How strategic reasoning and brainstorming can help auditors detect fraud

Abstract

SUMMARY: Auditors often fail to effectively modify their standard audit procedures in response to fraud risk. Two audit interventions, strategic reasoning (i.e., considering how the audit client may be concealing a fraud from the auditor) and brainstorming in groups, have been suggested to help auditors design better fraud detection procedures. This paper summarizes a recent study ("Do Strategic Reasoning and Brainstorming Help Auditors Change Their Standard Audit Procedures in Response to Fraud Risk?" [Hoffman and Zimbelman 2009], The Accounting Review) in which an experiment was conducted in a high-fraud-risk setting to see whether these interventions helped audit managers design better fraud procedures. The study found that both interventions improved auditors' planning judgments, but that combining them was not more effective than either one alone. Thatis,onceindividualaudit managers reasoned strategically,adding more audit managers to the process in a brainstorming group did not resultin better judgments, and brainstorming groups did not obtain additional benefits from reasoning strategically together.