As per GAAP, while auditing a company, an Auditor just checks a sample of financial transactions and not all the transactions. Hence, the management can escape even a major fraud if they intend to do so. True or False ?

Audit does not give the absolute assurance, it gives the reasonable assurance. Further, we should also note the fact that, even if auditors vouch the% of the transactions, there still lies some unavoidable risk due to the auditors involved and the judgement/conclusion made on the audit evidence.

The case you mentioned is of management collusion. Management are the one having full responsibility for detection and prevention of fraud and error. So, If management is involved in the misstatement or fraudulent  financial reporting, it would definitely be difficult for the auditor to identify the fraud.

Therefore, Fraud may remain undetected, not because auditor applies the sampling but because the fraud is of high level management collusion and it is a control weaknesses of the concerned company. And, as said by Mr.  frank mwansa, primary responsibility of prevention and detection of fraud and error is not of the auditor, management (Board of directors in must of the cases) are primarily responsible for this.

False. The auditor does not have any responsibility with regard to prevention and detection of fraud. It is management's responsibility to put up strong and effective internal controls. The auditor is only responsible for forming and expressing an opinion on the financial statements, the responsibility and preparing and presenting the financial statements in accordance with applicable financial reporting framework is that of management of the entity and with oversight from those charged with governance. Unless they want to  ignore there responsibility and act fraudulently.

If management has wilful intent to hide information, it can be done otherwise also. On account of a good auditor, the process of selecting sample (how the vouchers are selected for audit) needs to be a scientific approach. This will substantially reduce probability of missing an important event, though the probability does not reduce to absolute Zero

agree with collogeus answer

Even if the fraud transaction is included in the sample, still the management can escape if fraud in skillfully perpetrated.  So its true. 

agree with the answers ..................................................

I agree with specialists answers

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