An analysis of external and internal auditors’ use of ISA 240 red flags: The impact of auditors’ estimation of fraud pervasiveness

Al-Dhubaibi, Ahmed Abdullah Saad; Sharaf-Addin, Hussein H.

doi:10.1080/23311975.2022.2118209

Cogent Business & Management

2022

DOI: 10.1080/23311975.2022.2118209

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An analysis of external and internal auditors’ use of ISA 240 red flags: The impact of auditors’ estimation of fraud pervasiveness

Ahmed Abdullah Saad Al-Dhubaibi

Hussein H. Sharaf-Addin

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Cited by 5 publications

References 34 publications

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External auditors’ use and perceptions of fraud factors in assessing fraudulent financial reporting risk (FFRR): Implications for audit policy and practice

Kassem

2023

Secur J

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This study used semi-structured interviews with twenty-four external auditors to explore how they perceive and use fraud factors when assessing fraudulent financial reporting risk in external audits. The fraud factors include top management’s motive, integrity, opportunity, rationalisation, and capabilities. The participants work for Big four audit firms and have international auditing experience, specifically in the US, the UK, Egypt, the UAE, Qatar, Bahrain, and Saudi Arabia. The findings reveal that top management’s integrity and motives are, in theory, the most critical factors in fraud risk assessment. However, a self-selection bias pushes external auditors not to evaluate these essential factors because they are too complicated to assess, and not enough guidance is provided to them by standard setters or audit firms. In turn, external auditors concentrate mainly on evaluating the opportunities to commit fraud when assessing fraud risk. This may lead to non-optimal fraud risk assessment and, ultimately, non-optimal audit quality. The findings have implications for policy, practice, and future research, later discussed.

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External auditors’ use and perceptions of fraud factors in assessing fraudulent financial reporting risk (FFRR): Implications for audit policy and practice

Kassem

2023

Secur J

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Internal auditor competence and internal control: Improving internal audit quality to prevent fraudulent financial statements

Novatiani,

Kusumah,

Yadiati

et al. 2024

Cogent Business & Management

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Effect of audit client’s use of blockchain technology on auditing accounting estimates: evidence from the Middle East

Elmaasrawy,

Tawfik,

Abdul-Rahaman

2024

JFRA

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Purpose This study aims to examine the effect of audit client’s use of blockchain (BC) on auditing accounting estimates (AEs), especially the inherent risk (IR), control risk (CR) and collection of audit evidence. Design/methodology/approach The study used a questionnaire to collect data for a sample of 249 auditors. A partial least squares method is used to test the hypotheses. Findings The results showed positive relationship between audit client’s use of BC and both IR and CR when auditing AEs. The results also showed the BC improves the collection of sufficient and appropriate audit evidence when auditing AEs. Research limitations/implications This study did not address all the risks associated with auditing AEs, including fraud, detection, sampling and nonsampling risks, and the procedures and tests for auditing AEs. Practical implications There are several implications of this research, including that it informs the revision of auditing standards and guidelines to correspond with successive technological changes, which subsequently clarify the roles and responsibilities of auditors, and the study findings will also cause changes to the design and form of audit procedures so as to obtain sufficient and appropriate audit evidence. Originality/value To the best of the authors’ knowledge, this study is considered the first of its kind that deals with the effects of audit client’s use of BC on audit AEs in the Middle East and North Africa region. This study also presented different sets of measures as proxies for measuring IR, CR and AE.

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An analysis of external and internal auditors’ use of ISA 240 red flags: The impact of auditors’ estimation of fraud pervasiveness

Cited by 5 publications

References 34 publications

External auditors’ use and perceptions of fraud factors in assessing fraudulent financial reporting risk (FFRR): Implications for audit policy and practice

External auditors’ use and perceptions of fraud factors in assessing fraudulent financial reporting risk (FFRR): Implications for audit policy and practice

Internal auditor competence and internal control: Improving internal audit quality to prevent fraudulent financial statements

Effect of audit client’s use of blockchain technology on auditing accounting estimates: evidence from the Middle East

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