PROFESSIONAL SCEPTICISM AND AUDITORS ABILITY TO DETECT .
Scientific Research Journal (SCIRJ), Volume V, Issue IX, September 2017ISSN 2201-2796109PROFESSIONAL SCEPTICISM AND AUDITORSABILITY TO DETECT FRAUD BASED ONWORKLOAD AND CHARACTERISTICS OFAUDITORSNI NYOMAN AYU SURYANDARIa.suryandari@ymail.comUniversitas Mahasaraswati DenpasarBali, IndonesiaANIK YUESTIanikunmas@gmail.comUniversitas Mahasaraswati DenpasarBali, IndonesiaAbstract- Fraud detection ability of auditors means a processwhere auditors found the offense committed intentionally thatresulted misstatements in the financial statements. Auditors mustunderstand the red flags of fraud which is a sign of cheating isseen from the trail left by the action of fraud perpetrators, so ittakes the attitude of skepticism from an auditor. This studyaimed to examine the effect of workload, characteristics ofauditors of the professional skepticism and the ability to detectfraud. Myers Briggs Type Indicator (MBTI) was used to classifythe personality of the auditor. Respondents in this study wereobtained from the 37 auditor in public accounting firm registeredin Bali. Data collection methods in this research use aquestionnaire. The analysis tool used is Partial Least Square(PLS). This study shows that the variable workload and the typeof personality do not affect the professional skepticism and frauddetection ability of auditors. While variable auditors experiencehave affect positive on professional skepticism and frauddetection ability of auditors.Keywords: Workload, Auditors experience, personality types,Skepticism, fraud detection ability, Bali, Indonesia.I. INTRODUCTIONA. Research BackgroundThe skepticism has long been a fundamental concept inthe public accounting profession. SAS (Statement of AuditingStandards) No. 1 "Codification of Auditing Standards andProcedures" states that the auditor should use professionalskepticism in the consideration of audit that includes thoughtswere always asking, critical and objective in assessing auditevidence and assess the honesty of the client. One of thecauses of the high risk audit failure in detecting financialstatements fraud because the auditor has low professionalskepticism (Beasley et al, 2001) so that the auditor is not ableto consider the existence of fraud in audit planning (Carpenteret al, 2002). This study aimed to get empirical evidence aboutthe influence of the workload, the characteristics of theauditors (proxy by audit experience and personality types ofauditor's) on professional skepticism and the auditor's abilityto detect fraud.Because of the pressure of the workload, causing theauditor does not perform some procedure and auditors willeasily accept the explanation of the auditor without thinking(DeZoort and Lord, 1997 in Lopez and Peters, 2011). Inaddition to their experience in the audit, the auditor is able toknow the signs of fraud and would be more skeptical. Whilethe auditor who has the personality to think logically andobjectively based on facts will increase skepticism and betterable to detect fraud.II. RESEARCH PROBLEMBased on the background mentioned earlier, theformulation of research problems are:1).Whether the workload, audit experience, andpersonality types affect professional skepticism?2).Whether the workload, audit experience, andpersonality types affect the auditor's ability todetect fraud?B. RESEARCH OBJECTIVESBased on the formulation of the above problems, theobjectives to be achieved in this study are as follows:1)To analysis affect the workload, auditexperience, and personality type on professionalskepticism.2)To analysis affect the workload, auditexperience and personality types on the auditor'sability to detect fraud.C. BENEFITS RESEARCHThis study is expected to provide benefits to severalparties such as the firm public accountants, the research isexpected to provide input in improving the professionalskepticism and improve the ability to detect fraud. Forwww.scirj.org 2017, Scientific Research Journal
