Managers’ Use of an Omission Strategy to Perpetrate Fraud and Auditors’ Evaluations of the Resulting Misstatements

SUMMARY In this article, we provide a practitioner summary of our paper “Error or Fraud? The Effect Omissions on Management’s Fraud Strategies and Auditors’ Evaluations Identified Misstatements” (Hamilton Smith 2021). that study, investigated (1) whether managers employ an “omission strategy” to reduce the perceived intentionality their fraudulent misstatements (2) auditors are prone believe such omissions unintentional. We found choose perpetrate fraud by omitting transactions from financial statements critical information supporting documents, rather than using more active forms (e.g., providing false information). also less skeptical when they involve omission, as opposed misrepresentation. Overall, study identifies concerning pattern, wherein method chosen managers—omission—is unlikely be judged intentional auditors.