Document Type : Original Article
Department of Accounting, Najafabad Branch, Islamic Azad University, Najafabad, Iran
One of the strategies of audited firms' management is to divert the auditor's attention from the managed accounts to clean accounts (without misstatement) or accounts that contain misstatements other than managed accounts to affect the auditor's ability to detect fraud. The experimental method and a sample include 106 auditors in 2022. We examine whether managers attempt to reduce the perceived intentionality of their fraudulent misstatements by perpetrating fraud via omission, as opposed to a more active form of commission, and how auditors evaluate the resulting misstatements. We find that managers choose to omit a transaction from the financial statements rather than record a transaction inappropriately. They also decide to omit critical information from supporting documents rather than provide misleading information. However, auditors generally believe that misstatements involving omissions are unintentional. Specifically, we find that auditors are less skeptical of an omitted transaction than a misrecorded transaction. They are also less skeptical of a misstatement that results from management omitting information from a supporting document than misrepresenting information. Finally, a method of fraud (omission) is identified that those managers are likely to use; on the other hand, those auditors are unlikely to judge it as intentional.