Scientific Research Journal (SCIRJ), Volume V, Issue IX, September 2017ISSN 2201-2796academics, this study is expected to add insight andknowledge about skepticism and fraud detection. As for theregulators, the study was expected to provide input on policymaking.II LITERATURE AND HYPOTHESIS110includes a questioning mind constantly and criticallyevaluating audit evidence. Auditors should not assume thatmanagement is dishonest, but also should not assume that themanagement of unquestioned honesty. The auditor also shouldnot be satisfied with the evidence is less persuasive for hisbelief in the honesty of management.B. Hypothesis DevelopmentA. Literature ReviewFraudThe definition of fraud according to Bologna et. al(1993: 3) are as follows: “ Fraud is criminal deceptionintended to financially benefit the deceiver”. Fraud is definedas criminal fraud that aims to provide financial benefit to thefraudster. Albrecht (2012: 6) states that:“The fraud is a generic term, and embraces all themultifarious means whichhuman ingenuity can devise, whichare resorted to by one individual, to get an advantage overanother by false representations. No definite and invariablerule can be laid down as general proportion in defining fraud,as it includes surprise, trickery, cunning and unfair ways bywhich another is cheated. The only boundaries defining it arethose which limit human knavery”.Association of Certified Fraud Examiners (ACFE)grouping fraud into three, namely:1) CorruptionBlack "s Law Dictionary in Wells (2007) defines" corrupt"a spoiled; Tainted; depraved; debased; morallydegenerate. Corruption schemes can be broken down intofour classifications: (1) conflict of interest, (2) bribery, (3)the provision illegal, and (4) economics blackmail.2) Assets MisappropriationMisappropriation of assets is divided into two categories,namely: (1) Cash abuse such as skimming cash, Larceny orfraudulent disbursements, and (2) the abuse of non-cashsuch as abuse or theft of inventory and other assets.3) Fraudulent Financial StatementsFraudulent financial statements can be accomplished by (1)the sale of fictitious (2) records of income and / or expensein the period that is not appropriate, (3) hide liabilities andexpenses that aims to shrink the amount of liabilities andexpenses for the company look more profitable, (4)eliminate information or include deliberate misinformationof the notes to the financial statements, or (5) assesses theassets inappropriately.Ability to Detect FraudIn conducting fraud detection auditors are required to havesome ability / skills that can support them in the conduct ofdetection, such as (1) the technical skills include competenceaudit, information technology and expertise investigation, (2)the skills / ability to work in a team, auditor must be able toaccept the ideas, knowledge and expertise of others withcommunication and open-minded, and (3) the ability to advise,this ability must be owned by a senior auditor in which asenior should be able to lead the juniors during theinvestigation process (Mui, 2010).Professional skepticismPublic Accountants Professional Standards Section 230 PSANo. 04 defines professional skepticism as an attitude thatThe effect of workload on professional skepticism and theauditors ability to detect fraudNasution and Fitriany (2012) states that the auditor'sworkload can be seen from the large number of clients thatmust be handled by an auditor with the limited time auditor tocomplete the audit. With a high workload, an auditor mayreceive an explanation from the client without having tosearch deeper information on the audit evidence obtained. Thisproves that the heavy work load will reduce the auditor'sprofessional skepticism (Nasution and Fitriany, 2012).The workload of an auditor is usually associated with a busyseason which usually occurs at the beginning of the firstquarter mainly due to the many companies that have a fiscalyear that ended in December. Excess work during busy seasonwill lead to fatigue and the tight time budget for the auditorthat will produce low quality audit (Lopez and Peters, 2011).Murtisari and Ghozali (2006) found evidence that theburden of work that resulted in excess jobs will decrease jobsatisfaction and performance auditor. Lopez and Peters(2011)research, which is supported by Fitriany (2011)research found that the auditor's workload negatively affectaudit quality. Increasing workload will reduce the ability ofauditors to detect fraud a company that will result in well withthe resulting audit quality will be lower. Based on this conceptit is assumed that the more workload that the auditor willfurther lower professional skepticism. In addition, the auditorworkloads more thought to the less will improve the ability todetect it when confronted with symptoms of fraud. Thehypothesis of this study are as follows:H1:H2:Workload negatively affect on professional skepticismWorkload negatively affect on the auditor's ability todetect