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PART C: ACCOUNTING AND REPORTING SYSTEMS, CONTROLS AND COMPLIANCE 
 
282
 
 
5
Responsibility for detecting and preventing fraud 
It is the responsibility of the directors to take such steps as are reasonably open to them to 
prevent and 
detect
fraud. 
5.1 The responsibility of directors 
In a 
limited company
, or plc, it is the responsibility of the directors to prevent and detect fraud. They 
should: 
(a) Ensure 
that 
the 
activities
of the entity are conducted honestly and that its 
assets 
are safeguarded 
(b) 
Establish arrangements to 
deter 
fraudulent or other dishonest conduct and to 
detect
any that 
occurs 
(c) 
Ensure that, to the best of their knowledge and belief, 
financial information
, whether used 
internally or for financial reporting, is reliable 
5.2 The role of the auditor 
The responsibility of the external auditor is only to express an opinion on whether the financial 
statements give a true and fair view of the company's financial situation and results. 
The auditor should design audit procedures so as to have a 
reasonable expectation
of detecting 
misstatements arising from fraud or error. It should be emphasised that, in the case of a sophisticated 
fraud, which has been designed to escape detection by the auditors, a 
reasonable expectation
is all that 
they can have.
If the auditors become aware during the audit that fraud or error may exist, they should document their 
findings and report them to management. 
In the case of fraud, the auditors should then consider whether the matter should be reported to an 
appropriate authority in the public interest. If they decide that this is the case, they request that