The Effect of Fraud Risk Assessment Frequency and Fraud Inquiry Timing on Auditors' Skeptical Judgments and Actions

Abstract

SYNOPSIS Identifying ways to improve and maintain professional skepticism, particularly for the purpose of reducing the risk of material misstatement due to fraud, continues to be a top priority for the auditing profession. This study examines two strategies for improving skeptical behavior in a fraud-related task: (1) practicing inward-directed skepticism through repeated risk assessments and (2) performing timely fraud inquiries of operational-level employees. Results indicate auditors made more skeptical judgments when revisiting and reassessing fraud risk assessments. Further, when auditors performed operational-level fraud inquiries prior to substantive testing, participants exhibited significantly greater increases in skeptical judgment than those who performed inquiries subsequently or not at all. We also observed a greater tendency toward skeptical action, but only on the part of participants who were highly skeptical by nature. These findings support the effectiveness of two strategies for improving skepticism throughout an audit engagement that can improve fraud detection.

Analisis Pembentukan Judgement Auditor Pada Penilian Risiko Fraud: Perspektif Bounded Rationality Theory

“…Mereka mengandalkan hubungan antara kelemahan pengendalian internal dan kesalahan akuntansi sebagai dasar judgement auditor (Frederick & Libby, 1986). Auditor disarankan untuk meninjau perikatan audit lebih dari sekali untuk mempertahankan skeptisisme dan mengurangi bias (Brasel et al, 2019). Beberapa faktor seperti kepentingan yang bertentangan, batasan dalam komunikasi, dan motivasi pribadi, berkontribusi untuk meyakinkan judgement auditor (Carpenter & Dirsmith, 1993), dan itu menegaskan bahwa kesamaan tujuan antara atasan dan bawahan dapat meningkatkan judgement auditor (Asare & Wright, 2001).…”

“…Beberapa faktor seperti kepentingan yang bertentangan, batasan dalam komunikasi, dan motivasi pribadi, berkontribusi untuk meyakinkan judgement auditor (Carpenter & Dirsmith, 1993), dan itu menegaskan bahwa kesamaan tujuan antara atasan dan bawahan dapat meningkatkan judgement auditor (Asare & Wright, 2001). Penelitian lain mencakup bahwa auditor yang tidak mudah percaya menunjukkan kecenderungan untuk mengubah judgement sebagai bentuk aksi dalam menerapkan sikap skeptis (Brasel et al, 2019). Pembahasan di atas menunjukkan bahwa telah banyak penelitian tentang auditor judgement.…”

How does depletion interact with auditors' skeptical dispositions to affect auditors' challenging of managers in negotiations?

“…Prior audit research finds that higher trait skeptics exhibit behaviors consistent with the three dimensions (e.g., Brasel et al, 2019;Eutsler et al, 2018;Koch et al, 2016;Quadackers et al, 2014). For example, survey research finds that auditors higher on the Hurtt (2010) trait skepticism scale engage in greater searching for evidence, questioning of evidence, and suspension of judgment when performing audit tasks (Janssen et al, 2021).…”

Fraud Risk Factors that Affect the Audit Program Plan: The Case of Kurdistan Region, Iraq

“…Furthermore, several studies suggest that determining the critical risk factors could help auditors in an audit case and fraud risk assessment and affect the nature, timing, and extent of the audit procedures, evidence collected, and audit quality (Colbert, 1996;Helliar et al, 1996;Bedard et al, 1999;Blay et al 2007;De Martinis et al, 2007;Blay et al, 2008;Chang et al, 2008;Razak et al, 2018). Brasel et al (2019) found that auditors made more skeptical judgments when revisiting and reassessing fraud risk assessments. Furthermore, when auditors perform operational-level fraud inquiries before substantive testing, they exhibit a significantly greater skeptical judgment than when inquiries are performed subsequently or not at all.…”