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It is the auditor’s responsibility to detect fraud. Why this statement is wrong?
It is the auditors responsibility to give reasonable assurance about the truth and fairness of the financial statements ie they contain no material misstatements. That’s their legal responsibility: nothing about fraud.
Auditors perform their work on a test basis as it is usually impossible to double-check every transaction. Therefore:
(1) Small frauds might escape detection and that would not interfere with the auditor’s opinion anyhow because they are not material.
(2) It is recognised that fraudsters can be devious and might, for example, use forged documents (relatively easy with Photoshop) to cover their crimes. So, provided the auditor has been diligent to the normal level expected, they are not even expected to discover material frauds.
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