Fraud Detection Skill of External Auditors

Abstract

After Enron, auditors were required to detect fraud in financial statements. The new accountants do not care about the fraud phenomenon. These new, untrained accounting graduates face shrewd and manipulative fraud perpetrators. Lack of fraud detection skills has become a scathing criticism to accountants. This study aims to examine and provide empirical evidence about the effect of auditor competence, independence, professional skepticism on fraud detection skills. Another objective to test whether auditor experience could moderate that relationship. This is a quantitative research, with primary data obtained from CPA firms in Jakarta as the highest CPAs in Indonesia. Two hundred sets were sent, 192 exemplars were completed and processed with the MRA technique. The study results confirm that competence, independence, and Experience positively affect fraud detection skills. CPAs' Experience strengthens the positive influence of independence on fraud detection skills. Professional skepticism does not affect fraud detection skills. The information provides additional clues to management regarding fraud prevention policies in an organization. For example, giving rewards or awards can further encourage employees to be honest, responsible, and committed to their organization.