In comparing management fraud with employee fraud, the auditor's risk of failing to discover the fraud is greater for
A) employee fraud because of the larger number of employees in the organization.
B) employee fraud because of the higher crime rate among blue collar workers.
C) management fraud because of management's ability to override existing internal controls.
D) management fraud because managers are inherently smarter than employees.

Question

Quizplus · Accepted Answer

Management fraud has a higher risk of going undetected because managers have more power and can override or manipulate existing internal controls to perpetrate the fraud. Employee fraud may involve a larger number of individuals, but the nature of the fraud tends to be smaller in scale and less complex. The higher crime rate among blue-collar workers (option B) is a stereotype and not a reliable basis for assessing fraud risk. The assertion that managers are inherently smarter than employees (option D) is unfounded and irrelevant to fraud risk assessment.

In Comparing Management Fraud with Employee Fraud, the Auditor's Risk