Enhancing auditors fraud risk assessment by using throughput model as a decision aid

Al Shammakhi, Badriya Nasser Said

Abstract

Following the recommendations in the current standards (e.g., Canadian Institute of chartered accountants, IAASB, AICPA (SAS No. 82 and 99)), along with the fraud triangle factors, in this work, a decomposition approach that employs SAS No. 99 factors is proposed, whereby these are decomposed in a Throughput model (TP) that serves as a decision aid. Auditors’ task of assessing fraud risk is a critical step that affects auditing planning and procedures, especially in the light of the recent major financial scandals. Authors of several prior studies suggest that a decision aid is an effective way to improve fraud risk assessment and make the best use of professional skepticism. Throughput model breaks up the decision making into four main dominant concepts: Perception (P), Information (I), Judgment (J), and Decision Choice (D). This decision aid is expected to be beneficial in the performance of comprehensive fraud risk assessments, and direct the auditor’s attention to wide classes of problems, especially those associated with the SAS No. 99/ ISA 240 requirements. This work is intended to test the decomposition of the categorized fraud risk factors into processes comprising the thinking model. In the present study, an experimental setting comprising of 42 auditors from different audit positions was adopted, and the model was tested using Partial Equation Modeling PLS. A comparison analysis was subsequently performed to compare auditors characterized by high and low skepticism in two fraud risk conditions (high and low). The results suggest that, when the SAS No. 99 factors were decomposed into the dominant concepts of the Throughput model, an effect was found between these dominant concepts. In addition, study findings reveal no significant differences between high and low skepticism when auditors follow the process of thinking model to assess fraud risk. These findings suggest that the requirement and recommendation under SAS No. 99 can effectively increase auditors’ sensitivity to high risk factors when the situation suggests high fraud risk.

Citation

Al Shammakhi, B. N. S. (2017). Enhancing auditors fraud risk assessment by using throughput model as a decision aid. (Thesis). University of Hull. Retrieved from https://hull-repository.worktribe.com/output/4224019

• Thesis Type: Thesis
• Deposit Date: Mar 15, 2022
• Publicly Available Date: Feb 24, 2023
• Keywords: Business
• Public URL: https://hull-repository.worktribe.com/output/4224019
• Additional Information: Business School, The University of Hull
• Award Date: Mar 1, 2017