• ISSN: 2301-3567 (Print), 2972-3981 (Online)
    • Abbreviated Title: J. Econ. Bus. Manag.
    • Frequency: Quarterly
    • DOI: 10.18178/JOEBM
    • Editor-in-Chief: Prof. Eunjin Hwang
    • Executive Editor: Ms. Fiona Chu
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HOME > Archive > 2015 > Volume 3 Number 2 (Feb. 2015) >
JOEBM 2015 Vol.3(2): 194-200 ISSN: 2301-3567
DOI: 10.7763/JOEBM.2015.V3.179

Effects of Internal Controls, Fraud Motives and Experience in Assessing Likelihood of Fraud Risk

Zuraidah Mohd-Sanusi, Norhayati Mohamed, Normah Omar, and Mohd-Daniel Mohd-Nassir

Abstract—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.

Index Terms—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: zuraidahms@salam.uitm.edu.my).
N. Mohamed was with the Universiti Teknologi MARA. She is now with the Ministry of Education, Putrajaya, Malaysia (e-mail: norhayati.mohamed@mohe.gov.my).
N. Omar is with the Accounting Research Institute, Universiti Teknologi MARA, 40450, Shah Alam, Selangor, Malaysia (e-mail: normah645@salam.uitm.edu.my).
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: daniel_nassir@yahoo.com).

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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.

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