Hey Toshi,
this depends on if FortiGate is configured to update the changes to FortiManager or not.
If the FortiGate is supposed to update changes to FortiManager -> yes, status should be auto-update, you are correct.
If the FortiGate is not supposed to update changes to FortiManager automatically -> status would in fact be conflict.
In addition, sometimes for some reason the FortiGate does not perform auto-update even though it should, and in that case the status will also be conflict. It's hard to say what the case was here - but good point!
@NIS If you frequently see the conflict status, it might be worth opening a ticket with Technical Support, because that would indicate changes are happening on FortiGate that FortiGate is not sharing back to FortiManager, and something in the connection between FortiManager and FortiGate might not be quite healthy.