Fraud and Auditors’ Responsibility

In this chapter, we synthesize our understanding of auditors' responsibility for fraudulent financial reporting (i.e., fraud). The prevention and detection of fraud is an important priority for the profession, and thus we explore ways to improve auditors' fraud investigations in the future. We broaden our understanding of this issue by documenting auditors' and regulators' responses to major fraud scandals throughout history, and then build on this by developing a model to summarize the current state of the academic literature in the area. We also identify the significant unresolved issues related to fraud that require the attention of researchers, regulators, and auditors. Accordingly, this chapter contributes to the literature by incorporating the perspectives of research and practice to provide insights that are informative to academics, auditors, and the profession at large, as well as to standard setters, regulators, and policy makers