How could external auditors assess the rationalization of fraud?
ISSN: 1359-0790
Article publication date: 20 October 2021
Issue publication date: 30 September 2022
Abstract
Purpose
This study aims to explore methods that external auditors can use to assess the rationalization of fraud in fraud risk assessment in auditing.
Design/methodology/approach
An online questionnaire was used to collect data from 150 Big 4 auditors.
Findings
The results reveal a total of 18 methods that auditors can use to assess the rationalization of fraud. However, some methods were recommended more than others by the auditors in this study. These methods include incorporating the assessment of rationalization into the assessment of motives for fraud and integrity, understanding the client’s business and regulatory environment, inquiring management and the board of directors about past fraud cases and observing management responses and reactions during auditors’ inquiry about fraud-related matters.
Practical implications
The guidance provided by this study could help enhance auditors’ skills in assessing fraud risks, which, in turn, may increase the likelihood of detecting fraud. The guide could also be helpful for audit firms in their fraud training programs.
Originality/value
This study is the first to explore methods for assessing the rationalization of fraud by drawing on the experience and insights of Big 4 auditors.
Keywords
Acknowledgements
Funding: This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.
Data availability statement: The data that support the findings of this study are available on request from the corresponding author. The data are not publicly available due to privacy or ethical restrictions.
Ethics approval statement: All ethical approvals were obtained prior to conducting this research. The participants were fully informed about the nature of this research, the data that will be collected, how their personal data will be protected and the nature of their participation through the participant’s information sheet. A consent form was also sent to participants to seek their permission to take part in the current study. The participant’s information sheet and consent form are available upon request.
Declaration of interest: None.
ORCID ID: https://orcid.org/0000–0001-5384–3800.
Citation
Kassem, R. (2022), "How could external auditors assess the rationalization of fraud?", Journal of Financial Crime, Vol. 29 No. 4, pp. 1458-1467. https://doi.org/10.1108/JFC-08-2021-0184
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited