Contemporary Insights from a Fraud Brainstorming Field Survey

Posted: 14 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: February 18, 2016

Abstract

The purpose of this study is to guide practice and future research by examining contemporary fraud brainstorming practices. Using field data collected from audits conducted during 2013-2014, we investigate team characteristics, attendance and communication, brainstorming structure, timing, and effort, and brainstorming quality. Results show that although some practices are similar to those reported in earlier field studies, there are interesting differences (e.g., decreased use of checklists, shorter sessions, and risk-based deployment of resources in brainstorming). These differences suggest brainstorming has evolved throughout the intervening period during which new audit standards became effective and the PCAOB criticized auditors’ performance in fraud risk identification and risk response generation. We also examine differences in audit team characteristics and brainstorming practices across risk and trading- status partitions. Results reveal auditors deploy more resources to brainstorming when engagement risk is heightened (i.e., publicly traded clients with high fraud and/or high inherent risk); correspondingly, brainstorming quality is assessed as higher on these engagements. Collectively, our findings indicate risk-based resource allocations in brainstorming and diligent responses to regulatory concerns.

Keywords: audit planning, engagement risk, field survey, fraud brainstorming, professional skepticism

JEL Classification: M4, K4

Suggested Citation

Dennis, Sean A. and Zehms, Karla M., Contemporary Insights from a Fraud Brainstorming Field Survey (February 18, 2016). Accounting Horizons, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2746546 or http://dx.doi.org/10.2139/ssrn.2746546

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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