The effects of tone at the top and coordination with external auditors on internal auditors’ fraud risk assessments

Wang, Isabel Z.; Fargher, Neil

doi:10.1111/acfi.12191

Cited by 8 publications

(7 citation statements)

References 46 publications

(43 reference statements)

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“…Beaudoin et al (2015) conduct an experimental study and find that CFOs' fraudulent financial reporting decisions are influenced by personal financial incentives and earnings management ethics. Wang and Fargher (2015) find that the internal auditors' assessed fraud risk is higher when senior management's attitude towards ethics and integrity is relatively poor. Dyreng et al (2010) report that individual executives play a significant role in explaining the level of tax avoidance by companies.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 85%

Chief financial officer demographic characteristics and fraudulent financial reporting in China

Sun

Kent

et al. 2017

Accounting & Finance

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We investigate whether management's cognitions, values and perceptions are associated with fraud for 18 863 firm-years for Chinese listed firms from 2000 to 2014. Demographic characteristics of the chief financial officer (CFO) are used as proxies for management's cognitions, values and perceptions. We find that fraudulent financial reporting is higher when CFOs are younger, male, and have lower education backgrounds. An analysis of inflated earnings, fictitious assets, material omissions and other material misstatements provide similar results, with the exception that CFOs with higher education levels are associated with more inflated earnings.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 85%

Chief financial officer demographic characteristics and fraudulent financial reporting in China

Sun

Kent

et al. 2017

Accounting & Finance

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“…Roussy (2013) berargumentasi bahwa ketika auditor menjalankan peran ganda, pengawas dan konsultan seringkali terjerembab pada ambiguistas peran yang dapat mengancam kedudukan profesi mereka sebagai internal control. Independensi auditor internal harus dipertaruhkan untuk melayani kebutuhan manajerial dalam mengelola dan mengendalikan operasi organisasi (Aghghaleh, Mohamed, & Ahmad, 2014;Wang & Fargher, 2017). Hal ini juga dipicu oleh rendahnya kualitas penilaian audit internal dalam organisasi disebabkan faktor-faktor seperti pengalaman kerja yang rendah, assesment profesional yang abu-abu, rendah support dari manajemen puncak, dan miskonsepsi peran auditor internal dengan manajemen (Ege, 2015;Lin, Cefaratti, Lee, & Huang, 2018).…”

Section: Hasil Dan Pembahasanunclassified

“…Roussy (2013) mengungkapkan bahwa auditor internal dalam memberikan assurance dan consulting seringkali jatuh pada sikap grey independence dengan mengorbankan Independensi mereka untuk melayani kepentingan puncak. Hal ini dapat menyebabkan tidak tercapainya kualitas audit yang mencerminkan independensi laporan audit internal (Hoos, Messier, Smith, & Tandy, 2018;Wang & Fargher, 2017). Oleh karena itu, pekerjaan auditor internal sebelum melakukan audit internal adalah perlu melakukan identifikasi risiko dini, pemantapan kualitas misi audit internal, dan konsisten dengan perannya untuk menghasilkan output audit internal yang berkualitas.…”

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“…Penelitian di atas sebagai pengantar atas penggalian tentang audit internal yang dapat memerangi kasus korupsi pengadaan di Indonesia. Pendalaman terhadap audit internal didapatkan dari penelitian sebelumnya yang dilakukan oleh Ferry, Zakaria, Zakaria, & Slack (2017), Gamar & Djamhuri (2015), Roussy (2013), dan Wang & Fargher (2017). Oleh karena itu, artikel ini bertujuan untuk mengkaji kembali status peran audit internal sebagai alat melawan kasus korupsi pengadaan.…”

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Reorentasi Audit Internal Untuk Melawan Korupsi Pengadaan

