How Does an Audit or a Forensic Perspective Influence Auditors’ Fraud-Risk Assessment and Subsequent Risk Response?

2021 ◽  
Author(s):  
Lawrence Chui ◽  
Mary B Curtis ◽  
Byron J Pike
Keyword(s):  
Risk Assessment ◽  
High Risk ◽  
Fraud Detection ◽  
Risk Environment ◽  
Risk Response ◽  
Fraud Risk ◽  
Risk Environments ◽  
Potential Improvement ◽  
Fraud Risk Assessments ◽  
Subsequent Risk

This study examines whether priming auditors with a forensic perspective improves their fraud-risk assessments and subsequent audit-plan responses. We contribute to the literature by investigating a potential improvement in fraud detection that encourages auditors to take a forensic specialist’s perspective, while retaining the audit tenets of efficiently identifying and responding to risk. We prime auditors with a forensic perspective and compare their fraud performance to unprimed auditors in both low- and high-risk contexts, finding primed auditors assess fraud-risk significantly higher in all fraud-risk environments. In a high-risk environment, primed auditors propose a more appropriate audit-plan response. Relevant to fraud detection, these audit-plan modifications were consistent with those determined by a panel of audit and forensic experts. They exhibit a sensitivity in the low-risk environment, whereby their risk response is similar with that of the unprimed auditors. Finally, we find perspective-taking affects risk response through its influence on risk assessment.

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

2019 ◽  
Vol 33 (1) ◽  
pp. 1-15 ◽  
Author(s):  
Kelsey R. Brasel ◽  
Richard C. Hatfield ◽  
Erin Burrell Nickell ◽  
Linda M. Parsons
Keyword(s):  
Risk Assessment ◽  
Fraud Detection ◽  
Risk Assessments ◽  
Professional Skepticism ◽  
Fraud Risk ◽  
Operational Level ◽  
Assessment Frequency ◽  
Fraud Risk Assessments

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.

scholarly journals How Fraud Risk Decomposition Affects Auditors' Fraud Risk Assessments

2020 ◽  
Vol 14 (1) ◽  
pp. P26-P32
Author(s):  
Chad A. Simon ◽  
Jason L. Smith ◽  
Mark F. Zimbelman
Keyword(s):  
High Risk ◽  
Unintended Consequences ◽  
Risk Assessments ◽  
Risk Decomposition ◽  
Fraud Risk ◽  
Trade Offs ◽  
Auditing Standards ◽  
Fraud Risk Assessments

SUMMARY In this paper, we provide a practitioner summary of our paper “The Influence of Judgment Decomposition on Auditors' Fraud Risk Assessments: Some Trade-Offs” (Simon, Smith, and Zimbelman 2018). In that study, we investigate potential unintended consequences from current auditing guidance on risk assessments. Specifically, auditing standards recommend separate assessments of the likelihood and magnitude of risks (hereafter, LM decomposition) when auditors assess risk. Our study involved several experiments, including one with experienced auditors, where we found evidence that LM decomposition leads auditors to be less concerned about high-risk fraud schemes relative to auditors who make holistic risk assessments. Our other experiments involved non-auditing settings and replicated this finding while exploring potential explanations for it. After providing a summary of our study and its results, we offer concluding remarks on the potential implications of our findings.

On the Use of Checklists in Auditing: A Commentary

2014 ◽  
Vol 8 (1) ◽  
pp. C1-C25 ◽  
Author(s):  
J. Efrim Boritz ◽  
Lev M. Timoshenko
Keyword(s):  
Risk Assessment ◽  
Experimental Studies ◽  
Risk Assessments ◽  
Cue Combination ◽  
Assessment Task ◽  
Fraud Risk ◽  
Red Flag ◽  
Application Methods ◽  
Effective Use ◽  
Fraud Risk Assessments

SUMMARYExperimental studies concerning fraud (or “red flag”) checklists often are interpreted as providing evidence that checklists are dysfunctional because their use yields results inferior to unaided judgments (Hogan et al. 2008). However, some of the criticisms leveled against checklists are directed at generic checklists applied by individual auditors who combine the cues using their own judgment. Based on a review and synthesis of the literature on the use of checklists in auditing and other fields, we offer a framework for effective use of checklists that incorporates the nature of the audit task, checklist design, checklist application, and contextual factors. Our analysis of checklist research in auditing suggests that improvements to checklist design and to checklist application methods can make checklists more effective. In particular, with regard to fraud risk assessments, customizing checklists to fit both client circumstances and the characteristics of the fraud risk assessment task, along with auditor reliance on formal cue-combination models rather than on judgmental cue combinations, could make fraud checklists more effective than extant research implies.

scholarly journals Development of the Fatigue Risk Assessment and Management in High-Risk Environments (FRAME) Survey: A Participatory Approach

