Which of the following best describes the auditor’s responsibility for detecting financial fraud versus detecting a defalcation?

a. There is more responsibility for detecting financial fraud because audits are designed to look for financial misstatements.

b. The auditor is responsible for detecting financial fraud only if it is material, but is responsible for detecting all defalcations caused by a known deficiency in the client’s internal control.

c. The auditor is responsible for detecting material misstatements to the financial statements; thus there is no difference in the responsibility of detecting financial fraud or a defalcation as long as they are material.

d. The auditor is responsible for detecting financial fraud of any amount if collusion and red flags were present.