Do Fine Feathers Make a Fine Bird? The Influence of Attractiveness on Fraud-Risk Judgments by Internal Auditors

Abstract

Independence and objectivity are the chief principles assumed to underlie internal auditors’ fraud-risk judgments. However, a substantial body of evidence regarding attractiveness stereotyping and the attractiveness halo effect suggests that physical attractiveness of potential suspects may influence internal auditors’ fraud-risk judgments according to the proverb “what is beautiful is good”. In this seminal inter-disciplinary experimental study we investigated whether internal auditors are susceptible to such appearance-related biases, or whether they correct for them due to their expertise and motivation as suggested by the process model of appearance-based stereotyping. 193 internal auditors were presented a misappropriation-of-assets scenario, in which the attractiveness of a suspect was manipulated. To determine whether professional expertise is associated with increased resilience to appearance-related biases, their fraud-risk judgments were contrasted with those acquired from 240 control subjects with no auditing experience. In line with our predictions attractiveness modulated naïve subjects’ fraud-risk judgments, whereas internal auditors did not show any indication for appearance-related biases. Our findings demonstrate that internal auditors’ experience and motivation immunize them to the well-documented phenomena of physical attractiveness stereotyping and the attractiveness halo effect – at least when fraud-risk judgments do not involve face-to-face interactions. We propose a two-step procedure to maximize objectivity of internal auditors’ fraud-risk judgments.

Keywords: Internal Audit Function, Internal Auditor, Fraud, Physical Attractiveness Stereotype

JEL Classification: M4, M42,