraud– An Audit Firm Perspective – which considers the initiatives that many audit firms are taking to improve their fraud prevention practices.  

This new report has been collated from auditors at the UK’s largest audit firms and sets out the steps that must be taken across the industry to uncover fraud and tackle it.  

The ICAEW’s report makes the following recommendations:  

  • “Audit firms working to change ingrained cultures, behaviours and mindsets, assessing the need for greater, risk-assessed specialist and forensic involvement at all stages of the audit, embedding fraud-related learnings across the firm and reinforcing professional scepticism.” 
  • “Executive and non-executive directors reconsidering the adequacy of the company’s current approach to fraud risk management, re-evaluating the overall company ethos and engaging all stakeholders in the audit process, as well as developing an audit and assurance policy.” 
  • “Government and audit regulators involving all stakeholders in a debate about fraud risk management to inform new fraud-related requirements for companies and related requirements for auditors, enforcing existing sanctions against those who mislead auditors, and engaging with HMRC, the FCA and others to enable more effective sharing of fraud-related learnings.” 

The report is a useful look into how audits can improve fraud detection and prevention but, like many other auditors, our team are already highly involved in these important activities to ensure that our clients’ finances are protected.  

To find out more about our audit services, please contact your Seymour Taylor representative today or email enquiries@stca.co.uk or call 01494 552 100. 

This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 05 August 2022.