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

Abstract

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. Accounting and psychology team literature suggests that audit teams generally outperform individual auditors. However, the psychology literature suggests that brainstorming tasks are one exception because brainstorming teams lose ideas that were previously generated by the individuals on the team. Results from my experiment suggest that brainstorming sessions result in an overall loss of ideas generated by individual auditors prior to the brainstorming session. However, while the overall number of ideas is reduced, brainstorming audit teams generate more quality fraud ideas than individual auditors generate before 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.

Keywords: Fraud, brainstorming, audit teams, risk assessments

JEL Classification: M41, M49, G38