Nominal versus Interacting Electronic Fraud Brainstorming in Hierarchical Audit Teams

Posted: 10 Jun 2014

See all articles by Clara Xiaoling Chen

Clara Xiaoling Chen

University of Illinois at Urbana-Champaign; University of Illinois at Urbana-Champaign - Department of Accountancy

Ken Trotman

UNSW Australia Business School, School of Accounting

Flora H. Zhou

Bentley University

Date Written: June 4, 2014

Abstract

In this study, we examine whether interacting hierarchical teams outperform nominal hierarchical teams in electronic brainstorming. Our hierarchical audit teams were composed of 111 managers and seniors from two Big 4 accounting firms. We compare fraud brainstorming outcomes between nominal and interacting teams for two tasks of varying complexity: a simpler task of fraud risk factor identification and a more complex task of fraud hypothesis generation. We find that nominal teams generate a significantly larger number of unique fraud risk factors and fraud hypotheses than interacting teams. Nominal teams also generate higher quality fraud hypotheses. We provide evidence that social loafing by less experienced auditors in interacting teams drives the differences between nominal and interacting teams in the fraud hypothesis generation task. In addition, less experienced auditors have less developed mental simulations for frauds in interacting teams compared to those in nominal teams. A key contribution of our study is that it identifies the underlying mechanisms of the differential fraud brainstorming outcomes between nominal and interacting teams.

Keywords: fraud brainstorming, nominal versus interacting teams, mental simulation, social loafing

Suggested Citation

Chen, Clara Xiaoling and Chen, Clara Xiaoling and Trotman, Ken and Zhou, Flora H., Nominal versus Interacting Electronic Fraud Brainstorming in Hierarchical Audit Teams (June 4, 2014). Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2447725

Clara Xiaoling Chen

University of Illinois at Urbana-Champaign ( email )

389 Wohlers Hall
1206 S. Sixth Street
Champaign, IL 61820
United States
217-244-3953 (Phone)

University of Illinois at Urbana-Champaign - Department of Accountancy ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Ken Trotman (Contact Author)

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

Flora H. Zhou

Bentley University ( email )

175 Forest Street
Waltham, MA 02145
United States

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