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Management fraud (fraudulent financial reporting) is not the expected norm, but it happens from
time to time. In the United States; several cases have been widely publicized. They happen when
motives and opportunities overwheim managerial integnity. Required: a. What distinguishes
management fraud from a defalcation? b. What are an auditor's responsibilities under auditing
standards to detect management fraud? c. What are some characteristics of management fraud
that an audit team should consider to fulfil the responsibilities under auditing standards? e. Under
what circumstances might an audit team have a duty to disclose management's frauds to parties
other than the company management and its board of directors?

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  • 1. Management fraud (fraudulent financial reporting) is not the expected norm, but it happens from time to time. In the United States; several cases have been widely publicized. They happen when motives and opportunities overwheim managerial integnity. Required: a. What distinguishes management fraud from a defalcation? b. What are an auditor's responsibilities under auditing standards to detect management fraud? c. What are some characteristics of management fraud that an audit team should consider to fulfil the responsibilities under auditing standards? e. Under what circumstances might an audit team have a duty to disclose management's frauds to parties other than the company management and its board of directors?