The Effect of Forensic Expertise and Time Pressure on Fraud Risk Assessment and Responsiveness

Abstract

Professional standards direct auditors to consult with forensic specialists to enhance the quality of fraud decisions. However, research underlying this prescription is limited. We address this gap by examining the effect of forensic expertise and time pressure on fraud cue identification and responsiveness in an experiment manipulating forensic expertise (forensic specialist versus auditor) and time pressure (present versus absent). The results show that forensic specialists identify more fraud cues than auditors, although this did not result in differential fraud risk assessment. Further, auditors not only plan less effective audit procedures than forensic specialists but also the performance difference is more substantial in the more realistic time pressure condition. However, as with prior studies, we did not find an association between fraud risk assessment and the planning of audit procedures for both groups. Taken together, the results provide evidence that consulting forensic specialists can enhance fraud decision quality and the performance difference is attributable to fraud cue identification and program planning but not through differential assessment of fraud risk assessment or its linkage to program planning.