This “paper” is shit.
They get the most basic function of auditing wrong. Auditors are taught from the beginning that they do not look for fraud. You should not expect auditors to detect fraud. My wife is in finance and I have a dozen Big 4 auditors as friends. This is one of the basic things hammered into every auditor from day one. Auditors do not look for fraud.
If they happen to find fraud they need to report it. But they don’t go into an audit looking for fraud.
Second, using restatements as a measure of fraud is stupid. restatements can happen for a bunch of reasons, the least of which are fraud. Very often people make mistakes and thats why every company has a tolerance of error called materiality. Sometimes errors aren’t detected for many quarters and would cause a restatement.
As well the auditing rules leave room for interpretation. There is always dynamic tension between the accounting team of a company vs the auditors. The fact that a company and auditors gets things wrong and then for this to be classified as “fraud” is stupid. It’s most often times not fraud. Sometimes the audit partner changes and their opinion is vastly different from the previous partner which causes a lot of regurgitation of the financials and likely a reevaluation of the contract. But the audit partner doesn’t want to lose her job or go to jail so I think for the most part having strict laws and tough punishments is very motivating for auditors.
That said, I worked for a company that got shut down for true fraud. The cfo and ceo lied about sales in order to make their numbers. They both went to jail but this is the most basic fraud and they went to jail for a long time.