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October 2014

Why Audits Cannot Detect All Fraud

Real Examples and Insights from an Expert Witness

Auditors are expected by the public to find financial statement fraud, even though U.S. GAAS has long held that they might not be able to detect all frauds. The following discussion draws upon the experience of an expert witness in numerous major fraud cases in order to illustrate situations in which auditors can—and cannot—reasonably be expected to detect fraud. Certain factors can make fraud nearly impossible to discover, even when a competent GAAS audit is performed, and certain factors are often present when auditors should have detected fraud.

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