Improving Auditors’ Fraud Judgments Using a Frequency Response Mode*

The effect of alternative fraud model use on auditors’ fraud risk judgments

“…Finally, although the empirical fraud literature reflects strong interest in understanding and improving auditors' fraud-related judgments (e.g., Asare and Wright, 2004;Wilks and Zimbelman, 2004;Carpenter, 2007;Hogan et al, 2008;Kochetova-Kozloski et al, 2011;Johnson et al, 2013;Trompeter et al, 2013), it reflects an almost exclusive focus on the fraud triangle as a basis for evaluating auditor fraud detection performance.…”

The Efficacy of a Decision Support System in Enhancing Risk Assessment Performance

“…Electronic systems such as an electronic work paper system (Kepczyk, ), electronic audit confirmation, and electronic review have replaced traditional paper‐based systems. Further, audit firms have developed advanced electronic audit support systems (Dowling & Leech, ) which include sophisticated data‐mining tools and fraud databases of previous fraudulent clients (Kochetova‐Kozloski et al., ). Thus, auditors can collect external information from relevant databases for effectual risk assessment performance.…”

“…Further, audit firms are devoting efforts toward development of advanced audit support systems (Kochetova‐Kozloski et al., ) to enhance performance. Specifically, audit firms can increase auditors’ usage of external information by utilizing DSS to facilitate the search for information from a variety of sources.…”

“…Although auditors can access a voluminous amount of complex information electronically, effective utilization of such information remains a difficult challenge (Kochetova-Kozloski, Messier, & Eilifsen, 2011). Emerging technologies in the audit environment provide motivation and opportunities for DSS development.…”

External Auditors' Judgment and Decision Making: An Audit Process Task Analysis

“…Another stream in the fraud literature examines how documentation of fraud planning impacts fraud risk assessments. Examining response modes, Kochetova‐Kozloski, Messier, and Eilifsen () find that auditors' judgments are closer to a Bayes' Theorem benchmark when auditors assess fraud cases using frequency responses, rather than probabilities, especially when base rates are low. Favere‐Marchesi () finds that when auditors decompose their fraud risk assessments into components (incentives, opportunities and attitude) prior to their overall fraud assessment, they achieve more appropriate overall and component fraud risk assessments, as compared to auditors that categorize fraud risk factors into the components before the assessment and then later assess the components.…”