An internal audit of warehouse inventory revealed no material deficiencies. However, management later discovered fraud, which occurred during the period that was audited, and determined that a major control deficiency allowed the fraud to occur. Given management's discovery, which of the following statements is valid?
The internal auditors should have had sufficient knowledge of fraud to identify red flags indicating possible fraud. While it is true that the primary responsibility for preventing and detecting fraud rests with management, internal auditors are expected to have enough understanding of fraud risks to recognize signs that could indicate fraud is occurring. Ignoring red flags would indicate a lack of due professional care and proficiency.
A is better