Do fine feathers make a fine bird? The influence of attractiveness on fraud-risk judgments by internal auditors

2018 ◽  
Vol 22 (3) ◽  
pp. 332-344 ◽  
Author(s):  
Marc Eulerich ◽  
Jochen C. Theis ◽  
Junpeng Lao ◽  
Meike Ramon
Keyword(s):  
Internal Auditors ◽  
Fraud Risk ◽  
Risk Judgments

scholarly journals The Effects of Tone at the Top and Professional Skepticism on Fraud Risk Judgment Among Internal Auditors in Indonesia

2021 ◽  
Vol 20 (1) ◽  
pp. 139-154
Author(s):  
Lufti Juliana ◽  
◽  
Razana Juhaida Johari ◽  
Jamaliah Said ◽  
Ludovicus Sensi Wondabio ◽  
...  
Keyword(s):  
Working Environment ◽  
Professional Skepticism ◽  
Internal Auditors ◽  
Audit Failure ◽  
Fraud Risk ◽  
Risk Judgment ◽  
Tone At The Top ◽  
New Finding ◽  
Regulatory Bodies ◽  
Risk Judgments

Failure of the internal auditors (IAs) to appropriately apply fraud risk judgment could result in audit failure in revealing fraud and scandals. It leads to significant harmful consequences to the IAs’ profession. In carrying out their duties, IAs sometimes have to face top management pressure. Tone at the top becomes essential in creating an ideal working environment for the IAs. Moreover, the lack of professional skepticism has been one factor causing an auditor’s failure to achieve the optimal result in detecting fraud. The findings from 202 respondents revealed that the IAs who have high professional skepticism are more effective in making fraud risk judgments. However, the direct influence of the tone at the top on fraud risk judgment is not statistically supported. This new finding may help professional regulatory bodies and the internal auditing function consider the profile and its necessary environment to elevate fraud risk judgment to regain public trust in the profession.

The Effects of Internal Audit Report Type and Reporting Relationship on Internal Auditors' Risk Judgments

2015 ◽  
Vol 29 (3) ◽  
pp. 695-718 ◽  
Author(s):  
Douglas M. Boyle ◽  
F. Todd DeZoort ◽  
Dana R. Hermanson
Keyword(s):  
Audit Committee ◽  
Internal Audit ◽  
Risk Assessments ◽  
Audit Report ◽  
Internal Auditors ◽  
Fraud Risk ◽  
External Stakeholders ◽  
Risk Judgments ◽  
Audit Information ◽  
Control Risk

SYNOPSIS The governance literature (e.g., Archambeault, DeZoort, and Holt 2008) highlights the lack of internal audit information available to external stakeholders and discusses the need for a publicly available internal audit report (IAR) to describe the function and/or provide assurance. We study the effects of IAR type (i.e., descriptive IAR, assurance IAR) and internal audit reporting relationship (i.e., primarily to management or primarily to the audit committee) on internal auditors' judgments. Specifically, 108 experienced internal auditors provided fraud risk and control risk assessments in an experiment where IAR type and reporting relationship were manipulated randomly between subjects. Fraud risk assessments are higher (more conservative) when internal auditors provide assurance in an IAR or when they report primarily to the audit committee. A significant interaction indicates that internal auditors provide higher control risk assessments when they provide assurance in an IAR and report primarily to the audit committee. Providing descriptive information in an IAR to external stakeholders does not significantly affect internal auditors' fraud risk or control risk assessments. Supplemental results indicate moderate and varied support among internal auditors for the issuance of a descriptive IAR to external stakeholders, but significantly less support for the issuance of an assurance IAR. The results, in combination with Holt and DeZoort's (2009) evidence regarding the effect of descriptive IARs on investors' judgments, suggest the need for discussions of the value of IARs in practice.

The Effects of Judgments of New Clients' Integrity upon Risk Judgments, Audit Evidence, and Fees

2001 ◽  
Vol 20 (2) ◽  
pp. 85-99 ◽  
Author(s):  
Philip R. Beaulieu
Keyword(s):  
Source Credibility ◽  
Prospective Audit ◽  
Fraud Risk ◽  
Audit Evidence ◽  
Risk Judgments

Client integrity concerns auditors when they plan new audit engagements because it is related to both fraud risk and the source credibility of clients. Auditors may increase audit work and fees when they judge integrity to be below normal. In an experiment, a sample of 63 Canadian audit partners read information about a prospective audit client, including information about the client's CFO. This information was manipulated to support a judgment of either high or low integrity. As hypothesized, judgments of client integrity were negatively related to risk judgments, audit evidence extent recommendations (indirectly through risk judgments), and fee recommendations (indirectly through risk judgments and extent recommendations).

