Zuraidah Mohd-Sanusi

Audit judgment performance: assessing the effect of performance incentives, effort and task complexity

Purpose – This study examines the mediating effect of effort on the relationship between performance incentives and audit judgment performance under different levels of task complexity.Design/methodology/approach – Using an experimental research design, subjects are randomly assigned to three performance incentive groups: control, financial and feedback. Each subject is required to perform two experimental tasks of two complexity levels (low and high).Findings – Results indicate that performance incentive variables are positively related to audit judgment performance. Hierarchical regressions of moderated‐mediation analyses support the hypotheses that the mediation effect of effort on the relationship between performance incentives and audit judgment performance occurs under low task complexity and not under high task complexity. In other words, the positive relationship between effort and audit judgment performance is weakened under high task complexity.Research limitations/implications – The external va...

An Evaluation of Clients’ Fraud Reasoning Motives in Assessing Fraud Risks: From the Perspective of External and Internal Auditors☆

Abstract The auditors accuracy in conducting fraud risk assessment continues to be the most critical task. The reason is the effectiveness and efficiency of an audit depends on auditors ability to accurately assess the existing audit risks ( Jones, 2004 ). Applying to that, Malaysian Approved Standards on Auditing AI 240 on “Fraud and Error”, provides recommendation to auditors in assessing the clients likelihood of fraud risks based on the three elements of fraud triangle concept; opportunity, pressure and rationalization. Ideally, this audit standard highlighted the importance of auditors’ to evaluate these elements as it will assist them to understand their clients’ fraud reasoning motives and thus, properly assess the potential fraud risks that might be occurred. Based on the risk assessment, the auditors are required to plan the audit procedures in order to detect any material misstatement that may lead to fraud or error. In this study, as established in the ISA240, the fraud triangle concept has been used to examine the direct and interaction effect of the following fraud risk factors: (1) internal control system (opportunity); (2) pressure and; (3) type of auditors (internal and external auditors) on fraud risk assessment. An experimental research approach is adopted by sending a set of case scenarios to 129 auditors, comprises of both internal and external auditors. The respondents were required to complete two different case scenarios, where the level of internal controls and pressures were being manipulated; high and low. The results showed that there are significant relationships between each risk factors and fraud risk assessment. Furthermore, the results of the interaction effects (combination of two variables) also show significant effect on fraud risk assessment. The findings of this study may provide insights into the auditors’ judgment in assessing fraud risk. It is also could be beneficial to the auditors to increase their awareness of the importance to understand their clients fraud motives during fraud risk assessment task and thus, improve the audit quality.