Fraud risk assessment: a story based approach outperforms the checklist

James L. Bierstaker, Denise Hanes Downey, Jacob M. Rose, Jay C. Thibodeau

Research output: Contribution to journalArticleOtherpeer-review

1 Citation (Scopus)

Abstract

Bierstaker, Hanes-Downey, Rose, and Thibodeau (2018) investigate whether using a fraud story (a one-page summary of the key facts in an SEC AAER written as a narrative) as compared to a traditional checklist improves fraud risk assessments in two separate experiments. This article summarizes their findings and discusses practical implications and actionable suggestions for audit practitioners. Specifically, the summary focuses on the capacity of fraud stories to help novice auditors develop knowledge structures that closely resemble the knowledge structures of experts and ultimately to improve experienced auditors’ risk assessments. Importantly, one Big 4 firm that participated in this research has adopted new and innovative fraud training methods based upon the results of this study. This article discusses these training implications, along with the potential for stories to help auditors improve their fraud-related judgments and additional considerations for the design of decision aids and knowledge management systems.

Original languageEnglish
Pages (from-to)P9-P16
Number of pages8
JournalCurrent Issues in Auditing
Volume16
Issue number2
DOIs
Publication statusPublished - 2022
Externally publishedYes

Keywords

  • checklists
  • decision aids
  • fraud judgments
  • knowledge structures
  • story

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