Importance Of Brainstorming In Fraud Auditing

Introduction

New auditing standards require members of the audit team to discuss the potential for material misstatement due to fraud. This discussion should include an exchange of ideas or “brainstorming” among the audit team members about (1) how and where they believe that an entity’s financial statements might be susceptible to material misstatement due to fraud, and (2) how management could perpetrate and conceal fraudulent financial reporting. The brainstorming can take place during audit planning or during any part of the auditors’ information gathering (and members of the audit engagement are expected to communicate about fraud risk factors throughout the audit until its completion).

Investigating the effects of brainstorming

Key words: Fraud risk, audit planning, nature of audit procedures, brainstorming

Research objectives

Objectives of this research could be summarized as follows:

• Assuring the importance of brainstorming in fraud detecting process.

• Exploring how could brainstorming improve planning of audit procedures in response to fraud risk.

Research questions

• Have previous academic research and auditing settings explained how could brainstorming improve fraud detection process?

• Does auditors ' groups that brainstorm design more effective audit procedures than those who do not

99, Consideration of Fraud in a Financial Statement Audit, to supersede SAS No. 82 (AICPA 2002), highlighting the new requirement for audit teams to conduct a brainstorming session, in which auditors will exchange ideas about where an entity’s financial statements may be susceptible to fraud. This standard suggests that brainstorming will aid auditors in detecting fraud. Failure to detect existing fraud in financial statements has proved quite costly to auditing firms.

According to SAS No. 99, brainstorming is supposed to make the auditor more skeptical and also improve the auditor’s fraud risk assessment and search for fraud. Hence it is important to investigate how brainstorming effects auditors’ fraud risk assessments and search for material misstatements during planning of audit