Research into behavioral traits of the susceptibility to the risk of significant financial misstatements

Abstract

Subject. The article identifies behavioral signs of the susceptibility to the risk of material misstatements through the expert survey of professional auditors. Objectives. We do empirical research into the impact five behavioral traits have, which we discovered through the two parameter risk assessment model, i.e. tolerance to violation of laws, money pathology, susceptibility to high risk, aspiration of impunity and legislative illiteracy in finance. Method.s We performed the expert survey of professional auditors to discover what determines the susceptibility to fraud among those charged with financial reporting. The expert group was made on the basis of an unbiased approach and documentation. We applied the Rasch model to rank personal traits. The collected data were processed with methods of descriptive statistics and multivariate statistical analysis. Results. Carrying out the statistical analysis of experts’ opinions, we found that their significantly correlated. Personal traits were sorted by their impact on risk assessment. Money pathology, susceptibility to high risk, aspiration of impunity and legislative illiteracy in finance were acknowledged as the most influential factors in terms of the susceptibility to misstatements of financial reporting. Conclusions and Relevance. We empirically proved the importance of factors influencing the propensity to risk of misstating financial reports. We used our own theoretical concept. The findings can be useful to auditing forms to detect the customers’ propensity to the risk of manipulating financial reporting.