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Fraud Risk (fraud + risk)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Terms modified by Fraud Risk

fraud risk assessment

Selected Abstracts

Using Nonfinancial Measures to Assess Fraud Risk

JOURNAL OF ACCOUNTING RESEARCH, Issue 5 2009
JOSEPH F. BRAZEL
ABSTRACT This study examines whether auditors can effectively use nonfinancial measures (NFMs) to assess the reasonableness of financial performance and, thereby, help detect financial statement fraud (hereafter, fraud). If auditors or other interested parties (e.g., directors, lenders, investors, or regulators) can identify NFMs (e.g., facilities growth) that are correlated with financial measures (e.g., revenue growth), inconsistent patterns between the NFMs and financial measures can be used to detect firms with high fraud risk. We find that the,difference,between financial and nonfinancial performance is significantly greater for firms that committed fraud than for their nonfraud competitors. We also find that this difference is a significant fraud indicator when included in a model containing variables that have previously been linked to the likelihood of fraud. Overall, our results provide empirical evidence suggesting that NFMs can be effectively used to assess fraud risk. [source]

The Effectiveness of Alternative Risk Assessment and Program Planning Tools in a Fraud Setting,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2004
STEPHEN K. ASARE
Abstract This study examines the impact of alternative risk assessment (standard risk checklist versus no checklist) and program development (standard program versus no program) tools on two facets of fraud planning effectiveness: (1) the quality of audit procedures relative to a benchmark validated by a panel of experts, and (2) the propensity to consult fraud experts. A between-subjects experiment, using an SEC enforcement fraud case, was conducted to examine these relationships. Sixty-nine auditors made risk assessments and designed an audit program. We found that auditors who used a standard risk checklist, structured by SAS No. 82 risk categories, made lower risk assessments than those without a checklist. This suggests that the use of the checklist was associated with a less effective diagnosis of the fraud. We also found that auditors with a standard audit program designed a relatively less effective fraud program than those without this tool but were not more willing to seek consultation with fraud experts. This suggests that standard programs may impair auditors' ability to respond to fraud risk. Finally, our results show that fraud risk assessment (FRASK) was not associated with the planning of more effective fraud procedures but was directly associated with the desire to consult with fraud specialists. This suggests that one benefit of improved FRASK is its relation with consultation. Overall, the findings call into question the effectiveness of standard audit tools in a fraud setting and highlight the need for a more strategic reasoning approach in an elevated risk situation. [source]

The Effects of Fraud and Going-concern Risk on Auditors' Assessments of the Risk of Material Misstatement and Resulting Audit Procedures

INTERNATIONAL JOURNAL OF AUDITING, Issue 3 2007
Allen D. Blay
This study uses audit file data to analyze the association between the auditors' preliminary assessments of going-concern and fraud risk and the planning and performance of the financial statement audit. We analyze the association between the above risks and the auditor's assessment of the risk of material misstatement (RMM) within the revenue cycle, and examine whether going-concern and fraud risk assessments have an effect on the persuasiveness, timing and extent of audit evidence gathered. Our results indicate that both fraud risk and going-concern risk are significantly related to RMM. Our results also indicate that although the effect of fraud risk is fully mediated by the RMM, moderate going-concern risk remains significantly related to our proxies for the persuasiveness and timing of audit evidence, even after controlling for RMM. [source]

The Regulation of Public Company Auditing: Evidence from the Transition to AS5

JOURNAL OF ACCOUNTING RESEARCH, Issue 4 2010
RAJIB DOOGAR
ABSTRACT The replacement of Auditing Standard No. 2 (AS2) by Auditing Standard No. 5 (AS5) creates a natural experiment that sheds light on (1) potential inefficiencies caused by regulatory responses to a political crisis and (2) audit efficiency and effectiveness improvements resulting from the risk-based approach embodied in AS5. We study these effects by examining the impact of AS5 on audit fees. We find that AS5 audit fees are aligned with auditee fraud risk, but not AS2 audit fees. Second, relative to AS2 benchmark levels, AS5 audit fees are, on average, lower for all auditees. Third, relative to AS2 benchmarks, AS5 fees are lower for lower-fraud-risk auditees but greater for higher-fraud-risk auditees. Overall, the evidence is consistent with (1) initial overregulation (via AS2) followed by reform (via AS5) and (2) auditors deploying a risk-based audit approach to obtain both efficiency and potential effectiveness gains in audit production. [source]

Using Nonfinancial Measures to Assess Fraud Risk

Audit Programs and Audit Risk: A Study of Japanese Practice

INTERNATIONAL JOURNAL OF AUDITING, Issue 1 2006
Hironori Fukukawa
The current paradigm in audit practice for evidential planning is the Audit Risk Model. However, the notion of relevant risks has broadened with the adoption in recent years of holistic audit approaches encompassing business and process risks and an increased focus on fraud risks. This study examines whether audit planning is ,risk adjusted' using archival data from 235 clients from a well-established audit firm in Japan. We address all four aspects of audit planning (nature, extent, timing and staffing) and examine a wider variety of client risks than prior archival studies in order to reflect the current holistic audit approaches of global auditing firms. The main results indicate that although audit planning is based on the level of and change in assessments of many audit risk variables, the associations between client risks and audit plans are rather modest. In this respect, our findings are consistent with those from prior research. We also find that client risks that comprise business risk and fraud risk affect audit planning to some extent. Finally, we report exploratory results suggesting a substitution effect between audit planning judgments in response to higher client risks such as increasing the extent of validity tests while decreasing the extent of confirmations. [source]