Different Approaches to Fraud Risk Assessment and Their Implications on Audit Planning

Authors

  • Judit Fortvingler
    Affiliation
    Budapest University of Technology and Economics
  • László Szívós
    Affiliation
    Budapest University of Technology and Economics
https://doi.org/10.3311/PPso.8436

Abstract

As a result of financial scandals, fraud has become an important concern over the past decades, which has also raised the issue of independent auditors’ responsibilities for detecting fraud. This study examines how auditors perform fraud risk assessment by applying either the traditional or the decomposition methods to different perceived risk level settings. We also investigate how the outcomes of risk assessment influence the audit planning phase.
The results prove that the decomposition approach more significantly enhances auditors’ sensitivity to fraud cues between a high and low fraud risk condition than using the traditional audit risk model. In addition, the perception of a more enhanced fraud risk leads to higher propensity to consult with forensic experts. Finally, the research also indicates that the assessed fraud risk level has fundamental impact on total hours budgeted for the audit engagement along with internal structure of total hours allocated to the audit.

Keywords:

fraud risk assessment, decomposition method, forensic expert, audit planning

Citation data from Crossref and Scopus

Published Online

2016-02-08

How to Cite

Fortvingler, J., Szívós, L. (2016) “Different Approaches to Fraud Risk Assessment and Their Implications on Audit Planning”, Periodica Polytechnica Social and Management Sciences, 24(2), pp. 102–112. https://doi.org/10.3311/PPso.8436

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Section

Articles