Irregularities:
Irregularities can be explained as intentional distortions of financial statements for whatever reason and also as misappropriation of possessions whether or not a company by deformation of financial statements. The auditor's duty to fraud and other irregularities is precisely similar as that of errors.
Materiality:
When the auditor knows or suspects that a fault or irregularity has happened or exists, then he cannot apply materiality thought until he has adequate proof of the extent of the fault or irregularity.
Indication of irregularities:
Possible signs of irregularities involve:
- Misplaced documents or vouchers, these could have been intentionally damaged to hide an irregularity;
- Proof of altered documents: modifications can occur after the transaction has been accepted;
- Unsatisfactory description: these are descriptions which are vague and are unproven;
- Proof of disputes;
- Existence of anxiety accounts or mysterious differences on reconciliations;
- Proof that internal control is not operating as it is planned to;
- Overly lavish life styles of officers and employees;
- Figures not agreeing with prospects.