Management’s Perspectives on Auditor Fraud Inquiries

• In Event: Auditing and Auditor Characteristics

Abstract

This study examines how auditors carry out fraud inquiries. By understanding similarities and differences that occur in fraud inquiries, we hope to better understand how financial misstatements due to fraud persist despite auditors' fraud inquiries. We use semi-structured interviews of managers who responded to questions by auditors as part of the auditor's fraud inquiry. The interviews revealed substantial differences in the ways auditors perform fraud inquiries. Some auditors seem to approach audit fraud inquiries with a check-the-box mentality, while others appear to have taken the process more seriously. Only half of interviewees view the professional skepticism of the auditor conducting the fraud inquiries as adequate, high, or very high. Additionally, although most feel the fraud inquiry process is effective or moderately effective, six are less convinced of the effectiveness of the process. Most managers indicate the fraud inquiry process can be improved through increasing auditors’ industry knowledge, increasing auditor knowledge about the executive team and transparency, requiring face-to-face inquiry interviews, having auditors review compliance hotline complaints, and performing audit fraud inquiries at lower levels of client personnel as well as the executive officers.

Authors

• Anne M Wilkins, University of Tennessee-Chattanooga

• Louis A. Fayard, University of Tennessee-Chattanooga

• Madison Grody, University of Tennessee at Chattanooga