Professional Documents
Culture Documents
Introduction
The fraud problem continues to plague organizations and
stakeholders around the world (e.g., ACFE 2014; Firth
et al. 2005; Greer and Tonge 2006; Robinson et al. 2012).
For example, PwC (2014) reports that approximately half
of U.S. organizations suffered from fraud in the past
2 years and that a majority of respondents from these
organizations indicate an increase in the number of frauds
occurring. The Association of Certified Fraud Examiners
(ACFE 2014) indicates that total annual fraud losses have
increased steadily over the years to approximately $3.7
trillion globally and that fraud costs organizations 5 % of
their annual revenue. These frauds include financial statement
fraud, misappropriation of assets, and corruption
schemes involving companies of all sizes, ages, and
industries from all over the world.
In an effort to deal with the fraud problem, organizations
tax planning) and audit client status (i.e., audit client vs.
not an audit client) on perceived detection responsibility.
Accountability and Responsibility
The TMR describes accountability and responsibility as
related but distinct constructs. While responsibility reflects
an individuals connection to an event and prescriptions
governing an event, accountability deals with being
answerable to audiences for performing up to prescribed
standards that are relevant to fulfilling obligations, duties,
expectations, and other charges (Schlenker 1997). With
these perspectives in mind, Schlenker (1997, p. 250) asserts
that responsibility is not identical to accountability,
rather, responsibility flows from accountability.
The psychology literature provides alternative explanations
for why accountability pressure affects individual
judgment and decision-making, including social anxiety
(e.g., Schlenker and Leary 1982), self-attention (e.g.,
Carver 1979), and politically based impression management
(e.g., Tetlock 1992). We test the effects of accountability
pressure on auditor perceived responsibility for
fraud detection and judgment performance. The accounting
literature provides a large body of evidence showing that
accountability pressure affects individual judgment and
decision-making (see DeZoort et al. 2006 for a review). For
example, the accountability literature in auditing (e.g.,
Buchman et al. 1996; Cuccia et al. 1995; Hackenbrack and
Nelson 1996) shows that when audience views are known,
auditors tend to shift their attitudes and behavior to match
the evaluative audience. However, the literature lacks
evidence linking accountability to responsibility and subsequent
decision-making.
In this study, we test the extent that accountability
pressure increases auditors assessments of their responsibility
for fraud detection. Specifically, we predict that
auditors who are accountable to an evaluative audience
(with expectations of auditor fraud detection responsibility)
will report higher perceived responsibility for fraud
detection than anonymous auditors who are not confronted
with an evaluative audience. Accountability in this context
represents an external pressure stimulus that should motivate
an internal response in the form of increased perceived
responsibility. Stated formally:
H1 Accountable auditors will feel more responsibility for
detecting fraud than anonymous auditors.
Responsibility and Fraud Type
We predict that perceived responsibility for fraud detection
will differ significantly across fraud type. Although professional
audit standards do not distinguish among fraud
type in fraud-related guidance, we expect auditors to perceive
differences in detection responsibility given the
potential for different perceptual salience and personal
involvement among financial statement fraud, misappropriation
of asset, and corruption. Research in psychology
provides consistent evidence of salience effects on individual
attitudes and judgments. For example, the literature
(e.g., Taylor and Fiske 1978; Eagly and Chaiken 1993;
Method
Participants
A total of 1077 auditors participated in the study. For the
external auditor group, two Big 4 public accounting
firms provided 294 auditors from 49 different cities/offices
in the United States. The participants included 174 Associates
(audit experience M = 1.78 years), 96 Experienced
Associates (audit experience M = 2.58 years), and 24
Senior Associates (audit experience M = 3.25 years). A
majority (53 %) of the participants were male and onethird
(32 %) were CPAs. We administered the experiment
at regional and national training sessions within the participating
firms. Contact partners from both firms reviewed
and approved the study and the research materials prior to
administration.
For the internal auditor sample, 783 internal auditors
from five countries (i.e., Australia, Belgium, Canada,
Mexico, and the U.S.) participated in the study at IIA
meetings in 12 cities around the world. The participants
averaged 9.35 years of audit experience. While specific job
titles varied greatly, 24 % of the internal auditors had less
than 3 years of experience, 37 % had between three and
9 years, and 39 % had 10 or more years. We control for
audit experience and country affiliation in subsequent
analysis given the variation in these variables. A majority
of the participants were male (62 %) and had at least one
professional license (56 %). The instrument was translated
to Spanish for the Mexican participants and to French for
participants in Quebec. We used professional translators
and independent reviewers to confirm translation accuracy
and found no significant language-based differences in the
responses. The Institute of Internal Auditors Research
Foundation reviewed, approved, and endorsed the study
and research materials prior to administration.7
Research Instrument
After providing informed consent to participate, we
manipulated accountability at two levels (anonymous and
accountable) randomly between subjects at each data collection
session. Accountable participants were asked to
provide their names and e-mail addresses because their
responses were subject to review by the researchers. Participants
in the anonymous group provided no personal
information and were told that no effort would be made to
link them to their responses.
