Dennis Caplan

Internal Controls and the Detection of Management Fraud

The purpose of this paper is to examine an auditor?s decision to investigate for fraud, when a manager with exogenous incentives to misreport chooses the quality of internal controls. I extend the strategic auditing literature by allowing the manager both a choice with respect to fraud and a second choice that affects the error rate in the audit population. Consistent with the practitioner literature, I assume managers can commit fraud by overriding internal controls, and that audits conducted in accordance with Generally Accepted Auditing Standards (GAAS) do not always distinguish between errors and fraud.

Can incentives mitigate student overconfidence at grade forecasts

ABSTRACT Research shows that college students exhibit bias in their forecasts of exam performance. Most students are overconfident in their forecasts, academically weaker students are the most overconfident, and top-performing students are underconfident. The literature identifies negative repercussions of these biases, including inadequate preparation for exams. A recurring attribute of this literature is the absence of meaningful incentives for students to forecast accurately. We implement an extra credit scheme to incentivize accurate forecasts. Depending on how forecast bias is measured, the scheme mitigates bias by top-performing students and marginally mitigates bias by other students. Our results have several implications. First, we illustrate an extra credit tool instructors can use to incentivize students to make more thoughtful assessments of their future exam performance. Second, we show how the association between incentives and forecast bias differs across student groups. Finally, we show that results in this literature are sensitive to how bias is measured.

CSR Initiatives Across the Value Chain

The possible effect of the Dodd-Frank Act on internal auditing and corporate culture has been the subject of wide speculation by experts. But the author of this article cautions that what it is feared to do at some point—and what it actually has done to date—are broadly different. Is it likely to rehabilitate corporate cultures from the inside out? Will it be effective? The author, an expert in forensic accounting, weighs in with his opinion.