Article2001

The Relative Importance of Management Fraud Risk Factors

Barbara A. Apostolou · John M. Hassell · Sally A. Webber · Glenn E. Sumners

112 citations0/0 files storedBehavioral Research in Accounting

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Abstract

In an exploratory study, we report how 140 auditors rate the relative importance of 25 risk factors (red flags) identified in SAS No. 82. The Analytic Hierarchy Process (AHP) is used to produce a decision model for each subject, and mean decision models are reported for groups of subjects. The results indicate that management characteristics and influence over the control environment red flags were approximately twice as important as operating and financial stability characteristics red flags and about four times as important as industry conditions red flags. The three single most important red flags account for almost 40 percent of the total decision weight. A particularly interesting finding is that the mean decision models of 43 Big 5 auditors, 50 regional/localfirm auditors, and 47 internal auditors were not significantly different from each other.

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References

1985The Analytic Hierarchy Process 1985Decision making for leaders 1989Behavioral research in accounting 1934Optimum orders for the presentation of pairs in the method of paired comparisons.1997Assessing the Risk of Management Fraud Through Neural Network Technology.1997The Effects of SAS No. 82 on Auditors' Attention to Fraud Risk Factors and Audit Planning Decisions 1989The efficacy of a red flags questionnaire for assessing the possibility of fraud 1997Reliance on Decision Aids: An Examination of Auditors' Assessment of Management Fraud.

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2016Fraud detection using fraud triangle risk factors 2012Perceived importance of red flags across fraud types 2008Internal Auditors' Evaluation of Fraud Factors in Planning an Audit: The Importance of Audit Committee Quality and Management Incentives 2015The effect of alternative fraud model use on auditors’ fraud risk judgments 2018Internal control and employees’ occupational fraud on expenditure claims

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