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Evidence of Auditing as a Deterrent to Financial Reporting Irregularities

Arnold Schneider (Georgia Institute of Technology)
Neil Wilner (University of North Texas)

American Journal of Business

ISSN: 1935-5181

Article publication date: 22 April 1992

Abstract

This article investigates the impact of auditing on the commission of financial reporting irregularities by managers. We also examine whether the deterrent effect of auditing is affected by individual demographics. An experiment, using three case scenarios, was employed. Our findings indicated that auditing had a strong deterrent effect when the following conditions were present: material dollar amounts, irregularities involving asset overstatements, unambiguous violations of accounting principles, and low incentive for misstating income. While age, experience, and contact with auditors did not influence the deterrent effect of auditing, we found evidence that respondents with accounting and finance specializations perceived auditing as a greater deterrent than other respondents.

Keywords

Citation

Schneider, A. and Wilner, N. (1992), "Evidence of Auditing as a Deterrent to Financial Reporting Irregularities", American Journal of Business, Vol. 7 No. 1, pp. 24-28. https://doi.org/10.1108/19355181199200004

Publisher

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MCB UP Ltd

Copyright © 1992, MCB UP Limited