The effect of alternative fraud model use on auditors’ fraud risk judgments

2015 ◽  
Vol 34 (6) ◽  
pp. 578-596 ◽  
Author(s):  
Douglas M. Boyle ◽  
F. Todd DeZoort ◽  
Dana R. Hermanson
Keyword(s):  
Fraud Risk ◽  
Risk Judgments

Internal Audit Structure and Fraud Risk Assessment From a Regulatory Perspective

2019 ◽  
pp. 302-332
Author(s):  
Lale Aslan
Keyword(s):  
Risk Assessment ◽  
Portfolio Management ◽  
Internal Audit ◽  
Internal Auditors ◽  
Fraud Risk ◽  
Critical Areas ◽  
Regulatory Perspective ◽  
Descriptive Approach ◽  
Audit Standards

This chapter aims to depict the role of internal audit in Turkish capital markets by comparing the internal audit structure and its role in detecting fraud in financial institutions and developing a framework for assessing fraud risk in intermediary institutions. The newly constructed regulations concerning banks, intermediary institutions, and portfolio management companies are compared to a global benchmark by using a conceptual and descriptive approach. According to the results of this comparison, it is clear that Turkish legislation needs to be improved in critical areas. “Integrity” should be incorporated as a founding concept of the internal audit function. Certification of internal auditors needs to be encouraged, and internal audit standards need to be adapted. As a result, a fraud risk assessment template influenced by the new regulatory framework is developed for intermediary institutions.

scholarly journals Client Likeability in Auditor Fraud Risk Judgments: The Mitigating Influence of Task Experience, the Review Process, and a “Consider the Opposite” Strategy

2018 ◽  
Vol 12 (1) ◽  
pp. P11-P16 ◽  
Author(s):  
Brad A. Schafer ◽  
Jennifer Kahle Schafer
Keyword(s):  
Review Process ◽  
Education And Training ◽  
Related Research ◽  
Fraud Risk ◽  
Auditor Judgments ◽  
Evaluation Of Evidence ◽  
Task Experience ◽  
Risk Judgments ◽  
Global Bias ◽  
And Training

SUMMARY Auditors contend with an array of management personalities during the course of an audit engagement. Some clients by their nature are more likeable, while others create a stressful or unpleasant environment. We summarize two related research studies that examine whether and how a client's likeability influences auditors' fraud likelihood judgments. Results indicate that more likeable (dislikeable) clients cause lower (higher) auditor judgments of fraud likelihood. Results also indicate this bias operates indirectly by influencing the evaluation of evidence statements made by the client that relate to management pressures or attitudes rather than operating as a global bias on all evidence. Requiring an explanation for the judgment mitigates this bias, but only for experienced auditors. For inexperienced auditors and experienced non-audit CPAs, a prompt to “consider the opposite” mitigates the bias. These findings suggest that education and training can clarify relevant and irrelevant evidence cues in fraud judgments.

scholarly journals PENGENDALIAN INTERNAL DALAM PENGHIMPUNAN DANA NASABAH DI PD.BPR BANK SALATIGA

ProBank ◽  
2020 ◽  
Vol 4 (2) ◽  
pp. 188-212
Author(s):  
Sarah Wahidatun Niswah ◽  
Aprina Nugrahesthy Sulistya Hapsari
Keyword(s):  
Risk Assessment ◽  
Risk Analysis ◽  
Internal Control ◽  
Phenomenological Approach ◽  
Internal Auditor ◽  
Internal Auditors ◽  
Fraud Risk ◽  
Qualitative Descriptive ◽  
Descriptive Method

The purpose of this study is to look at the role of the internal auditors in  dealing with risks from customer fundraising activities in  PD.BPR  Bank Salatiga  has  been  running  effectively and  efficiently. Supervision of customer fund disbursement activities is very important in preventing the risk of fraud that may occur from the employee and the customer. Supervision carried out in preventing fraud risk starts from the risk assessment made by the internal auditor so that the impvolvement of the audit in assessing risk and handling the findings that occur can be resolved and provide recommendations related parties to the risk found. The reaserch method used is a qualitative descriptive method with a phenomenological approach in PD.BPR Bank Salatiga. Risk analysis mapping will be synchronized with possible events that have occurred so that the role of the internal auditors is known in assessing and resolving the risks that accur. From the risk analysis and findings, it was found that the role of the internal auditor in assessing and resolving the risks that occurred was limited to those who handled when the problems that occurred could not be resolved by the parties concerned. Internal control carried out by the bank in assessing the risks that might occur can be said to be quite good in assessing emerging risks and overcoming the risks that arise can be resolved.

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