Question:

"The planning, testing, and evaluation of audit evidence for indicia of fraud are unlikely to be successful without that attitude, particularly because fraud is a crime of deceit and because the popularly labelled potential red flags, which may appear by hindsight as bright-red flags, are more like mere threads in their true contemporaneous context."

(a) Explain the difficulties inherent in identifying and interpreting potential red flags.

(b) Describe the key conditions that tend to be present when fraud occurs and how potential red flags can be visible within each of these key conditions.