ABSTRACT
Managers and auditors are both subject to the civil and criminal law for dishonesty or negligence in the disclosure of financial information.
Fraud is proved when it is shown that a false representation has been made (1) knowingly, (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. … To prevent a false statement from being fraudulent, there must, I think, always be an honest belief in its truth.
(Lord Herschell in Derry v. Peek, 1889: 14 A.C.337)