The Impact of Auditors’ Professional Skepticism on Fraud Detection in an Emerging Economy

Abstract

Purpose: Corporate fraud is a significant issue that receives growing attention from auditors, regulators and the public. Fraud has been highlighted as a global issue since no country or institution can withstand it. Fraud has many aspects and it can manifest in various ways. However, whatever the type or nature of fraud, its impacts are always negative. As a consequence, it is fundamental that the auditing profession develop robust measures to detect fraud effectively. One way that can be used to enhance auditor’s ability to detect fraud is through high application of professional scepticism. Hence, in light of this, the study attempts to look into the essential factors that will drive high professional scepticism and to evaluate which determinant will be the most important to help auditors detect fraud.

Methodology:To achieve the research objectives, data was collected from a sample of 122 auditors via a survey questionnaire. The survey was a cross-sectional one and therefore all the study’s variables were measured at once.The questionnaire consisted of all compulsory questions which were set in a simple and direct way to facilitate the understanding of respondents. Both nominal and ordinal questions types were inserted in the questionnaire. Additionally, structured questions were designed to help participants answer the survey.

Findings:Based on the regression analysis carried out, the study results demonstrate that questioning mind, knowledge of red flags and training are significant predictors of auditor’s ability to detect fraud, with questioning mind being the most significant variable, while self-confidence turn out to be unsuccessful in contributing towards enhancing the auditor’s fraud detection skill.

Originality and Contribution:This research is a replication of previous research conducted by Hurtt (2013), Nasution and Fitriany (2012) and Fullerton and Durtschi (2004) but examined in the context of Mauritius. According to the best of my knowledge, no similar empirical studies have investigated the determinants that would improve auditor’s ability to detect fraud in the Mauritian context. Hence, this paper seeks to fill this gap by providing empirical results and adding to literature. The findings from the study will evaluate which factors have the greatest impact on the auditor’s fraud detection ability from the perspective of auditors situated in Mauritius.