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    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 
    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.


    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.

    fraud brainstorming, mental simulation, nominal versus interacting teams, social loafing
    Purpose of the Study:

    Detecting financial statement fraud is of high priority to the audit profession. Both U.S. (SAS 99/AU 316) and International (ISA 240) Auditing Standards require a discussion or “brainstorming session” among audit team members including how and when an entity’s financial statements can be susceptible to material misstatement due to fraud. While auditing standards do not specify how brainstorming sessions should be conducted, the most commonly used method in practice is open brainstorming, where individuals brainstorm in a face-to-face interacting team. However, the evidence from social psychology research shows that this form of brainstorming is unlikely to be the optimal method and suggests that there are potential benefits to audit practice of considering other alternatives.

    One potential alternative to face-to-face brainstorming is electronic brainstorming. In electronic brainstorming, computer software allows individual group members to separately input ideas without interruption. In this study, the authors examine whether interacting hierarchical teams outperform nominal hierarchical teams in electronic brainstorming. The authors also investigate the underlying mechanisms of the relative effectiveness of nominal versus interacting teams for these two tasks of varying complexity. Specifically, they examine two process variables: social loafing and mental simulations.

    In the nominal brainstorming condition, participants individually complete the two audit tasks on the computer, and team members’ unique ideas are then combined to form the team-level performance. In the interacting brainstorming condition, team members communicate via computer anonymously and are able to observe via computer screen the other two team members’ ideas during the two audit tasks.

    Design/Method/ Approach:

    Participants are 111 managers and senior auditors from two Big 4 accounting firms in Australia. The managers had an average audit experience of 84 months and the seniors had an average audit experience of 44 months. All participants received a $70 gift voucher for participating in the experiment. The experiment took place in a conference room of the participating according firm prior to April 2013.

    • Nominal teams generate a significantly larger number of relevant fraud risk factors and fraud hypotheses than interacting teams. In addition, compared to interacting teams, nominal teams also generate fraud hypotheses of higher quality, as measured by the number of expert-identified fraud hypotheses.
    • Social loafing of seniors drives the differences between nominal and interacting teams in the fraud hypothesis generation task. On average, there is a significantly greater difference in the generation of fraud hypotheses between managers and seniors in interacting teams than in nominal teams.
    • Mental simulations of seniors in interacting brainstorming teams are significantly less well developed than those of seniors in nominal brainstorming teams. These results are consistent with greater social loafing by seniors in fraud hypothesis generation in the interacting teams.
    • Interacting fraud brainstorming sessions may lead to less developed mental simulations for these auditors, which may negatively impact their subsequent performance in fraud-planning tasks.
    Risk & Risk Management - Including Fraud Risk
    SAS No. 99 Brainstorming – effectiveness, SAS No. 99 Brainstorming – process