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  • Jennifer M Mueller-Phillips
    The Effect of Partner Communications of Fraud Likelihood and...
    research summary posted June 22, 2017 by Jennifer M Mueller-Phillips, tagged 06.08 SAS No. 99 Brainstorming – effectiveness, 08.04 Auditors’ Professional Skepticism, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Title:
    The Effect of Partner Communications of Fraud Likelihood and Skeptical Orientation on Auditors’ Professional Skepticism
    Practical Implications:

    Based on previous studies and preconceived notions, the finding that partners expressing their own views about the low likelihood of fraud had no effect on professional skepticism was surprising. This suggest that partner’s concern of not expressing this opinion to the team because it would lower the overall professional skepticism may be unwarranted. The evidence from this study indicates that partners can raise professional skepticism within the team by communicating management’s view of low likelihood of fraud, however it is not recommended for partners to use this approach every single time. Also, encouraging both outward and internal skeptical orientation can raise professional skepticism as well.

    Citation:

    Harding, N, and K. T. Trotman. 2017. The Effect of Partner Communications of Fraud Likelihood and Skeptical Orientation on Auditors’ Professional Skepticism. Auditing, A Journal of Practice and Theory 36 (21): 111-131.

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  • Jennifer M Mueller-Phillips
    Information Sharing during Auditors’ Fraud Brainstorming: E...
    research summary posted June 22, 2017 by Jennifer M Mueller-Phillips, tagged 06.08 SAS No. 99 Brainstorming – effectiveness, 11.03 Management/Staff Interaction 
    Title:
    Information Sharing during Auditors’ Fraud Brainstorming: Effects of Psychological Safety and Auditor Knowledge
    Practical Implications:

    Staff and seniors auditors often times have more interaction with client personnel than other members on the team. These interactions provide them with insight into fraud-relevant information which is extremely valuable to the audit. It is important that partners create a group dynamic that is both supportive and nonthreatening in order to facilitate idea sharing. Firms can make brainstorming more effective by providing leadership training to partners encompassing these ideals.

    Citation:

    Gissel, J. L., and K. M. Johnstone. 2017. Information Sharing during Auditors’ Fraud Brainstorming: Effects of Psychological Safety and Auditor Knowledge. Auditing, A Journal of Practice and Theory 36 (21): 87-110.

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  • Jennifer M Mueller-Phillips
    Facilitating Brainstorming: Impact of Task Representation on...
    research summary posted May 31, 2016 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.09 Group Decision-Making, 06.0 Risk and Risk Management, Including Fraud Risk, 06.08 SAS No. 99 Brainstorming – effectiveness, 09.0 Auditor Judgment 
    Title:
    Facilitating Brainstorming: Impact of Task Representation on Auditors’ Identification of Potential Frauds
    Practical Implications:

    The results of this study are important due to the requirement of members of the audit engagement team to identify potential fraud. The results of this study identify a method of improving auditor performance of identifying potential frauds at both the individual brainstorming stage and the subsequent group brainstorming stage. Because the effectiveness of the group brainstorming session is dependent on the quality and quantity of inputs from the individual auditor brainstorming sessions, the present study suggests a simple intervention regarding task representation to improve the performance of these inputs. Specifically, auditors considering potential fraud categories (e.g., revenue recognition, inventory, etc.) one by one, as opposed to all at once, identify a greater quantity and quality of potential frauds. By improving both the individual and group brainstorming stages, auditors are less likely to overlook potential fraud.

    Citation:

    Chen, W., A. S. Khalifa, and K. T. Trotman. 2015. Facilitating brainstorming: Impact of task representation on auditors’ identification of potential frauds. Auditing: A Journal of Practice & Theory 34 (3): 1-22.

  • Jennifer M Mueller-Phillips
    Nominal versus Interacting Electronic Fraud Brainstorming in...
    research summary posted July 27, 2015 by Jennifer M Mueller-Phillips, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.07 SAS No. 99 Brainstorming – process, 06.08 SAS No. 99 Brainstorming – effectiveness 
    Title:
    Nominal versus Interacting Electronic Fraud Brainstorming in Hierarchical Audit Teams.
    Practical Implications:

    The adoption of these electronic brainstorming alternatives by audit firms would be consistent with the increase in the use of technology within audit firms. As firms move to electronic brainstorming, there are potential benefits of using a nominal form over an interacting form. Firms should at least be aware of some potential negative effects of interacting electronic brainstorming, such as social loafing, and consider the benefits of building mechanisms to overcome such negative effects. The authors find that because less experienced auditors make less effort in interacting brainstorming sessions, they develop less complete, coherent, and applicable mental simulations than those in nominal teams.

