
In the case of a limited company, an auditor is appointed by the company’s shareholders. He is not a bloodhound, but he is a watchdog. Unless doubtful situations are there, the auditor is totally justified in relying upon the management/employees of his client.Īn auditor is not expected to act as a detective or approach his or her work with undue suspicion or having preconceived notions in mind. In that case, the learned Judge Lopes categorically defined an auditor’s duty by stating that an auditor is a watchdog, but not a bloodhound. Initially, it was more to do with the decision given in the Kingston Cotton Mills Co.
In the last century, the way an auditor’s duty is perceived with regard to the detection and prevention of fraud and error has undergone many changes. The legal perspective on “Auditor is a watchdog, not a bloodhound” In this blog, we are going to throw light on some of these decisions and discuss the meaning of the famous quote “Auditor is a watchdog, not a bloodhound”. It has been laid down by several legal decisions and has been considered in many professional pronouncements.
The duty of an auditor with regard to the detection and prevention of fraud and error has been a matter of discussion for a long time.