Let’s state that again more simply. Munter is telling people that even small amounts of fraud that are immaterial in dollar terms could still be material issues that investors would want to know about, because the fraudulent transactions suggest deeper problems in the company’s system of internal controls. So auditors should be more diligent in investigating the root cause of every erroneous financial transaction they find, and in assessing internal controls with a cynical eye that assumes management might commit fraud.
At an abstract level, his point makes sense. In practice, however, his point is likely to meet resistance from auditors, who will say they can only do so much to find fraud.
‘Enforcement 40’ for 2020
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