The Effects of the Presence of Fraud and Auditor Certification Considering Professional
Skepticism on Fraud Risk Assessment Performance
Dissertation Manuscript
Submitted to Northcentral University
School of Business and Technology Management
in Partial Fulfillment of the
Requirements for the Degree of
DOCTOR OF PHILOSOPHY
by
CYNTHIA E. VANCE
San Diego, California
May 2017
ProQuest Number:
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Abstract
Financial statement fraud is still prevalent in the United States, even after the enactment
of the Sarbanes-Oxley Act of 2002 and SAS No. 99. Researchers and auditing regulators
report that auditors’ fraud risk assessments are not effectively detecting financial
statement fraud. Both professional skepticism and fraud knowledge are attributes that
may have an effect on auditors’ fraud risk assessment outcomes. The purpose of this
quantitative between-participants research study was to examine the independent
variables of the presence of fraud and auditor certification while controlling for
professional skepticism in relation to the dependent variable, fraud risk assessment
performance, for participants within the U.S., who are certified public accountants
(CPAs) and/or certified fraud examiners (CFEs). The experiment was conducted in the
online environment using Qualtrics online survey software. Participants completed the
Hurtt Professional Skepticism Scale questionnaire to measure professional skepticism
and conducted a fraud risk assessment of a company’s set of financial statements (Form
10-K). Statistical data analysis was performed using both a two-way analysis of variance
(ANOVA) and a two-way analysis of covariance (ANCOVA) in conjunction with
planned comparisons to determine interaction effects of the variables. Results revealed a
significant effect of the presence of fraud on fraud risk assessment performance with and
without the influence of professional skepticism. However, the absence of fraud risk
condition produced a higher fraud risk assessment performance than the presence of fraud
risk condition, which did not support the hypothesis. Moreover, the effect of auditor
certification had an insignificant effect on fraud risk assessment performance with and
without the influence of professional skepticism. Results of this study provide support
that a quantitative review of financial statements does not accurately assess fraud risk,
even if the evaluators possess higher levels of professional skepticism. Further research
should be conducted to evaluate the minimum requirements prescribed by the accounting
profession for effective financial statement fraud detection.
Acknowledgements
I would like to thank my dissertation committee chair, Dr. Vanessa Ann Claus, for
all of her assistance and dedication to my research project. She went over and above to
help me complete the dissertation process on time. Additionally, I am appreciative of the
time commitment and advice from my dissertation reviewers, Dr. Garrett Smiley and Dr.
Stephen Verrill. I am also grateful to Dr. Gail Gessert and the faculty members at
Northcentral University who equipped me with the skills needed to become a scholar
through their valuable feedback and insights during my coursework. I also would like to
thank my wonderful son, Cory, for understanding my time commitment to this project,
and my friends and family for their continued support. I thank God for being with me
during this journey and giving me the strength to persevere.
Table of Contents
Chapter 1: Introduction……………………………………………………………………1
Statement of the Problem ………………………………………………………………………………… 5 Purpose of the Study ………………………………………………………………………………………. 6 Theoretical Framework …………………………………………………………………………………… 9 Nature of the Study ………………………………………………………………………………………. 11 Research Questions ………………………………………………………………………………………. 13 Significance of the Study ………………………………………………………………………………. 15 Definition of Key Terms ……………………………………………………………………………….. 17 Summary …………………………………………………………………………………………………….. 18
Chapter 2: Literature Review ……………………………………………………………………………….. 20
Theoretical Framework …………………………………………………………………………………. 21 Regulations …………………………………………………………………………………………………. 24 Risk Assessment Models ………………………………………………………………………………. 34 Auditors’ Attributes ………………………………………………………………………………………. 49 Certified Fraud Examiners …………………………………………………………………………….. 66 Summary …………………………………………………………………………………………………….. 69
Chapter 3: Research Method ………………………………………………………………………………… 71
Research Methodology and Design ………………………………………………………………… 76 Population and Sample ………………………………………………