After the accountability treatment, internal auditor (external
auditor) participants were told to assume they were
working as an internal auditor (external auditor) at a publiclytraded tool manufacturer. Company background
Results
Manipulation Checks
We used two multiple-choice questions to assess whether
the participants comprehended the accountability and fraud
Brainstorming
We also tested the extent that fraud detection responsibility
affects auditor brainstorming to evaluate whether perceived
responsibility impacts auditor performance behavior. Simple regression results provide support for H3 by indicating
a significant positive relation between responsibility
and the number of fraud-related audit procedures brainstormed
(b = .11, p = .001).
We also ran a multivariate ANCOVA to evaluate the
effects of responsibility, accountability, fraud type, auditor
type, and audit experience on the number of procedures
brainstormed. In addition to the significant responsibility
effect (F(1, 862) = 10.90, p = .001), the results in Table 3
indicate a significant main effects for accountability pressure,
fraud type, and auditor type. Specifically, accountable
auditors brainstormed significantly more fraud
detection procedures (M = 2.29, SD = 1.55) than anonymous
participants (M = 1.69, SD = 1.34, F(1, 862) =
13.35, p\.001). For fraud type, auditors in the misappropriation
of assets group (M = 2.18, SD = 1.48) brainstormed
more procedures than auditors in the financial
statement fraud group (M = 1.88, SD = 1.44, t(580),
p = .01) and the corruption group (M = 1.78, SD = 1.45,
t(598), p\.001). Finally, the auditor type main effect
(F(1, 862) = 22.37, p\.001) indicates that internal
auditors (M = 2.16, SD = 1.48) brainstormed significantly
more procedures than external auditors (M = 1.42,
SD = 1.29).
The results also again indicate a significant interaction
between fraud type and auditor type (F(2, 862) = 3.37,
p = .03). As shown in Fig. 4, although the difference in
brainstorming between external auditors (M = 1.67,
SD = 1.43) and internal auditors (M = 1.97, SD = 1.44)
in the financial statement fraud condition is not significant
(t(276) = 1.60, p = .11), internal auditors brainstormed
significantly more detection procedures than external
auditors in the misappropriation of assets condition (internal
auditor M = 2.47 vs. external auditor M = 1.40,
t(302) = 5.78, p\.001) and the corruption condition
(internal auditor M = 2.04 vs. external auditor M = 1.16,
t(294) = 4.59, p\.001). Finally, internal auditors in the
misappropriation of assets group brainstormed significantly
more detection procedures than internal auditors in the
financial statement fraud group (t(417) = -3.44, p\.001)
and internal auditors in the corruption group
(t(439) = 3.16, p = .002). For the external auditors, the
only significant brainstorming difference emerged between
the financial statement fraud group and the corruption
group (t(158) = 2.48, p = .01). The two-way interaction
between accountability pressure and fraud type and the
three-way interaction among accountability, fraud type,
and auditor type were again both insignificant.
For the remaining control variables, the results indicate
that both audit experience and country affiliation are significant
in the model. Interestingly, while we found an
Discussion
Overall, the results from 878 auditors indicate moderate
and varied levels of perceived fraud detection responsibility.
As suggested by responsibility theory, we found that
accountable auditors perceived significantly more fraud
detection responsibility than anonymous auditors. We also
found a significant interaction between fraud type and
auditor type with external auditors perceiving the most
detection responsibility for financial statement frauds,
while internal auditors perceived similar detection
responsibility across the three fraud types. Analysis of the
TMRs formative links reveals that personal control and
professional obligation are significantly related to perceived
responsibility for detection, while task clarity was
not.
The results also provide insight into auditor performance,
with detection responsibility significantly affecting
brainstorming performance and partially mediating the
accountabilitybrainstorming relation. Accountable auditors
also brainstormed significantly more fraud detection
procedures than anonymous auditors. Further, internal
auditors brainstormed more detection procedures than
external auditors, and a significant interaction between
fraud type and auditor type revealed that internal auditors
brainstormed significantly more misappropriation of assets
and corruption detection procedures than external auditors.