Can strategic reasoning prompts improve auditors' sensitivity to fraud risk?

dc.contributor.advisorKachelmeier, Steven J. (Steven John), 1958-en
dc.creatorBowlin, Kendall Owenen
dc.description.abstractThe basic premise of risk-based auditing is that more (fewer) audit resources should be allocated to accounts that are more (less) likely to be misstated. However, financial reporting managers can exploit such allocations by intentionally misstating balances that are less likely to draw auditor attention. If auditors do not recognize this strategic implication of risk-based auditing, undetected misstatements among ostensibly low-risk accounts could be much more common than traditional risk assessment procedures suggest. The purpose of this study is to examine whether prompting auditors to form beliefs about managers’ expectations of, and responses to, audit strategies can enhance auditors’ sensitivity to the strategic risk of fraud among accounts typically considered low-risk. Using a multi-account audit game, I find that auditors do not naturally attune to strategic risks but instead tend to focus resources on “highrisk” accounts. However, when auditors are prompted to reason strategically, they utilize more resources and devote that increase almost entirely to “low-risk” accounts. I also find that, although increasing available resources does result in an overall increase in the amount of utilized resources, the relative effect of the strategic prompt is robust to the level of available audit resources.en
dc.rightsCopyright is held by the author. Presentation of this material on the Libraries' web site by University Libraries, The University of Texas at Austin was made possible under a limited license grant from the author who has retained all copyrights in the works.en
dc.subject.lcshAccounting frauden
dc.subject.lcshRisk assessmenten
dc.subject.lcshRisk managementen
dc.titleCan strategic reasoning prompts improve auditors' sensitivity to fraud risk?en University of Texas at Austinen of Philosophyen

Access full-text files

Original bundle

Now showing 1 - 1 of 1
Thumbnail Image
546.2 KB
Adobe Portable Document Format

License bundle

Now showing 1 - 1 of 1
No Thumbnail Available
1.66 KB
Item-specific license agreed upon to submission