The efficacy of a red flags questionnaire for assessing the possibility of fraud

Abstract

This field experiment ( n = 137 auditors) examined the efficacy of a red flags questionnaire for assessing the risk of material fraud at a client. Two variables — evaluation of a fraud case or a no-fraud case, and use or non-use of a red flags questionnaire — were manipulated. Questionnaire users showed increased comprehensiveness and uniformity in data acquisition. However, questionnaire use had no significant impact on fraud risk assessment for the no-fraud case and was dysfunctional for the fraud case. Possible reasons for the dysfunction are explored and suggestions for future research are presented.