fraudThe effect of audit experience on professional skepticism andthe auditors ability to detect fraudExperience according to Webster's Ninth NewCollegiate Dictionary in Sucipto (2007) is a knowledge /expertise gained through an event by direct observation orparticipation in such events so that more and more complextasks are carried out led to increased experience (Christiawan,2002). In addition, the more often and the recurrence of a jobis done is also a factor that can improve the experience andmake it more aware of the obstacles that may be experienced(Bawono and Singgih, 2011). Experience to be an importantindicator for the professional qualifications of an auditor (AUSection 110 paragraph 04). Audit experience is the experiencegained auditor during the audit of financial statements in termsof both duration and number of assignments that once handled(Suraida, 2005). Auditors that more experience will have ahigher ability to discover fraud contained in the financialstatements and also can provide more accurate explanation ofwww.scirj.org 2017, Scientific Research Journal
Scientific Research Journal (SCIRJ), Volume V, Issue IX, September 2017ISSN 2201-2796the findings for increased professional skepticism (Libby andFrederick, 1990 and Suraida, 2005).Sularso and Na'im (1999) in Taufiq (2008) states that aperson is more experience in a substantive fields have morethings stored in his memory, and can develop a goodunderstanding of the relative frequency of events. Suraida(2005), Noviyanti and Bandi (2002), and Muiet. al (2010)have proved that one of the factors that can increase theskepticism of a professional auditor is the number of auditexperience that has been owned by auditors and manyexperiences will result in better performance in detecting casesof fraud compared with inexperienced auditors.Based on the above, the more experience will increasethe professional skepticism. In addition, more experiencedauditor will further enhance the ability to detect whenconfronted with symptoms of fraud. The hypothesis of thisstudy are as follows:H3: audit experience positively affect on professionalskepticismH4: audit experience positively affecton the auditors abilityto detect fraudThe effect of Personality Type combination of ST and NT onProfessional Skepticism and auditors ability to detect fraudA person's personality is formed by two factors:heredity (genetic factors) are the basic factors that shape one'spersonality, and environmental factors, the factors that affect aperson's personality based on where a person grew up. In thisstudy, personality types grouped by Myers-Briggs TypeIndicator (MBTI). Myers-Briggs Type Indicator (MBTI) wasdeveloped by Katharine Cook Briggs and her daughter IsabelBriggs Myers named based on the personality theory of CarlGustav Jung. In the MBTI, personality type of man can bedivided into four pairs of preference: (1) the preferenceExtraversion and introversion (E and I), (2) the preferenceSensing and Intuition (S and N), (3) preferences Thinking andFeeling (T and F ), and (4) preference Judging and Perceiving(J and P). Auditor with a combination of personality types STand NT based on the theory of Myers Briggs is an auditor whotend to think logically in making decisions and taking intoaccount all the facts are there to support his decision. Based onthe concept above, it is suspected that the auditor withpersonality type combination of ST and NT are auditors whohave skepticism professionals and auditors that will furtherenhance the ability to detect when confronted with symptomsof fraud compared to the auditor with the type of otherpersonalities (Nasution and Fitriany, 2012).The hypothesis of this study are:H5: Auditor with personality type combination of ST andNT have professional skepticism higher than theauditor with other personality types.H6: Auditor with personality type combination of ST andNT will further enhance the ability to detect whenconfronted with symptoms of fraud compared to theauditor with other personality types.III. METHODA. Research FrameworkAuditor is the party that is expected to bridging theinterests of management and users of financial statements,111so that the auditor is expected to detect fraud. It is no lessimportant to be possessed by an auditor is to haveprofessional skepticism because it would affect thequality of the audit. This study aims to determine theeffect of workload and characteristics of auditors (proxiedby audit experience and