Auditor expert performance in fraud detection: The case of internal auditors

Grace Yanchi Mui (2010). Auditor expert performance in fraud detection: The case of internal auditors PhD Thesis, UQ Business School, The University of Queensland.

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Author Grace Yanchi Mui
Thesis Title Auditor expert performance in fraud detection: The case of internal auditors
School, Centre or Institute UQ Business School
Institution The University of Queensland
Publication date 2010-01
Thesis type PhD Thesis
Supervisor Larelle Chapple
Peter Green
Peter Clarkson
Total pages 239
Total colour pages 12
Total black and white pages 4
Subjects 15 Commerce, Management, Tourism and Services
Abstract/Summary Fraud is an inevitable cost of doing business. Organisations are responding to the pervasiveness of fraud by employing increased fraud risk management strategies. Internal audit is the most effective corporate control available to management to address the threat of fraud. Internal audit as an effective corporate control is studied in the context of the mandatory obligation imposed by The Institute of Internal Auditors’ 2009 International Professional Practices Framework (hereafter, IPPF). This mandatory obligation requires the internal audit function to ‘evaluate the potential for the occurrence of fraud and [to evaluate] how the organisation manages fraud risk’ (IPPF performance standard 2120.A2 Risk Management). At the individual auditor level, the internal auditor is required to ‘possess the knowledge, skills, and other competencies to perform their individual responsibilities’ (IPPF attribute standard 1210 Proficiency). These standards have the potential to increase expectations on the internal audit profession to prevent and detect the threat of fraud. This expectations gap raises two research questions: (1) What are the determinants of auditors’ fraud detection capabilities? and (2) What constitutes expert performance in the fraud detection task? This thesis aims to address these research questions through the performance of two studies. Study 1 used interviews to investigate the determinants of fraud detection capabilities of both the external auditor and internal auditor. Study 2 drew on the results from Study 1 and was an online survey of Australian internal audit practitioners. Study 1 confirmed that the determinants of auditor expert performance in other audit tasks established in literature, namely, certification, continuous learning, practical experience, analytical reasoning, data analysis skills, communication skills, are also applicable to the fraud detection task. Further, the fraud detection task requires key, unique capabilities because fraud has an inherent element of deception and concealment by fraud perpetrators. The determinants of auditor expert performance unique to the fraud detection task include mentoring, technical skills, and the ability to work in a team. An additional finding is the identification of an effective control environment as a determinant related to the environment where the auditor performs audit work. The resulting model of auditor expert performance in fraud detection depicts the relationship of these determinants (independent variables) with expert performance in fraud detection (the dependent variable). The inclusion of new determinants and the revision of the definitions of determinants established in literature provided the solution to Research Question 1. Subsequently, auditor expert performance in fraud detection was defined based on the resulting combination of determinants. This was the solution to Research Question 2. Study 2 was an online survey with new scales of measurement that were developed from Study 1 interview data. Expert studies and pilot studies were conducted to validate these new scales of measurement. The online survey captured the perceptions of Australian internal audit practitioners about the determinants identified in Study 1. The survey data was applied to the model of auditor expert performance in fraud detection. The main findings of this study are: (1) the assessment of the effectiveness of the strategies to develop auditors’ knowledge of fraud and fraud detection - mentoring, practical experience, continuous learning, and certification; (2) the assessment of the effectiveness of each determinant in contributing towards auditor expert performance in fraud detection. The findings of this thesis supported the expectation that the uniqueness of the fraud detection task impacted on the composition of auditors’ fraud detection capabilities and subsequently, the composition and definition of auditor expert performance in fraud detection. The participation of practitioners – internal auditors, external auditors, and fraud investigators - and academics in the data collection and validation processes provided valuable insight into the research design and provided helpful data for the two studies. The main contribution of this thesis is the extension of Bonner and Lewis’ (1990) model of auditor expert performance to the fraud detection task. Next, the resulting model of auditor expert performance in fraud detection provides the internal audit profession, organisations, and the individual internal auditor with an understanding of the factors that impact on the individual internal auditor’s fraud detection capabilities. Therefore, this practical understanding of internal auditors’ fraud detection capabilities has the potential to: (1) contribute to the development and improvement of an organisation’s fraud risk management strategy; (2) inform the policy debate regarding the promulgation of professional and mandatory standards; and (3) contribute to auditing practice and the audit profession through the identification of strategies to educate the audit profession about fraud detection. The final contribution is the research design where the qualitative study (Study 1) contributed to the development of the survey instrument and provided insights into the results of the structural mode (Study 2).
Keyword auditing, internal auditor, fraud detection
Additional Notes Colour pages: page numbers 2, 10,20, 83, 103, 128, 156, 161, 163, 164, 166, 167 Landscape pages: page numbers 40, 134-136

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Created: Mon, 16 Aug 2010, 13:14:03 EST by Ms Grace Mui on behalf of Library - Information Access Service