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An analysis of Hong Kong Auditors' perceptions of the importance of selected red flag factors in risk assessment
journal contribution
posted on 2001-08-01, 00:00 authored by A Majid, Ferdinand GulFerdinand Gul, J S L TsuiABSTRACT. This study examined auditors’ perceptions of the relative level of risk of fraud and material irregularities associated with the presence of six red flag factors and also evaluated the quality of auditors’ judgements. The study was conducted in two stages. In the first stage, subjects were asked to rank the importance of 15 factors that proxy the existence of material misstatements. Based on the responses to this questionnaire, 6 of the most important factors were identified and included in the second stage, a lens model experiment. In the lens model experiment, 30 experienced auditors from a cross-section of Big 6 firms were used as subjects in a repeated-measures ANOVA design. Results showed that misstatements in prior audits and indicators of going-concern problems were perceived to be the most significant factors in alerting auditors to the risk of fraud and material irregularities. In making these judgements, auditors demonstrated a relatively high level of consensus
and consistency. However, the two most important factors in the lens model experiment are not the same as the results of the first survey suggesting that the first group of respondents, faced with a simple questionnaire, used heuristics in their decision making. The results have implications for audit practice.
and consistency. However, the two most important factors in the lens model experiment are not the same as the results of the first survey suggesting that the first group of respondents, faced with a simple questionnaire, used heuristics in their decision making. The results have implications for audit practice.
History
Journal
Journal of business ethicsVolume
32Issue
3Pagination
263 - 274Publisher
Kluwer Academic PublishersLocation
Berlin, GermanyPublisher DOI
ISSN
0167-4544eISSN
1573-0697Language
engPublication classification
C Journal article; C1.1 Refereed article in a scholarly journalCopyright notice
2001, Kluwer Academic PublishersUsage metrics
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