1. Strong internal control system that will ensure that assets are safeguarded and check collusion between employees.
  2. Proper remuneration of staff.
  3. Proper segregation of duties
  4. Overall supervisory controls by management.
  5. Use of budgets to control the company’s activities. At the year-end the actual and budgeted results should be compared.
  6. Rotation of duties so that employees do not establish very close and absorbing relationships that could lead to collusions.
  7. Institute or establish an internal auditing function.
  8. Mechanise the system to avoid errors of casting and small omissions or commissions.
  9. Employing staff that are qualified, of integrity and reliable.

Auditors interest in detection and prevention of errors and irregularities.

  1. The existence of errors and frauds may imply that the accounting system is not a reliable basis for financial statement preparation. As such the auditor can conclude that proper books of account have not been kept.
  2. Too many errors and frauds also indicate that the internal control system is not operating as it is expected to. As such an auditor who had intended to place reliance on the controls and performance of compliance tests may have to change his approach to increase the detailed substantive tests. If he is to obtain relevant and reliable audit evidence.
  3. Errors and frauds if they are of sufficient magnitude and are not properly disclosed in financial statements could affect the true and fair view given by those financial statements with the possibility that the auditors conclusion might be wrong.