How should auditors acquire views on fraud risks from management?

Auditors should acquire views on fraud risks from management by making inquiries of management and others within the entity. This approach allows auditors to gather direct insights from those who oversee operations and decision-making processes, helping to identify potential areas where fraud may occur. Engaging in discussions with management can reveal their understanding of the organization's internal controls, risk assessments, and previous experiences with fraud or misconduct. This interaction fosters a dialogue that not only provides valuable information about the perception of fraud risk but also encourages a culture of openness that can enhance overall fraud prevention efforts.

Management is often the first line of defense against fraud due to their familiarity with the company’s operations and the environment in which it operates. By soliciting their perspectives, auditors can better assess the adequacy of existing controls and the potential impact of fraud on the organization. While other approaches like surveying external stakeholders or analyzing market competition can provide some context, they do not yield the same level of specific and relevant information as direct inquiries with management. Hence, this method is recognized as a best practice in understanding and assessing fraud risk within an organization.