"Assessing and addressing fraud risk based on earnings calls:  effects of focusing auditors on fraud vs. on management's dissonance"

Online FAR Masterclass on 4 December 2020, 3.30-5.00 p.m. CET by Mark Peecher (Professor at Illinois, Gies College of Business) - Registration is now open via this link.

What is this Masterclass about?
Listening to earnings calls has the potential to improve auditors’ exercise of professional skepticism, as these calls can reveal signs of aggressive financial reporting or even fraud.  Prior research shows that experienced audit partners in the United States can detect signs of deception in earnings calls at rates well above chance, but only if instructed to watch for signs of dissonance in management as opposed to watch for signs of fraud. Thus, while experienced auditors appear to have an ability to detect signs of deception, they appear to subconsciously suppress this ability due to the aversive nature of fraud and disincentives for suspecting fraudulent financial reporting. A limitation of prior research is that the auditors were listening to earnings call of non-clients, and it could be that auditors psychologically are more reluctant to see and respond to fraud indicators at their clients. 

The project team addresses this limitation and advances the literature by conducting a field experiment in which 184 auditors listen to their own clients’ earnings calls in the midst of audit engagements. They examine how auditors alter their assessment of the risk of material misstatement, including fraud risk, their plans for addressing these assessed misstatement risks, and the correlation between these two. Rather than focusing only on experienced audit partners, the team uses auditors with a wide range of audit experience. Further, they also use a control group of auditors listening to the same earnings calls for non-clients.  

Preliminary results indicate that what auditors think they learn from earnings calls differs markedly based whether or not they are instructed to focus on fraud indicators, focus on indicators of dissonance in managers, or both. They find that prompting auditors to focus on fraud actually reduces auditor concern about fraud risk unless accompanied also by a dissonance prompt. Prompting a focus on management dissonance, by contrast, results in an increase in auditors’ assessed risk of material misstatement and strengthens the correlation among assessing and addressing risk.     

You can now register using this link.

Please note that this Masterclass will be in English.

Who should attend?
The FAR Masterclass is of interest to audit practitioners and firm management, auditing standard setters, audit supervisors, auditing students, auditing teachers and audit scientists. The masterclass is open to everyone working in the field of accountancy.

Back to overview
Online FAR Masterclass by Prof. Mark Peecher on
  • Date:
    4 December 2020
  • Time:
    15:30 - 17:00
  • Location:
    Online event - Registration is now open

Event starts in:

9 d. 11:31:48

Speakers

About the speakers

Prof. Mark E. Peecher PhD

Prof. Mark E. Peecher PhD

Mark E. Peecher , CPA, is a professor of accountancy and a Deloitte Teaching Fellow at the University of Illinois, specializing in behavioral auditing and accounting research. He holds a bachelor’s, master’s, and Ph.D. degrees in accountancy from Illinois. Prior to returning to his alma mater, he was a faculty member at the University of Washington. An active member in the AAA’s Audit Section, Mark currently serves as the Audit Section’s past president.

Professor Peecher’s business-press writings about auditing have appeared in The Wall Street Journal, and his scholarly writings have appeared in AccountingOrganizations & SocietyAuditing: A Journal of Practice & TheoryContemporary Accounting ResearchInternational Journal of AuditingJournal of Accounting ResearchOrganizational Behavior and Human Decision Processes, and The Accounting Review. He has presented his research at numerous conferences, consortia, and universities, and he has served on the editorial boards at Auditing: A Journal of Practice & TheoryThe Accounting Review, and Issues in Accounting Education. Mark enjoys teaching both undergraduate courses and doctoral seminars related to auditing. He particularly likes helping to mentor doctoral students, three of whom have won outstanding doctoral dissertation awards.