2019 ◽  
Vol 16 (4) ◽  
pp. 522 ◽  
Author(s):  
Ashley Shortz ◽  
Ranjana Mehta ◽  
S. Peres ◽  
Mark Benden ◽  
Qi Zheng
Keyword(s):  
Risk Assessment ◽  
High Risk ◽  
Oil And Gas ◽  
Participatory Approach ◽  
Assessment Tools ◽  
Delphi Consensus ◽  
Risk Environments ◽  
Stakeholder Input ◽  
Risk Assessment And Management ◽  
High Risk Environments

Existing risk assessment tools are not effective or sustainable in identifying Oil and Gas Extraction (OGE) workers at high risk of fatigue-related injuries or incidents. We developed a comprehensive Fatigue Risk Assessment and Management in high-risk Environments (FRAME) survey through an industry-academic participatory approach. The FRAME survey was developed through: (1) systematic gathering of existing fatigue scales; (2) refining the inventory using the Delphi Consensus technique; and (3) further refinement through employee/worker focus groups. The participatory approach resulted in a final FRAME survey across four fatigue dimensions—sleep, shiftwork, physical, and mental fatigue, and was composed of 26 items. The FRAME survey was founded on occupational fatigue science and refined and tailored to the OGE industry, through rigorous industry stakeholder input, for safer, effective, practical, and sustainable fatigue assessment and management efforts.

scholarly journals PRACTITIONER SUMMARY How Fraud Risk Decomposition Affects Auditors' Fraud Risk Assessments

2020 ◽  
pp. 0000-0000
Author(s):  
Chad A. Simon ◽  
Jason L. Smith ◽  
Mark F. Zimbelman
Keyword(s):  
High Risk ◽  
Unintended Consequences ◽  
Risk Assessments ◽  
Risk Decomposition ◽  
Fraud Risk ◽  
Auditing Standards ◽  
Fraud Risk Assessments

In this paper, we provide a practitioner summary of our paper "The Influence of Judgment Decomposition on Auditors' Fraud Risk Assessments: Some Tradeoffs" (Simon, Smith, and Zimbelman 2018). In that study, we investigate potential unintended consequences from current auditing guidance on risk assessments. Specifically, auditing standards recommend separate assessments of the likelihood and magnitude of risks (hereafter, LM decomposition) when auditors assess risk. Our study involved several experiments, including one with experienced auditors, where we found evidence that LM decomposition leads auditors to be less concerned about high-risk fraud schemes relative to auditors who make holistic risk assessments. Our other experiments involved non-auditing settings and replicated this finding while exploring potential explanations for it. After providing a summary of our study and its results, we offer concluding remarks on the potential implications of our findings.

scholarly journals Evidence of genotypic adaptation to the exposure to volcanic risk at the dopamine receptor DRD4 locus

2016 ◽  
Vol 6 (1) ◽  
Author(s):  
Charlotte Faurie ◽  
Clement Mettling ◽  
Mohamed Ali Bchir ◽  
Danang Sri Hadmoko ◽  
Carine Heitz ◽  
...  
Keyword(s):  
High Risk ◽  
Dopamine Receptor ◽  
Genetic Basis ◽  
Active Volcano ◽  
Selective Advantage ◽  
Risk Averse ◽  
Risk Environment ◽  
Risk Environments ◽  
Receptor Locus ◽  
Negative Frequency Dependent Selection

Abstract Humans have colonized and adapted to extremely diverse environments, and the genetic basis of some such adaptations, for example to high altitude, is understood. In some cases, local or regional variation in selection pressure could also cause behavioural adaptations. Numerous genes influence behaviour, such as alleles at the dopamine receptor locus D4 (DRD4), which are associated with attitude toward risk in experimental settings. We demonstrate genetic differentiation for this gene, but not for five unlinked microsatellite loci, between high- and low risk environments around Mount Merapi, an active volcano in Java, Indonesia. Using a behavioural experiment, we further show that people inhabiting the high risk environment are significantly more risk averse. We provide evidence of a genetic basis for this difference, showing that heterozygotes at the DRD4 locus are more risk averse than either homozygotes. In the high risk environment, allele frequencies are equilibrated, generating a high frequency of heterozygotes. Thus it appears that overdominance (i.e. selective advantage of heterozygotes) generates negative frequency dependent selection, favouring the rarer allele at this locus. Our results therefore provide evidence for adaptation to a marginal habitat through the selection of a neurocognitive trait with a genetic basis.

