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An Analysis of Auditors' Fraud Risk Judgments in a Multi-Auditing Tasks Setting

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Intellectual Contribution by Frederick Choo

Contribution Title

An Analysis of Auditors' Fraud Risk Judgments in a Multi-Auditing Tasks Setting

Publication

Journal of Forensic Accounting

Co-author

Year

2003

Description

This study analyzed auditors' fraud risk judgment in a multi-auditing tasks setting. Specifically, the interaction effect and pattern of fraud-identification knowledge (KNOW) on auditors' fraud risk judgments across four auditing tasks (TASK) were analyzed in a laboratory experiment. The experimental design was a split-plot 2 x 4 repeated measures ANOVA with TASK the within-subject variable and KNOW the between-subject variable. In the experiment, TASK was operationalized by embedding two fraud risk factors in each of four auditing tasks: planning consideration (TASK1), evidence gathering (TASK2), test results evaluation (TASK3), and disclosure consideration (TASK4). KNOW was operationalized by the frequency of fraud that the auditors have encountered. The analysis showed that TASK x KNOW interaction significantly affected the auditors' fraud risk judgments from TASK1 through to TASK4. The analysis also showed that the auditors followed three distinctive Linear x Quadratic interaction patterns: (a) at the beginning of the fraud audit, the high KNOW auditors' fraud risk judgments adjusted more rapidly than the low KNOW auditors did, (b) throughout the fraud audit, the low KNOW auditors' fraud risk judgments adjusted to a greater extent than the high KNOW auditors did, and (c) towards the end of the fraud audit, both the high and low KNOW auditors have few adjustments in their fraud risk judgments. Interpretation and implication of the analysis were discussed.

Complete Citation

This study analyzed auditors' fraud risk judgment in a multi-auditing tasks setting. Specifically, the interaction effect and pattern of fraud-identification knowledge (KNOW) on auditors' fraud risk judgments across four auditing tasks (TASK) were analyzed in a laboratory experiment. The experimental design was a split-plot 2 x 4 repeated measures ANOVA with TASK the within-subject variable and KNOW the between-subject variable. In the experiment, TASK was operationalized by embedding two fraud risk factors in each of four auditing tasks: planning consideration (TASK1), evidence gathering (TASK2), test results evaluation (TASK3), and disclosure consideration (TASK4). KNOW was operationalized by the frequency of fraud that the auditors have encountered. The analysis showed that TASK x KNOW interaction significantly affected the auditors' fraud risk judgments from TASK1 through to TASK4. The analysis also showed that the auditors followed three distinctive Linear x Quadratic interaction patterns: (a) at the beginning of the fraud audit, the high KNOW auditors' fraud risk judgments adjusted more rapidly than the low KNOW auditors did, (b) throughout the fraud audit, the low KNOW auditors' fraud risk judgments adjusted to a greater extent than the high KNOW auditors did, and (c) towards the end of the fraud audit, both the high and low KNOW auditors have few adjustments in their fraud risk judgments. Interpretation and implication of the analysis were discussed.

Website

http://online.sfsu.edu/~profchoo

See Faculty: Frederick Choo

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