—The audit profession has attempted to improve
auditors’ ability in assessing likelihood of fraud risk so as to
enhance audit quality and increase investor confidence.
Malaysian Approved Standards on Auditing, AI 240 on “Fraud
and Error” and National Audit Department guidelines on fraud
requires the auditor to assess the likelihood of fraud based on
the internal control and pressure and opportunity. The purpose
of this study is to examine which factor most likely use by
auditors in assessing the likelihood of fraud risk. An
experimental approach is adopted by sending case scenarios to
63 auditors from the National Audit Department of Malaysia
and 67 final year accounting students. Both groups have to
complete two different case scenarios which level of internal
controls and fraud motivation (i.e., pressures and opportunity)
are being manipulated into high and low level. The results
indicate that there are significant interaction between internal
controls and fraud motivation factors. The findings may
provide insights into the auditors’ judgment in fraud risk
assessment which could be beneficial to increase the auditors’
awareness and understanding of fraud risk factors and thus,
maintain their viability in the auditing profession.
—Assessment of fraud risk, fraud triangle,
internal control, audit judgment. fraud motives.
Z. Mohd-Sanusi is with the Accounting Research Institute and Faculty of
Accountancy, Universiti Teknologi MARA, 40450, Shah Alam, Selangor,
Malaysia (e-mail: firstname.lastname@example.org).
N. Mohamed was with the Universiti Teknologi MARA. She is now with
the Ministry of Education, Putrajaya, Malaysia (e-mail:
N. Omar is with the Accounting Research Institute, Universiti Teknologi
MARA, 40450, Shah Alam, Selangor, Malaysia (e-mail:
M. D. Mohd-Nassir is now with the Faculty of Accountancy, University
Teknologi MARA, 40450, Shah Alam, Malaysia, on leave from the
Malaysian Audit General Office, Putrajaya, Malaysia (e-mail:
Cite: Zuraidah Mohd-Sanusi, Norhayati Mohamed, Normah Omar, and Mohd-Daniel Mohd-Nassir, "Effects of Internal Controls, Fraud Motives and
Experience in Assessing Likelihood of Fraud Risk," Journal of Economics, Business and Management vol. 3, no. 2, pp. 194-200, 2015.