WE refer to the commentary, "Can auditors be trusted to detect fraud?" (BT, Sept 1).

The writer has correctly stated that the auditor's role is to express an opinion on whether the financial statements, as prepared by management, are free from material misstatement.

However, we wish to point out some misconceptions regarding an audit and the auditing profession.

Firstly, a misstatement is not the same as fraud. Fraud is an intentional act to deceive. Material misstatements may include errors that are intentional or unintentional. The former could be fraudulent in nature whereas the latter are genuine mistakes.

The auditing profession understands that fraud is a real business risk. Fraud is not easy to detect, especially if it involves collusion or where utmost effort has been made to cover the act.

Secondly, we would like to clarify the scope and value provided by an audit.

Before expressing an opinion, the auditor will identify key risk areas within the business that have a higher potential of significant errors in the financial numbers and perform robust audit procedures on them.

Key risk areas are selected because, as rightly noted by the writer, it is impossible to audit all aspects of the company.

Upon discovering the errors, the auditor will discuss with management the significance, possible root causes and implications of the errors. Management will be required to quantify the errors and rectify the financial statements to reflect the true financial position and performance of the company.

For example, a risk area for a retail business would be its inventories. If the actual quantity of inventories differs from what is reflected in the company's records, the auditor will discuss the implications of the error with management. The financial statement will then have to be amended accordingly by management to capture the correct inventory quantity. Additionally, the auditor would help determine what caused the error so that the control systems can be improved to prevent such errors from recurring.

Hence, the value of an audit comes from addressing high-risk areas, helping management identify internal control lapses and recommending appropriate improvements to the entity's internal controls. This enhances the confidence of the intended users in the reliability of the financial statements.

Thirdly, we would like to clarify that ethics and integrity are hallmarks of the auditing profession. Maintaining a high standard of ethics enables the auditor to make sound professional judgment. If required, auditors will not hesitate to issue qualified audit opinions.

For more information on the auditor's role, please refer to "Summary of Singapore Standard on Auditing (SSA) 200" on the ISCA Centre for Auditing and Assurance website.

Lee Fook Chiew 
Chief executive officer 
Institute of Singapore Chartered Accountants