Explain the importance of ‘tone at the top’ or ‘control environment’ in reducing the risk of fraud in companies.

Research and development.
December 25, 2020
Discuss the auditor’s responsibility
December 25, 2020

1. Explain the importance of ‘tone at the top’ or ‘control environment’ in reducing the risk of fraud in companies.

2. Why have external auditors not been entirely successful in reducing managers’ actions in ‘making the numbers’?

3. In your opinion, what could be done to avoid auditor failures?

4. Define the terms ‘earnings management’ and ‘quality of earnings’ with respect to the external auditor’s responsibilities. Discuss the auditors’ responsibilities and how to draw a line between ‘earnings management’ and fraud.