    Citation:

    Chen, Clara X., Trotman, K. T., & Zhou, F. 2015. Nominal versus Interacting Electronic Fraud Brainstorming in Hierarchical Audit Teams. Accounting Review 90 (1): 175-198.

  • The Auditing Section
    The Influence of Documentation Specificity and on...
    research summary last edited May 25, 2012 by The Auditing Section, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.01 Fraud Risk Assessment, 06.08 SAS No. 99 Brainstorming – effectiveness, 09.0 Auditor Judgment, 09.02 Documentation Specificity 
    Title:
    The Influence of Documentation Specificity and on Auditors’ Fraud risk Assessments and Evidence Evaluation Decisions
    Practical Implications:

    This study provides important insights into the fraud assessment process. The most common method of risk assessment is to create summary fraud risk memos. However, the PCAOB recommends that auditors make documentation more specific in their assessments of fraud risk. This study suggests that when auditors receive specific documentation of fraud risks, alone, their fraud related judgments improve. However, the study provides evidence that when a more specific fraud risk memo is prepared and auditors are also reminded about the possibility of fraud (i.e., primed) that assessments of fraud actually decline. This is a significant finding considering that it is common in practice for auditors to be reminded about the possibilities of fraud, as a way to increase auditors’ awareness of fraud risk.

    Citation:

    Hammersley, J.S., E.M. Bamber, and T.D. Carpenter. 2010.  The influence of documentation specificity and priming on auditors’ fraud risk assessments and evidence evaluation decisions.  The Accounting Review 85 (2): 547-571.

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  • The Auditing Section
    Impact of the Type of Audit Team Discussions on Auditors’ G...
    research summary last edited May 25, 2012 by The Auditing Section, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.01 Fraud Risk Assessment, 06.07 SAS No. 99 Brainstorming – process, 06.08 SAS No. 99 Brainstorming – effectiveness 
    Title:
    Impact of the Type of Audit Team Discussions on Auditors’ Generation of Material Frauds
    Practical Implications:

    The results of this study are important for audit firms to consider when designing their group discussions, required by US and International auditing standards, regarding the susceptibility of their clients’ financial statements to fraud and ways these potential frauds could be enacted.  The study’s findings suggest that interacting groups with brainstorming guidelines and pre-mortem groups (i.e., where participants engage in a backward-thinking process, in which they envision the event of an undiscovered fraud emerging after the financial statement audit period) generate the highest quantity and quality of fraud ideas.  The study’s results are important for audit firms to consider, since the quantity and quality of ideas generated in the fraud group discussions are key characteristics of the output of such discussions.  Specifically, the quantity of ideas is important because the “mere mention” of ideas during the meeting is likely to elevate auditors’ overall skepticism and alert them to a variety of potential frauds they could encounter. The quality of ideas is an inherently important output of the discussion, and the rarity/uniqueness of ideas (a dimension of quality in the study) is important because audit team members are likely to already be aware of obvious potential frauds, and so the group discussion could be best used to construct more “out of the box” frauds that are less likely to be known.

    Citation:

    Trotman, K.T., Simnett, R., and A. Khalifa. 2009. Impact of the Type of Audit Team Discussions on Auditors’ Generation of Material Frauds. Contemporary Accounting Research. 26(4): 1115 – 1142.

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  • The Auditing Section
    Auditor Risk Assessment; Insights from the Academic...
    research summary last edited May 25, 2012 by The Auditing Section, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.01 Fraud Risk Assessment, 06.05 Assessing Risk of Material Misstatement, 06.08 SAS No. 99 Brainstorming – effectiveness 
    Title:
    Auditor Risk Assessment; Insights from the Academic Literature
    Practical Implications:

    This article provides a very informative summary of current research related to the risk assessment process that supports the audit.  By outlining both general audit risk insights as well as fraud risk insights, the authors provide a clear and informative summary that should be of use to any audit firm attempting to better understand the current theoretical and practical research related to this emerging area.  Finally, by utilizing the PCAOB questions, the discussion also provides insights directly relevant to the current regulatory process.

    Citation:

    Allen, R.D., D.R. Hermanson, T.M. Kozloski, and R.J. Ramsay. 2006.  Auditor Risk Assessment: Insights from the Academic Literature.  Accounting Horizons 20(2): 157-177.

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