personality types) on professionalskepticism and the auditor's ability to detect fraud. Thisresearch was conducted at the public accountant firmlisted in Bali. This study is a replication of researchconducted by Nasution and Fitriany (2012). Researchframework in this study are:WorkLoadSkept ismeProfesionalAudit orexperienceKemampuanMendet eksiKecuranganPersonalit yTypeCont rol Variable:- Gender- PositionB. Operational Definition and Measurement of Variables1) Auditors Ability to Detect Fraud (ABILITY)The questionnaire in this study using statements regardingsymptoms of fraud developed by Fullerton and Durtschi(2004) which consists of symptoms consisting ofcorporate fraud environment and symptoms of financialrecords and accounting practice. Variable corporateenvironment (ENVR) in this study have observed that 4variables ABILITY1 until ABILITY4. Variable financialrecords and accounting practice (FR AP) in this studyhave observed that 6 variables ABILITY5 untilABILITY10.2) Professional Skepticism (SKEP)Professional skepticism variables measured using a modelHurtt, Eining, and Plumlee (HEP) which is used inresearch Fullerton and Durtschi(2004). Model HEPmeasure of skepticism professionals based on 6characteristics, namely: 3 statements about questioningmind, 2 statements regarding the suspension of judgment,2 statements regarding the search for knowledge, 3statements regarding interpersonal understanding, 2statements about self-confidence, and 3 statementregarding self-determination.3) Workload (WORK)The workload is measured by the average number ofaudits carried out by auditors during the year. A value 1for the number of assignments 1-3, value 2 for the numberof assignments 4-7, value 3 for the number of assignments8-10, value 4 for the number of assignments more than 10years. The lower the value of this variable, indicates thelow workload of auditors.4) Audit Experience (EXPR)Audit experience measured by the length of workexperience as an auditor (Suraida, 2005). A value of 1 for1-5 years audit experience, value 2 for 6-10 years auditexperience, the value of 3 for 11-15 years auditexperience, and value of 4 for more than 15 yearsauditwww.scirj.org 2017, Scientific Research Journal
Scientific Research Journal (SCIRJ), Volume V, Issue IX, September 2017ISSN 2201-2796experience. The higher the value of these variables, meansmore experience have had auditors.5) Personality Type (PERSON)Personality type was measured using the Myers-BriggsType Indicator (MBTI). Noviyanti (2008) classifypersonality types auditor into two groups, namely thepersonality type ST (Sensing-Thinking) and NT(Intuition-Thinking). Auditor with personality type ST(Sensing-Thinking) and NT (Intuition-Thinking) werecoded 1 and auditor with personality types other than ST(Sensing-Thinking) and NT (Intuition-Thinking) werecoded as 0.6) Control VariablesOther variables that affect skepticism based on previousresearch professional and the auditor's ability to detectfraud is used as control variables in this study are:Gender (GEND)In this study Gender consists of two types ofmen and women. Auditor with female genderwas coded 1 and auditor with the male genderwere coded 0. Predicted that auditor with femalegender have higher professional skepticism andability to detect fraud than male auditors.Position (POSITION)Auditor with the position of senior auditor,supervisor, manager / asisstent managers andpartners are given a value of 1, while the auditorin the position of junior auditor rated 0.Predicted that the position of a junior auditorhas professional skepticism and the ability todetect fraudulent lower than a position of seniorauditor, supervisor, manager / assistant managerand partner.C. SampleThe population in this study is the auditors who work in publicaccountant firm listed in Bali. The sample was determined bysimple random sampling method. Respondents in this study isa junior auditor and senior auditor who worked on publicaccountant firm.D. Data Collection MethodsThe method of collecting data in this study using surveydata collection techniques by using a questionnaire(questionnaire).E. Data Analysis TechniquesIn this study, analysis of data using the approach PartialLeast Square (PLS). PLS is a model equation StructuralEquation Modeling (SEM) based components or variants.The equation in this study are:SKEP α β1 BK β2EXPR β3 PERSON(1)ABILITY α β1 BK β2EXPR β3 2 KAP Drs. Sri1010MarmoDjogosarkoro3 KAPDrs.66WayanSunasdyana4 KAP Gunarsa655 