scholarly journals The Effects of Tone at the Top and Professional Skepticism on Fraud Risk Judgment Among Internal Auditors in Indonesia

2021 ◽  
Vol 20 (1) ◽  
pp. 139-154
Author(s):  
Lufti Juliana ◽  
◽  
Razana Juhaida Johari ◽  
Jamaliah Said ◽  
Ludovicus Sensi Wondabio ◽  
...  
Keyword(s):  
Working Environment ◽  
Professional Skepticism ◽  
Internal Auditors ◽  
Audit Failure ◽  
Fraud Risk ◽  
Risk Judgment ◽  
Tone At The Top ◽  
New Finding ◽  
Regulatory Bodies ◽  
Risk Judgments

Failure of the internal auditors (IAs) to appropriately apply fraud risk judgment could result in audit failure in revealing fraud and scandals. It leads to significant harmful consequences to the IAs’ profession. In carrying out their duties, IAs sometimes have to face top management pressure. Tone at the top becomes essential in creating an ideal working environment for the IAs. Moreover, the lack of professional skepticism has been one factor causing an auditor’s failure to achieve the optimal result in detecting fraud. The findings from 202 respondents revealed that the IAs who have high professional skepticism are more effective in making fraud risk judgments. However, the direct influence of the tone at the top on fraud risk judgment is not statistically supported. This new finding may help professional regulatory bodies and the internal auditing function consider the profile and its necessary environment to elevate fraud risk judgment to regain public trust in the profession.

The Effects of Internal Audit Report Type and Reporting Relationship on Internal Auditors' Risk Judgments

2015 ◽  
Vol 29 (3) ◽  
pp. 695-718 ◽  
Author(s):  
Douglas M. Boyle ◽  
F. Todd DeZoort ◽  
Dana R. Hermanson
Keyword(s):  
Audit Committee ◽  
Internal Audit ◽  
Risk Assessments ◽  
Audit Report ◽  
Internal Auditors ◽  
Fraud Risk ◽  
External Stakeholders ◽  
Risk Judgments ◽  
Audit Information ◽  
Control Risk

SYNOPSIS The governance literature (e.g., Archambeault, DeZoort, and Holt 2008) highlights the lack of internal audit information available to external stakeholders and discusses the need for a publicly available internal audit report (IAR) to describe the function and/or provide assurance. We study the effects of IAR type (i.e., descriptive IAR, assurance IAR) and internal audit reporting relationship (i.e., primarily to management or primarily to the audit committee) on internal auditors' judgments. Specifically, 108 experienced internal auditors provided fraud risk and control risk assessments in an experiment where IAR type and reporting relationship were manipulated randomly between subjects. Fraud risk assessments are higher (more conservative) when internal auditors provide assurance in an IAR or when they report primarily to the audit committee. A significant interaction indicates that internal auditors provide higher control risk assessments when they provide assurance in an IAR and report primarily to the audit committee. Providing descriptive information in an IAR to external stakeholders does not significantly affect internal auditors' fraud risk or control risk assessments. Supplemental results indicate moderate and varied support among internal auditors for the issuance of a descriptive IAR to external stakeholders, but significantly less support for the issuance of an assurance IAR. The results, in combination with Holt and DeZoort's (2009) evidence regarding the effect of descriptive IARs on investors' judgments, suggest the need for discussions of the value of IARs in practice.

Do fine feathers make a fine bird? The influence of attractiveness on fraud-risk judgments by internal auditors

2018 ◽  
Vol 22 (3) ◽  
pp. 332-344 ◽  
Author(s):  
Marc Eulerich ◽  
Jochen C. Theis ◽  
Junpeng Lao ◽  
Meike Ramon
Keyword(s):  
Internal Auditors ◽  
Fraud Risk ◽  
Risk Judgments

The Effects of Judgments of New Clients' Integrity upon Risk Judgments, Audit Evidence, and Fees

2001 ◽  
Vol 20 (2) ◽  
pp. 85-99 ◽  
Author(s):  
Philip R. Beaulieu
Keyword(s):  
Source Credibility ◽  
Prospective Audit ◽  
Fraud Risk ◽  
Audit Evidence ◽  
Risk Judgments

Client integrity concerns auditors when they plan new audit engagements because it is related to both fraud risk and the source credibility of clients. Auditors may increase audit work and fees when they judge integrity to be below normal. In an experiment, a sample of 63 Canadian audit partners read information about a prospective audit client, including information about the client's CFO. This information was manipulated to support a judgment of either high or low integrity. As hypothesized, judgments of client integrity were negatively related to risk judgments, audit evidence extent recommendations (indirectly through risk judgments), and fee recommendations (indirectly through risk judgments and extent recommendations).

scholarly journals THE APPLICATION OF PROFESSIONAL SKEPTICISM IN FRAUD DETECTION (A Case Study at BPKP Representative of Central Java Province)

2018 ◽  
Vol 2 (2) ◽  
pp. 175
Author(s):  
Sarina Gabryela Aprilyanti Butar Butar
Keyword(s):  
Sampling Method ◽  
Supervisory Board ◽  
Fraud Detection ◽  
Professional Skepticism ◽  
Internal Auditors ◽  
Self Confidence ◽  
Central Java ◽  
Functional Position ◽  
Central Java Province

