Fraud and error

Fraud and error are a separate topic, although either may become relevant when investigating a change of auditor.

Aspect	Fraud	Error
Meaning	An intentional act involving deception.	An unintentional mistake.
Key distinction	Deliberate.	Accidental.
Example	Creating fictitious sales invoices to inflate revenue.	Accidentally recording an RM5,400 invoice as RM4,500.
Another example	Stealing cash and altering records to conceal the theft.	Overlooking a depreciation calculation.

Management, with oversight from those charged with governance, has primary responsibility for preventing and detecting fraud. The auditor seeks reasonable assurance that the financial statements contain no material misstatements caused by fraud or error. Fraud can be harder to detect because it may involve concealment, collusion or management overriding controls. mia.org.my

Student takeaway: Fraud is intentional; error is unintentional. Both can cause material misstatements.