The Effect of Fraud Risk Assessment Frequency and Fraud Inquiry Timing on Auditors' Skeptical Judgments and Actions

What is it about?

Identifying ways to improve and maintain professional skepticism continues to be a top priority for the auditing profession. This study examines two strategies for improving skeptical behavior during the audit: (1) requiring auditors to conduct repeated fraud risk assessments to increase inward-directed skepticism, and (2) performing fraud inquiries of operational-level employees prior to substantive procedures. Results indicate auditors made more skeptical judgments when revisiting and reassessing fraud risk assessments. Further, when auditors performed operational-level fraud inquiries prior to substantive testing, participants exhibited significantly greater increases in skeptical judgment than those who performed inquiries subsequently or not at all. These findings support the effectiveness of two strategies for improving skepticism throughout an audit engagement that can improve fraud detection.

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