SAS No. 99. - Consideration
of Fraud in a Financial Statement Audit, to supersede SAS No. 82 (AICPA 2002),
requires auditors to conduct fraud brainstorming sessions on every audit.
Brainstorming aims to improve auditors' professional skepticism and reduce
their cognitive dissonance. So they can more effectively evaluate the potential
of fraud when investigating financial statements. Despite SAS No 99., Auditors
continue to fail at modifying their standard audit procedures in response to
fraud risk. The Public Company Accounting Oversight Board (PCAOB) cited a lack
of professional skepticism as the primary cause of inconsistent brainstorming
sessions. Our experiment advances Carpenter's (2007) study by investigating
whether the Certified Fraud Examiner’s designation enhances
fraud risk detection by improving professional skepticism and brainstorming
quality in audit teams. The results should inform regulators, academic
researchers, and audit practitioners. It can shift how accounting
educators and industry professionals prepare auditors to effectively evaluate
unstructured fraud cues to lessen the impact of fraud losses and save investors
hundreds of millions of dollars in economic value.