The purpose of this research is to describe the application of professional skepticism on government internal auditors of the Financial and Development Supervisory Board (BPKP) Representative of Central Java Province in detecting fraud. The application of professional skepticism will be understood based on the characters of attitude, as stated by Hurtt (2010), consisting of questioning mind, suspension on judgment, search for knowledge, interpersonal understanding, self-confidence, and selfdetermination.This research is conducted using qualitative approach and refers to theoretical proposition. The data was collected by interviewing forensic auditors at each of functional position. The interviewees were determined by using purposive sampling method. They were forensic auditors who had ever been sued for audit report. The result shows that the forensic auditors of BPKP Representative of Central Java have already had proper comprehension about professional skepticism in fraud detection. The forensic auditors of BPKP Representative of Central Java have also applied professional skepticism in detecting fraud.

The Effects of Auditors' Accessibility to “Tone at the Top” Knowledge on Audit Judgments

2014 ◽  
Vol 26 (2) ◽  
pp. 73-96 ◽  
Author(s):  
Regan N. Schmidt
Keyword(s):  
Mental Representation ◽  
Decision Aid ◽  
Audit Quality ◽  
Mental Representations ◽  
Data Availability ◽  
Control Environment ◽  
Audit Process ◽  
Mediation Analyses ◽  
Fraud Risk ◽  
Tone At The Top

ABSTRACT: This study examines how external auditors' accessibility to “tone at the top” knowledge impacts subsequent audit judgments. To examine this relationship, a decision aid is investigated that differentially facilitates the auditors' retrieval of “tone at the top” evidence from memory. Results of an experiment indicate that, holding the client's “tone at the top” constant, the structure of a control environment decision aid influences the auditors' mental representation of the “tone at the top.” Further, favorable “tone at the top” mental representations transfer to induce relatively favorable control environment and fraud risk assessments, and greater reliance on management's explanation for variances detected in analytical procedures. Mediation analyses identify the control environment assessment as a mediator between the influenced mental representation and the subsequent fraud risk and analytical procedure judgments. The results of the paper underscore the importance of how auditors develop their “tone at the top” mental representations, the influence of these mental representations on subsequent audit judgments, and the stage in the audit process where interventions can improve audit quality. Data Availability: Contact the author.

Fraud Brainstorming Group Composition in Auditing: The Persuasive Power of a Skeptical Minority

2020 ◽  
Author(s):  
Michelle McAllister ◽  
Allen D. Blay ◽  
Kathryn Kadous
Keyword(s):  
Group Composition ◽  
Risk Assessments ◽  
Control Groups ◽  
Professional Skepticism ◽  
Mediation Analyses ◽  
Fraud Risk ◽  
Persuasive Power ◽  
High Trait ◽  
Fraud Risk Assessments

We experimentally examine the effects of trait professional skepticism on fraud brainstorming performance. We find that groups with a minority, but not a majority, of high trait skeptics develop more fraud ideas than control groups with no high trait skeptics. Mediation analyses indicate that minority high trait skeptic groups also assess higher fraud risk, in part because they consider more fraud ideas. Low trait skeptics who brainstorm in groups with a minority of high trait skeptics tend to view the minority high trait skeptic as the best member of the group because of that member's unique insights. Their individual, post-brainstorming fraud risk assessments remain high, indicating conversion to the minority (skeptical) viewpoint. Our study contributes to the brainstorming literature by highlighting the importance of group composition. It suggests that firms can promote skeptical team judgments by leveraging individuals' high trait skepticism in thoughtfully composed interacting groups.

The effect of alternative fraud model use on auditors’ fraud risk judgments

2015 ◽  
Vol 34 (6) ◽  
pp. 578-596 ◽  
Author(s):  
Douglas M. Boyle ◽  
F. Todd DeZoort ◽  
Dana R. Hermanson
Keyword(s):  
Fraud Risk ◽  
Risk Judgments

scholarly journals The Contribution of the Internal Audit Function in Risk Management

2017 ◽  
Vol 8 (3) ◽  
pp. 178
Author(s):  
Faten Hanna Kerazan
Keyword(s):  
Risk Management ◽  
Internal Audit ◽  
Professional Organizations ◽  
Professional Certification ◽  
Public And Private ◽  
Internal Auditors ◽  
Internal Audit Function ◽  
Private Banks ◽  
Regulatory Bodies ◽  
Training Courses

This study aimed to identify the contribution of internal audit in risk management in Syrian public and private banks, the questionnaire was used in collecting the initial data, which was distributed to a sample of board of directors and executives in these banks.The study found that there is a contribution to the internal audit function in risk management in all Syrian public and private banks and there are no statistically significant differences on this contribution.The study recommended of the need to conduct training courses for workers in the internal audit function and issue instructions and necessary legislations to regulate the activity of internal audit in banks, a committee of internal audit must be formed within the Association of Chartered Accountants in Syria, where its mission is to the development of internal auditors and the need for cooperation of professional organizations of accounting, auditing and regulatory bodies in Syria to establish an association for internal auditors to qualify them and give them a professional certification to carry out their roles under the new framework for exercising of the profession that guarantees to provide the necessary advice and guidance for them to bring the profession up to the required level.

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