During December 2017, TWD increased its casualty insurance coverage on several pieces of sophisticated machinery from historical cost to replacement cost. Inquiries about the substantial increase in revenue that TWD recorded in the fourth quarter of 2017 disclosed a new policy. TWD guaranteed several municipalities that it would refund the federal and state funding paid to it if any municipality fails federal or state site cleanup inspection in 2018. An initial public offering of TWD's stock is planned for late 2018. Auditing Standards Review. Management fraud (fraudulent financial reporting) is not the expected norm, but it happens from time to time. In the United states, several cases have been widely publicized. They happen when motives and opportunities overwhelm managerial integrity. What distinguishes management fraud from a defalcation? What are an auditor's responsibilities under auditing standards to detect management fraud? What are some characteristics of management fraud that an audit team should consider to fulfill the responsibilities under auditing standards? What factors might an audit team notice that should heighten the concern about the existence of management fraud? Under what circumstances might an audit team have a duty to disclose management's frauds to parties other than the company's management and its board of directors? Analytical Procedures: Ratio Relationships. The following situations represent errors and frauds that could occur in financial statements. Required: State how the ratio in question would compare (higher, equal, or lower) to what the ratio