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A natural field experiment examining the joint role of audit partner leadership and subordinates’ knowledge in fraud brainstorming

Sean A. Dennis and Karla M. Johnstone

Accounting, Organizations and Society, 2018, vol. 66, issue C, 14-28

Abstract: Research shows that audit partner leadership is critical to achieving fraud brainstorming objectives. We examine how partner leadership and subordinate knowledge jointly influence brainstorming processes and outcomes. We conduct a natural field experiment that manipulates partner leadership during actual brainstorming sessions to leverage naturally-occurring differences in the knowledge levels of managers versus seniors. Our design allows us to examine how knowledge differences within the organization influence judgments on actual engagements, thereby facilitating uniquely realistic inferences about partner leadership in interactive brainstorming. We predict and find that quality-differentiated leadership improves the mental representations of fraud risk for seniors, but not managers. Consistent with theory around shared mental models, these changes are, in turn, associated with the engagement team's planned fraud risk responses. Further analyses reveal that our leadership prompts are relatively more novel for seniors than managers, supporting the notion that seniors have more room for improvement in their mental representations than managers.

Keywords: Audit planning; Field experiment; Fraud brainstorming; Professional skepticism (search for similar items in EconPapers)
JEL-codes: G30 K4 M41 M42 (search for similar items in EconPapers)
Date: 2018
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