KAP75KetutBudiartha6 KAPDrs.108KetutMuliarthaRM &RekanTotal4437Source: processed data (2016)Questionnaire distributed totaled 44 by the return of thequestionnaire are as follows:Table 3.Returns Data SampleInformationThe number ofquestionnaireQuestionnaire distributed44Questionnaires were not 7returnedQuestionnaires returned37Questionnaireswere 0canceledQuestionnaire used in the 37analysisResponse rate97,36%Usable response rate97,36%Source: processed data (2016)1B. Characteristics of RespondentsProfile of respondents explained about gender,respondent job title, and work experience ofrespondents. Characteristics of respondents can be seenin Table 3.Table 3. Characteristics of 8Total237PositionPartner0Manager1Senior auditor20Junior auditor16IV RESULTS AND DISCUSSIONA. Description of RespondentsThe following table displays a questionnaire distributedto each resNoFirms NameThe numberThe numberofofquestionnaires questionnairesTotal337Length of work1-5 yearwww.scirj.org 2017, Scientific Research Journal15
Scientific Research Journal (SCIRJ), Volume V, Issue IX, September 2017ISSN 2201-279646-10 year2211-15 year0 15 year0Total37COMPOSITE RELIABILITYReliability test can be seen from Cronbach's alphavalues must be more than 0.6 and composite reliabilityvalues must be more than 0.7. Based on table 4, valuesCronbach's alpha is more than 0.6 and compositereliability values is more than 0.7 this means that itmeets the test model.The number of audit1-3 tasks34-7 tasks7113STRUCTURAL MODEL (INNER MODEL)Table 6. R SquareR SquareK1 10 tasks10K2Total37X1X2X30.347200Y1IV. DISCUSSION0.256870Y2A. Construct validity testThe R2 each construct based on table 6 is Y1 0.347200.That means that Y1 (SKEP) can be explained by the1)Convergent validity testworkload, audit experience and personality type isTable 4.Overview AlgorithmCompositeCronbachs 34.7200% while the remaining 0.6528 is explained by othervariablesnot includedin the model. Y2
Fraud The definition of fraud according to Bologna et. al (1993: 3) are as follows: “ Fraud is criminal deception intended to financially benefit the deceiver”. Fraud is defined as criminal fraud that aims to provide financial benefit to the fraudster. Albrecht (2012: 6) states that:
through the educational qualification and professional certificates, and objectivity, . and quality factors and audit function as issued by internal and external auditors Institute of Standards consisted of independence, . sample was current external auditors and their number (23) auditors, and potential external auditors and their numbered .
CERTIFICATES ISSUED BY EXTERNAL AUDITORS GUIDANCE NOTES FOR BENEFICIARIES AND AUDITORS . 2 Introduction These guidance notes have been compiled to guide research beneficiaries and external auditors in the preparation of Certificates on the Financial Statements and on the
bounds of engagement. Investigative independence: no legitimate source of information is closed to auditors, requiring that auditors have freedom to examine information that auditors themselves deem to be relevant. If auditors wish to examine budgets and forecast accounts, they should be allowed to do so.
Auditors are not effectively trained to detect or recognize fraud. One expert noted that fact patterns suggesting that fraud exists (i.e., fraud schemes) are unfamiliar to many auditors because they have not been trained in this area and because fraud is a rare event. Auditors' lack training in fraud detection methods or fraud investigation
1 While we recognize that internal auditors also play an important role in detecting fraud, the focus of our study is on the effectiveness of external auditors. As such, we use the word “auditor” to refer to external auditors of the financial statements.
REVISED GUIDE FOR REGISTERED AUDITORS: ACCESS TO WORKING PAPERS Page 5 of 53 This Revised Guide for Registered Auditors: Access to Working Papers (Revised Guide) deals with the circumstances in which registered auditors (auditors) or firms are requested or required to grant access to working papers that support an auditor's opinion, conclusion
Happy 70th anniversary to the Institute of Internal Auditors. Established in 1941, The Institute of Internal Auditors (IIA) is an international professional association with global headquarters in Altamonte Springs, Fla., USA. The IIA is the internal audit profession's global voice, recognized authority, acknowledged leader, chief
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