Fraud Discovered During an Audit:
Under ISAs, auditors must communicate findings of fraud to the appropriate governance body, such as the audit committee or board of directors.
This ensures accountability and allows the organization to take appropriate remedial action.
Analysis of Other Options:
A). Confront management:This could compromise the investigation and is not the auditor ' s role.
B). Report to regulators:Not immediately required unless legal reporting obligations apply.
D). Confidentiality:Confidentiality rules allow communication with governance bodies as part of the audit process.
Conclusion:Reporting findings to the audit committee aligns with ISA requirements and best practices.
References:International Standards on Auditing (ISA) 240: Auditor ' s Responsibilities Relating to Fraud.

Customer due diligence is an important fraud prevention measure, especially when a new customer, foreign location, unusually large order, and request for credit all appear in the same transaction. A company should verify the legitimacy and financial reliability of the customer before extending credit. Examining EFG's net worth is relevant because ArtisanWare must evaluate whether the customer has the ability to pay and whether the transaction presents heightened fraud or collection risk. Applying the same level of due diligence to all customers is not always appropriate because higher-risk transactions require enhanced procedures. Due diligence is not limited only to corruption-risk countries, and a company should not accept a credit transaction without verifying the customer's identity and financial condition. Therefore, option D is the most accurate answer.

Theory of Differential Association:
* This theory suggests that criminal behavior is learned through interaction with others, primarily within intimate groups.
* Principles of the theory include:
* Learning through communication.
* Acquiring criminal knowledge similarly to other forms of learning.
Why A is Incorrect:
* General needs and values, such as poverty or desire for wealth, do not directly explain criminal behavior under this theory. Instead, the behavior is attributed to learned influences from others.
Clarification of Other Options:
* B, C, and D accurately reflect the principles of differential association.

The ACFE research consistently finds that the majority of occupational fraudsters are first-time offenders.
Specifically, "85% of occupational fraud perpetrators had never been punished or terminated for fraud-related conduct prior to the crimes in this study." Reference:ACFE Fraud Examiners Manual, 2020 International Edition -Fraud Prevention and Deterrence, Section 4.263.

Responsibility for Anti-Fraud Program Effectiveness:
Management holds ultimate responsibility for designing, implementing, and maintaining an effective anti- fraud program.
Internal and external auditors, as well as compliance functions, provide oversight and recommendations but are not directly responsible for the program ' s effectiveness.
Conclusion:Management is ultimately accountable for ensuring the success of the anti-fraud program.
References:ACFE guidelines on fraud risk governance and management roles.