 The Effects of Fraud Risk and Management Representation on Auditors’ Hypothesis GenerationTerence Bu‐Peow Ng, Wendy Green and Roger Simnett Abacus, 2001, vol. 37, issue 3, 352-368 Abstract: Hypothesis generation is considered to be critical to the effectiveness and efficiency of diagnostic processes in auditing. Using a between‐subjects experimental design, this work examines the impact of fraud risk and the availability of a non‐misstatement management explanation on auditors’ hypothesis generation performance. The context is when managers undertake analytical procedures at the planning stage of the audit. The results indicate that auditors are sensitive to increased fraud risk by generating more fraud hypotheses, while the number of misstatement hypotheses generated is not affected by fraud risk. The availability of a non‐misstatement management explanation was found not to interfere with auditors’ hypothesis generation performance, but facilitated the generation of proportionately more misstatement and fraud hypotheses from the same transaction cycle as that indicated by the management explanation. Together, these findings provide some insights on the sensitivity of auditors’ hypothesis generation to fraud risk and whether this sensitivity could be undermined by the availability of management representations. Date: 2001 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:abacus:v:37:y:2001:i:3:p:352-368 Ordering information: This journal article can be ordered from Access Statistics for this article Abacus is currently edited by G.W. Dean and S. Jones More articles in Abacus from Accounting Foundation, University of Sydney |
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