Dickinson Technologies, Inc.: Assessing Control Environment and Fraud Risk

2003 ◽  
Vol 18 (1) ◽  
pp. 71-78 ◽  
Author(s):  
Christopher P. Agoglia ◽  
Kevin F. Brown ◽  
Dennis M. Hanno
Keyword(s):  
Risk Assessment ◽  
Internal Control ◽  
Financial Statement ◽  
Risk Assessments ◽  
Background Information ◽  
Control Environment ◽  
Abstract Concepts ◽  
Fraud Risk ◽  
Financial Statement Audit ◽  
Fraud Risk Assessments

This instructional case provides you an opportunity to perform realistic audit tasks using evidence obtained from an actual company. Through the use of engaging materials, the case helps you to develop an understanding of the control environment concepts presented in SAS No. 78 (AICPA 1995), Consideration of Internal Control in a Financial Statement Audit, and fraud risk assessment presented in SAS No. 99 (AICPA 2002), Consideration of Fraud in a Financial Statement Audit. This case involves making a series of fraud risk assessments based on company background information and a detailed and realistic control environment questionnaire, which provide you a context that makes the often abstract concepts relating to control environment and fraud risk assessment more concrete.

Effects of Human-Likeness on Robot Use in High-Risk Environments

2021 ◽  
Vol 65 (1) ◽  
pp. 1049-1053
Author(s):  
Nathan L. Tenhundfeld ◽  
Hannah M. Barr ◽  
Emily O’Hear ◽  
Andrew Atchley ◽  
Jenna E. Cotter
Keyword(s):  
High Risk ◽  
Risk Environment ◽  
Risk Environments ◽  
Significant Difference ◽  
Human Likeness ◽  
High Risk Environments

Previous research has shown that the design of robots can impact the level of trust, liking, and empathy that a user feels towards a robot. Additionally, this empathy can have direct impacts on users’ interactions with the system. Existing research has looked at how empathy can influence user willingness to, for example, put the robot in harm’s way or to destroy the robot. However, these studies have been inherently reliant upon narrative driven manipulations, which may result in experimental demands which could have influenced the results. As such, we provide a human-likeness manipulation in order to evaluate the impacts of design which may evoke empathy, on use of robots in high-risk environments. Results indicate no significant difference in robot use between conditions. These results are in conflict with previous research. More research is needed to understand when users are/are not willing to use a robot in a high-risk environment.

scholarly journals Social learning in a high-risk environment: incomplete disregard for the ‘minnow that cried pike’ results in culturally transmitted neophobia

2015 ◽  
Vol 282 (1812) ◽  
pp. 20150934 ◽  
Author(s):  
Adam L. Crane ◽  
Anthony G. E. Mathiron ◽  
Maud C. O. Ferrari
Keyword(s):  
High Risk ◽  
Social Learning ◽  
Environmental Conditions ◽  
Cultural Transmission ◽  
Opportunity To Learn ◽  
Risk Environment ◽  
Risk Models ◽  
Risk Environments ◽  
The Social ◽  
Predator Cue

Many prey species rely on conspecifics to gather information about unknown predation threats, but little is known about the role of varying environmental conditions on the efficacy of social learning. We examined predator-naive minnows that had the opportunity to learn about predators from experienced models that were raised in either a low- or high-risk environment. There were striking differences in behaviour among models; high-risk models showed a weaker response to the predator cue and became neophobic in response to the control cue (a novel odour, NO). Observers that were previously paired with low-risk models acquired a strong antipredator response only to the predator cue. However, observers that interacted with high-risk models, displayed a much weaker response to the predator odour and a weak neophobic response to the NO. This is the first study reporting such different outcomes of social learning under different environmental conditions, and suggests high-risk environments promote the cultural transmission of neophobia more so than social learning. If such a transfer can be considered similar to secondary traumatization in humans, culturally transmitted neophobia in minnows may provide a good model system for understanding more about the social ecology of fear disorders.

Audit Team Brainstorming, Fraud Risk Identification, and Fraud Risk Assessment: Implications of SAS No. 99

2007 ◽  
Vol 82 (5) ◽  
pp. 1119-1140 ◽  
Author(s):  
Tina D. Carpenter
Keyword(s):  
Risk Assessment ◽  
Risk Identification ◽  
Risk Assessments ◽  
Fraud Risk ◽  
Psychology Literature ◽  
Audit Team ◽  
Fraud Risk Assessments

SAS No. 99 requires brainstorming sessions on each audit to help auditors detect fraud. This study investigates audit team brainstorming sessions and the resulting fraud judgments. The psychology literature provides mixed results on the benefits of brainstorming. Results from my experiment suggest that while the overall number of ideas is reduced, brainstorming audit teams generate more quality fraud ideas than individual auditors generate before the brainstorming session. Further, audit teams generate new quality fraud ideas during the brainstorming session. Results also suggest that audit teams' fraud risk assessments after the brainstorming session are significantly higher than those assessments given by individual auditors on the team prior to the brainstorming session, especially when fraud is present. These results should be informative to standard setters as they suggest that brainstorming audit teams' generation of new quality fraud ideas and their improved fraud risk assessments will likely enhance their ability to identify fraud.

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