Empowering Auditors to Pursue Fraud During Evidence Evaluation

Abstract

Auditors struggle to respond skeptically to fraud, reducing audit quality. This problem is particularly prevalent during the evidence evaluation phase of the audit, when auditors face the greatest time constraints. Empowerment theory suggests people overcome constraints and produce higher quality work when they feel empowered (i.e., capable of navigating the course of their work). Based on this theory, we develop an intervention that combines a professional skepticism charge code with supervisor support. Using an experiment, we predict and find that when fraud is present during evidence evaluation, auditors with our intervention recognize a greater number of fraud evidence items and identify more procedures that effectively target fraud. However, when fraud is absent, these auditors are, appropriately, no more likely to perform more work than other auditors. This study contributes to theory and practice as our theory-driven intervention improves auditors’ performance in an area where they have been deficient in practice.