Experts: Auditors not responsible for detecting fraud

Audit professionals have moved to clarify public expectations of auditors’ responsibilities, arguing that fraud prevention and detection are not solely the responsibility of external auditors but require active participation from company boards, management, shareholders, investors and audit committees.

Partner and Head of Audit, KPMG West Africa, Dr. Goodluck Obi made this clarification at the 2026 Audit Committee Conference in Lagos on Wednesday while delivering a presentation on audit failures, governance responsibilities and emerging challenges facing the profession.

According to him, a common public expectation that auditors are expected to identify every instance of fraud does not align with the actual scope of an audit, creating what professionals describe as an expectations gap between public perception and professional standards. “It’s a collective responsibility. The auditors, the board, the shareholders, investors, management, and the members of audit committees, i.e. those charged with governance,” Obi said.

“So there is a misconception in the industry that the auditor is expected to perform time role of a watchdog, meant to find and sniff out fraud wherever it is, but that’s not exactly what is expected under the professional standard,” he said. Obi argued that reducing audit failures requires stronger governance systems and internal controls rather than placing responsibility solely on external assurance providers.

“In terms of industry-wide practices, there are a couple of things that are important. I mean, I talked about effective control, strong governance and controls and oversight by management, which cannot be underpinned, which cannot be overemphasized.”

He added that management and directors remain accountable for preparing financial statements and establishing governance structures, while auditors are expected to exercise professional care and provide independent assurance.

“Of course, the auditor, where everybody is looking at the auditor, the auditor needs to demonstrate competence, needs to demonstrate independence, and needs to show that he’s not negligent and do all his duties with due care in line with relevant auditing standards.”

Addressing the gap between public expectations and professional responsibilities, Obi said continued engagement and public education remain necessary. “That’s part of what I did in my speech. I try to highlight the major differences, what the expectation is by the public and what it should be really based on professional standards.”

The conference also examined how artificial intelligence is reshaping financial reporting and audit processes, with speakers cautioning against replacing professional judgment with automated outputs.

Delivering a separate keynote presentation titled Guardians of Truth: Informed, Vigilant, and Attending, Christian Ekeigwe, Chairman of the Audit Committee Institute, said the profession faces a broader challenge than technology adoption as AI becomes more embedded in financial reporting and audit workflows.

Ekeigwe argued that the central risk is not that artificial intelligence will replace auditors but that professionals may become overly dependent on algorithmic outputs. “The most acute risk is not that AI will replace auditors. It is that auditors will stop thinking, and defer to the machine in their place.”

According to him, AI has introduced efficiencies in areas such as transaction testing, anomaly detection and risk assessment but remains susceptible to producing convincing outputs that may not always reflect reality.

He noted that AI-generated financial disclosures and audit tools require stronger human scrutiny because systems can generate plausible but inaccurate outputs.

“The challenge that artificial intelligence poses to the guardians of financial truth is not primarily a technology challenge. It is a thinking challenge.”

Ekeigwe said professional judgment, scepticism and contextual understanding remain essential to preserving trust in financial reporting. “What AI cannot do is what auditing has always fundamentally been: a professional act of abductive reasoning by a qualified, independent, accountable practitioner.”

Responding to concerns about AI adoption, Obi similarly supported cautious implementation of emerging technologies while maintaining human accountability. “AI can also make mistakes. AI can hallucinate. That’s the word.”

He said the profession supports responsible use of artificial intelligence rather than unrestricted dependence on automated systems. “So what we preach is responsible use of AI. So while we are encouraging this AI, but you must use it responsibly.”

These experts noted that accountability ultimately remains with professionals regardless of the technology used. “The fact that you ask AI to give you something, to provide, produce a report for you or do something for you, does not exonerate you from being responsible for that stuff.”