As’ad

Tarjo

Musyarofah

2019

jamal

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Abstrak: Reorientasi Audit Internal untuk Melawan Korupsi Pe ngadaan. Tujuan penelitian ini adalah untuk menemukan reorientasi peran audit internal dalam melawan korupsi pengadaan. Penelitian ini menggunakan metode configurative-ideographic case study pada informan yang berasal dari Auditor Pengawas Internal Pemerintah (APIP). Penelitian ini menemukan bahwa informan sering jatuh pada sikap penilaian profesional yang tidak objektif pada kegiatan pengadaan yang di dalamnya terdapat political corruption. Peneliti mengusulkan struktur pengawasan internal pemerintah daerah dengan pendekatan three lines for defense. Konsep ini mendedikasikan artikulasi yang jelas terhadap peran audit internal di lingkungan pemerintah daerah dalam memberikan support assurance.

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“…The notion that organizations are well advised to assert ethical propriety permeates the practitioner literature (Castellano and Lightle, 2005) and the international literature (Law, 2011) in accounting. Although a disproportionate amount of this work is focused upon its auditing implications (Wang and Fargher, 2017;Schmidt, 2014), studies are beginning to observe that words and policies themselves are insufficient (Pickerd et al, 2015). However, the accounting literature leans heavily upon how ethical ideas need to be embedded in internal controls or reinforced by regulation (Rae and Subramaniam, 2008;Rezaee, 2005).…”

Section: Theory and Literature Reviewmentioning

confidence: 99%

Walking the talk

Scheetz

Fogarty

2019

JAOC

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Purpose Based on exchange theory and the generalized norm of reciprocity, psychological contracts perceived by employees are believed to have dysfunctional consequences for organizations if breached. This paper aims to study the willingness of employees to report fraud, as such is an important aspect of internal control for organizations. Design/methodology/approach A 2 × 2 between-subjects experiment was conducted in which 99 participants with diverse accounting backgrounds were first asked questions about their preconceived beliefs (psychological contract) regarding how reports of unethical conduct would be managed, and their reaction if these beliefs were broken (psychological contract violation). Participants were given a hypothetical situation of fraud and then asked to indicate their likelihood of reporting fraud to a supervisor. Findings The main hypotheses are that employees will be less likely to report fraud when the organization fails to signal the presence of a positive ethical environment or when management reacts weakly to previous reports of unethical activity. The data and findings support these hypotheses. Additional testing also reveals that a psychological contract violation mediates the relationship between the outcome of previous reports and the intention to report fraud. Research limitations/implications As with any experimental study, this study’s results come with limitations. Reading an overly simplistic scenario that omits real world details and providing intention to report is very different from actually reporting fraud in one’s own place of employment. Therefore, reporting intentions may vary from actual reporting behavior. Further, reporting motivation (self-defense, altruism, etc.) and concern over retaliation are not measured. Practical implications Employees have expectations surrounding ethical corporate environments. Psychological contract violations occur as a result of broken expectations and are common in the workforce. In this study, a breakdown in the internal control environment because of a poor ethical culture, caused an even greater breakdown in internal controls because of employees’ decreased reporting intentions. Social implications Psychological contract violations impact employees’ intention to report fraud. These violations need to be understood so that additional measures and safeguards can be instituted when employees are not acting as a fraud defense or detection mechanism. During such times when there is a breakdown in this type of internal control (that is, when employees might be hesitant to report fraud), extra safeguards against fraud, additional procedures to detect fraud, and enhanced employee training encouraging reporting of suspected unethical conduct, become even more important. Originality/value Strong experimental methods provide a rigorous way to evaluate a problem of our day: job insecurity caused by rampant organizational turbulence. The hidden cost is expressed in terms of how less can be expected of employees as a first line of defense against fraud.

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The effects of tone at the top and coordination with external auditors on internal auditors’ fraud risk assessments

Cited by 8 publications

References 46 publications

Chief financial officer demographic characteristics and fraudulent financial reporting in China

Chief financial officer demographic characteristics and fraudulent financial reporting in China

Reorentasi Audit Internal Untuk Melawan Korupsi Pengadaan

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