Empirical research on external auditors ' detection of financial statement fraud

Abstract

The problems associated with auditors' ability to detect fraud create a significant challenge. Solving these problems will remain a priority in the profession for many years. As such, significant new empirical research is needed. In the short term, research on mechanical and cognitive models that assist auditors in fraud-risk assessment and link risk assessments to audit plans is encouraged. Empirical research aimed at providing insight on the effects of training, attention-directing decision aids, and experience on fraud detection should prove useful. Improving the effectiveness of audit plans to detect fraud must be a paramount goal of this stream of research. It is believed that behavioral research within a game-theoretic context will add significantly to accomplishing this goal.