Do Strategic Reasoning and Brainstorming Help Auditors Change Their Standard Audit Procedures in Response to Fraud Risk?

40 Pages Posted: 23 Mar 2007 Last revised: 10 Nov 2008

See all articles by Vicky B. Hoffman

Vicky B. Hoffman

University of Pittsburgh - Katz Graduate School of Business

Mark F. Zimbelman

Brigham Young University

Date Written: November 7, 2008

Abstract

The Public Company Accounting Oversight Board recently reported that its inspections show that auditors fail to effectively modify their standard audit procedures in response to fraud risk. Prior academic research is consistent with this finding. Our study examines the effects of two interventions on auditors' planning decisions in a high-fraud-risk setting: strategic reasoning and brainstorming in groups. Both interventions were predicted to lead auditors to more effectively modifiy their planned audit procedures. we use a panel of fraud experts to identify effective modifications to the audit plan of a specific fraud case. The experts' recommendations were then used to evaluate the effectiveness of practicing auditors' audit plans with and without the two interventions. We predict and find that each intervention leads to more effective modifications to the standard audit procedures and that the combination of the interventions is not significantly more effective than either intervention alone.

Keywords: audit planning, fraud risk, nature of audit procedures, strategic reasoning, brainstorming

JEL Classification: M49, G38

Suggested Citation

Hoffman, Vicky B. and Zimbelman, Mark F., Do Strategic Reasoning and Brainstorming Help Auditors Change Their Standard Audit Procedures in Response to Fraud Risk? (November 7, 2008). Available at SSRN: https://ssrn.com/abstract=970347 or http://dx.doi.org/10.2139/ssrn.970347

Vicky B. Hoffman

University of Pittsburgh - Katz Graduate School of Business ( email )

Pittsburgh, PA 15260
United States
412-648-1627 (Phone)

Mark F. Zimbelman (Contact Author)

Brigham Young University ( email )

Marriott School of Management 540 N Eldon Tanner Building
Provo, UT 84602
United States
801-422-1227 (Phone)

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