Audit Inquiries and Deception Detection: Standards, Research, and Guidance

Ariail, Donald L.; Blair, J. Pete

doi:10.2139/ssrn.1080511

Cited by 5 publications

(3 citation statements)

References 24 publications

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“…Auditors frequently interact with their clients to gather information on internal controls, accounting policies, and financial transactions (Ariail, Blair, and Smith, 2010;Hirst and Koonce, 1996;Trompeter and Wright, 2010;Eutsler, Norris, and Trompeter 2018). A good working relationship between auditors and their clients helps facilitate an efficient and effective audit by improving auditors' ability to gather evidence during these interactions.…”

Section: Professional Skepticism and Ill Willmentioning

confidence: 99%

Auditor Skepticism and Client Ill Will

et al. 2019

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Professional skepticism is considered an essential component of audit quality. Consequently, research has focused on ways to increase skepticism by identifying factors that either limit or encourage its practice. However, research has yet to explore potential negative consequences of professional skepticism. We conduct two experiments to investigate if high levels of skepticism create ill will in audit clients, and how ill will affects the auditor-client relationship and audit quality. In the first experiment, we find that high skepticism creates ill will in the client, which increases the likelihood the client recommends switching auditors and decreases the amount of evidence provided to the auditor. We find that auditors can ingratiate themselves with the client as an intervention to decrease the development of ill will and mitigate its adverse effects. In our second experiment, we examine if client pressure to persuade the auditor of their accounting position mitigates the relationship between high skepticism and ill will. We find an interaction such that if the evidence does not support the accounting treatment the client recommends, a high level of auditor skepticism does not cause clients to experience as much ill will toward the auditor. We contribute to the literature by investigating a new empirical construct, client ill will, and developing a more nuanced perspective of the interactions between auditors and their clients.

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Section: Professional Skepticism and Ill Willmentioning

confidence: 99%

Auditor Skepticism and Client Ill Will

et al. 2019

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“…Financial-statement auditors are a unique class of professionals charged with providing reasonable assurance that financial statements are not materially misstated due to fraud. However, prior work examining experienced auditors' capability to detect deception is sparse, and for narratives, is essentially nonexistent (Ariail, Blair, and Smith [2010]). In nonnarrative settings, two studies find that less than half of audit partners detect seeded fraud in case materials (Jamal, Johnson, and Berryman [1995], Johnson et al [2001]).…”

Section: Existing Evidence On Auditor Fraud Detectionmentioning

confidence: 99%

Improving Experienced Auditors’ Detection of Deception in CEO Narratives

Hobson

Mayew

Peecher

et al. 2017

J of Accounting Research

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We experimentally study the deception detection capabilities of experienced auditors, using CEO narratives from earnings conference calls as case materials. We randomly assign narratives of fraud and nonfraud companies to auditors as well as the presence versus absence of an instruction explaining that cognitive dissonance in speech is helpful for detecting deception. We predict this instruction will weaken auditors’ learned tendency to overlook fraud cues. We find that auditors’ deception judgments are less accurate for fraud companies than for nonfraud companies, unless they receive this instruction. We also find that instructed auditors more extensively describe red flags for fraud companies and more accurately identify specific sentences in narratives that pertain to underlying frauds. These findings indicate that instructing experienced auditors to be alert for cognitive dissonance in CEO narratives can activate deception detection capabilities.

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“…99). An interview is used to acquire vital audit information (Hirst & Koonce, ; Ariail, Blair & Smith, ; Trompeter & Wright, ). Its essentialness to the audit function may implant an expectation of cooperation, perhaps with sufficient strength to instill elements of cooperation as social norms.…”

Section: Proposed Structural Modelmentioning

confidence: 99%

Impressions That Arouse an Auditor's Suspicion of Lying in an Interview

Lee

Welker²

2015

Int J Auditing

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This study models the process by which auditors draw a suspicion of lying from an interviewee's behavior and tests the model with perceptions and beliefs collected from 147 auditors after they observed an interview. An understanding of the way auditors become suspicious of lying may lead to improvements in their deception-detection training. The proposed structural model includes impressions of the interviewee as intervening variables between perceptions of behavior and suspicion of lying. It was evaluated using SEM. The results show the instrumentality of two impressions, uneasiness and non-informativeness. An additional finding is that mental stress, which can be more intense for liars than for truth tellers, is not a suspicious behavior. Auditors may disregard signs of mental stress because interviewees typically have to answer thought-provoking questions, thereby confounding the mental stress of lying with the mental stress of the interview.

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Audit Inquiries and Deception Detection: Standards, Research, and Guidance

Cited by 5 publications

References 24 publications

Auditor Skepticism and Client Ill Will

Auditor Skepticism and Client Ill Will

Improving Experienced Auditors’ Detection of Deception in CEO Narratives

Impressions That Arouse an Auditor's Suspicion of Lying in an Interview

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