An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Tina D. Carpenter
University of Georgia

Jane L. Reimers
Rollins College

Phillip Z. Fretwell
Protiviti

Abstract: Recent financial reporting scandals have prompted actions directed at improving fraud prevention and detection. Internal auditors are now perceived as an important part of the solution to this breakdown in financial reporting. This study investigates ways to improve internal auditors’ fraud risk assessments. Prior research has questioned whether brainstorming might improve auditors’ fraud judgments and whether qualitative or quantitative risk assessments are preferred when assessing the likelihood of fraud. The accounting and psychology literature offer mixed results. Results from our experiment suggest that when fraud is present, interacting groups who brainstorm together provide higher fraud risk assessments than both individual auditors who brainstorm alone and those who do not brainstorm at all. Results also suggest that auditors who assess risk qualitatively provide higher fraud risk assessments than those auditors who assess risk quantitatively.

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