The Interaction between Internal Control Assessment and Substantive Testing in Audits for Fraud*

J. Reed Smith, Samuel L. Tiras and Sansakrit S. Vichitlekarn

Contemporary Accounting Research, 2000, vol. 17, issue 2, 327-356

Abstract: We examine the interaction between internal control assessments and substantive testing in a model of fraud detection. The purpose of our study is to examine a two†stage model of the auditor†manager interaction in which the auditor assesses the “likelihood†or possibility of fraud in the first stage and conducts substantive tests in the second stage. We examine the allocation of audit resources across these two distinct facets of the audit. We find that, regardless of the auditor's allocation, the probability of undetected fraud remains the same, but the allocation of some audit resources to internal control assessment may provide cost savings for the auditor.

Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://doi.org/10.1506/P7V7-1VUY-0QP8-5W7U

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:coacre:v:17:y:2000:i:2:p:327-356

Access Statistics for this article

More articles in Contemporary Accounting Research from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().