The Role of Experience with Type of Fraud and Fee Pressure in Auditors’ Decisions to Involve Forensic Specialists in Audit Engagements

• In Event: Auditors Use of Specialists

Abstract

This study examines two factors that might have an impact on auditors’ decisions to involve forensic specialists in audit engagements: experience with type of fraud and fee pressure. First, we find that auditors’ decisions regarding possible involvement of forensic specialists in the audit process differ based on the type of fraud. In the fraudulent financial reporting situation, auditors find it less important to cooperate with forensic specialists compared to the misappropriation of assets situation. This is related to the auditors’ prior experiences with improper revenue recognition misstatement issues. Second, we find that in high fraud risk engagements the auditors’ decisions to involve forensic specialists in audit engagements are not affected by the amount of fee pressure. Increased fee pressure, however, impacts the level of forensic specialists’ involvement; auditors reduce forensic specialists’ involvement in audit engagements when fee pressure is present.

Authors

• Dominyka Sakalauskaite, Copenhagen Business School

• Iris Stuart, Norwegian School of Economics