A Field Experiment Examining Audit Subordinates' Knowledge and a Partner-Led Intervention in Fraud Brainstorming

61 Pages Posted: 5 Mar 2016 Last revised: 19 Aug 2018

See all articles by Sean A. Dennis

Sean A. Dennis

University of Central Florida - Kenneth G. Dixon School of Accounting

Karla M. Zehms

University of Wisconsin - Madison - Department of Accounting and Information Systems

Date Written: March 3, 2016

Abstract

In a field experiment, we leverage differences in audit subordinates’ job-relevant knowledge about clients, fraud brainstorming objectives, and “normal” audit partner leadership to explore whether and how knowledge moderates the effect of a partner-led intervention on brainstorming processes and outcomes. Our research design allows us to examine how differences in subordinate knowledge (between seniors and managers) influence auditors’ judgment processes on actual audit engagements, thereby facilitating uniquely realistic inferences about the conditions under which prompt-based interventions influence brainstorming. We develop and test a theoretical model that articulates an indirect effect of quality-differentiated partner leadership on brainstorming outcomes through changes in subordinates’ mental representations of fraud risk, conditional on subordinate knowledge. We manipulate partner leadership in brainstorming sessions for actual audit engagements and induce quality-differentiated leadership in our treatment group. We measure changes in mental representations using retrospective recalls of targeted professional skepticism, the number of new fraud risks identified, and changes in fraud risk assessments as a result of brainstorming. We predict and find an effect of quality-differentiated partner leadership on changes in the mental representations of seniors, but not managers. We also predict and find an indirect effect on fraud risk response outcomes (i.e., planned procedures) through changes in mental representations of seniors, but not managers. Both effects are stronger for seniors than managers. Our findings suggest knowledge differences as an explanatory factor that can guide the interpretation of, and potentially reconcile, prior mixed findings regarding incremental benefits of interventions in teams that are already brainstorming interactively.

Keywords: Audit planning, field experiment, fraud brainstorming, professional skepticism

JEL Classification: M4, K2

Suggested Citation

Dennis, Sean A. and Zehms, Karla M., A Field Experiment Examining Audit Subordinates' Knowledge and a Partner-Led Intervention in Fraud Brainstorming (March 3, 2016). Available at SSRN: https://ssrn.com/abstract=2741873 or http://dx.doi.org/10.2139/ssrn.2741873

Sean A. Dennis (Contact Author)

University of Central Florida - Kenneth G. Dixon School of Accounting ( email )

University of Central Florida
P.O. Box 161400
Orlando, FL 32816-1400
United States

Karla M. Zehms

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States
608-234-1052 (Phone)
608-265-5031 (Fax)

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