The Effects of SAS No. 82 on Auditors' Attention to Fraud Risk Factors and Audit Planning Decisions

ABSTRACT Prior research finds that although auditors assess fraud risk accurately, they generally fail to adjust audit procedures appropriately. The most recent Public Company Accounting Oversight Board (PCAOB) inspections in 2016 still identify response to risks of material misstatement (RMM) as a major area of inspection focus and cite it as a recurring audit deficiency. In this study, participants assess RMM and make audit-planning judgments in a high/low fraud risk environment using either a traditional source-based representation of RMM (i.e., based on inherent, control, and fraud risk) or a newer type-based representation of RMM (i.e., based on error and fraud risk). The results indicate that while auditors in both groups show similar sensitivity to risk, the type-based group of auditors are better able modify their audit plans by using more procedures that are new to a standard audit program and assigning more experienced staff to address high fraud risk. Data Availability: Contact the author.

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The Importance of Account Relations on Audit Planning Decisions Based on the Seriousness of Interim Evidence Findings and the Presence of Profit Pressure

SSRN Electronic Journal ◽

10.2139/ssrn.540102 ◽

2004 ◽

Author(s):

Scott D. Vandervelde

Keyword(s):

Audit Planning ◽

Planning Decisions

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The Effects of Decision Aid Orientation on Risk Factor Identification and Audit Test Planning

Auditing A Journal of Practice & Theory ◽

10.2308/aud.2002.21.2.39 ◽

2002 ◽

Vol 21 (2) ◽

pp. 39-56 ◽

Cited By ~ 29

Author(s):

Jean C. Bedard ◽

Lynford E. Graham

Keyword(s):

Risk Factors ◽

Risk Management ◽

Decision Aid ◽

Decision Aids ◽

Management Strategies ◽

Risk Identification ◽

Matched Pair ◽

Audit Planning ◽

Audit Firms ◽

Risk Management Strategies

In auditing, risk management involves identifying client facts or issues that may affect engagement risk, and planning evidence-gathering strategies accordingly. The purpose of this paper is to examine whether auditors' identification of risk factors and planning of audit tests is affected by decision aid orientation, i.e., a “negative” focus wherein client risk and its consequences are emphasized, or a “positive” focus where such factors are not emphasized. Specifically, we expect that auditors will identify more risk factors using a negatively oriented risk identification decision aid, but only when engagement risk is relatively high. We address this issue in the context of auditors' knowledge of actual clients, manipulating decision aid orientation as negative or positive in a matched-pair design. Results show that auditors using the negative decision aid orientation identify more risk factors than do those using a positive orientation, for their higher-risk clients. We also find that decisions to apply substantive tests are more directly linked to specific risk factors identified than to direct risk assessments. Further, our results show that auditors with repeat engagement experience with the client identify more risk factors. The findings of this study imply that audit firms may improve their risk management strategies through simple changes in the design of decision aids used to support audit planning.

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Auditor Identification of Fraud Risk Factors and their Impact on Audit Programs

International Journal of Auditing ◽

10.1111/j.1099-1123.2005.00102.x ◽

2005 ◽

Vol 9 (1) ◽

pp. 59-77 ◽

Cited By ~ 46

Author(s):

Theodore J. Mock ◽

Jerry L. Turner

Keyword(s):

Risk Factors ◽

Fraud Risk

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Fraud risk factors and tendency to commit fraud: analysis of employees’ perceptions

International Journal of Ethics and Systems ◽

10.1108/ijoes-03-2019-0057 ◽

2019 ◽

Vol 35 (4) ◽

pp. 545-557

Author(s):

Jesi Rizky Anindya ◽

Desi Adhariani

Keyword(s):

Risk Factors ◽

Sampling Method ◽

Small Samples ◽

Dominant Factor ◽

Fraud Triangle ◽

Fraud Prevention ◽

Content Type ◽

Unethical Conduct ◽

Fraud Risk ◽

Convenience Sampling

Purpose This study aims to determine the fraud risk factors perceived by employees to have the greatest influence on individuals committing fraud as an unethical conduct, as well as to analyze employees’ opinions on fraud prevention program. Design/methodology/approach The fraud risk factors in this study are based on the concept of the fraud triangle as developed by Donald Cressey, as well as examples of situations set out in SAS No. 99. The samples used in this study are company employees who have been selected using the convenience sampling method. Findings A survey of 109 employees reports that none of the three factors (pressure, opportunity and rationalization) has a significant influence on fraud. However, when comparing the factors, the pressure is considered to have the highest impact. In terms of fraud prevention, the employees suggest that it is extremely important to implement all prevention tools, especially with regard to the adequate segregation of duties. Research limitations/implications Limitations of this study in terms of method and small samples are expected to inform future studies to overcome the limitations by using other methods such as interview and by collecting more respondents to gather their perceptions and opinions. Originality/value This study contributed to the literature in confirming the pressure as the dominant factor and in confirming the importance of anti-fraud programs as suggested by the agency theory.

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Fraud risk factors and auditing standards: A call for the replication of empirical research in an Islamic environment

The Arabian Journal of Accounting ◽

10.12785/aja/130104 ◽

2010 ◽

Vol 13 (1) ◽

pp. 123-1417

Author(s):

Mr. Tumpal Sitorus, et.al.

Keyword(s):

Risk Factors ◽

Empirical Research ◽

Fraud Risk ◽

Auditing Standards

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Do Strategic Reasoning and Brainstorming Help Auditors Change Their Standard Audit Procedures in Response to Fraud Risk?

The Accounting Review ◽

10.2308/accr.2009.84.3.811 ◽

2009 ◽

Vol 84 (3) ◽

pp. 811-837 ◽

Cited By ~ 106

Author(s):

Vicky B. Hoffman ◽

Mark F. Zimbelman

Keyword(s):

Academic Research ◽

Strategic Reasoning ◽

The Public ◽

Fraud Risk ◽

Planning Decisions ◽

Public Company

ABSTRACT: The Public Company Accounting Oversight Board recently reported that its inspections show that auditors fail to effectively modify their standard audit procedures in response to fraud risk. Prior academic research is consistent with this finding. Our study examines the effects of two interventions on auditors' planning decisions in a high-fraud-risk setting: strategic reasoning and brainstorming in groups. Both interventions are predicted to lead auditors to more effectively modify their planned audit procedures. We use a panel of fraud experts to identify effective modifications to the audit plan of a specific fraud case. The experts' recommendations are then used to evaluate the effectiveness of practicing auditors' audit plans with and without the two interventions. We predict and find that each intervention leads to more effective modifications to the standard audit procedures and that the combination of the interventions is not significantly more effective than either intervention used alone.

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