Answered: Why do you think companies were not…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Why do you think companies were not able to detect the fraud in their previous audit?

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The responsibility for the prevention and detection of fraud and error rests with the management through the implementation of an adequate system of internal control. Such a system reduces but does not eliminate the possibility of fraud and error and it is difficult to detect fraud than errors because fraud is sophisticated and organized conceal scheme as intentional misrepresentation in the books of accounts.

If there remains a deep-laid fraud in the accounts which in the normal course of verification may not be detected due to the inherent limitation of auditing.

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