Nominal versus interacting electronic fraud brainstorming in hierarchical audit teams

Xiaoling Chen, Ken T. Trotman, Flora Zhou

Research output: Contribution to journalArticlepeer-review

Abstract

In this study, we examine whether interacting hierarchical teams outperform nominal hierarchical teams in electronic brainstorming. Our hierarchical audit teams were composed of 111 managers and seniors from two Big 4 accounting firms. We compare fraud brainstorming outcomes between nominal and interacting teams for two tasks of varying complexity: a simpler task of fraud risk factor identification and a more complex task of fraud hypothesis generation. We find that nominal teams generate a significantly larger number of unique fraud risk factors and fraud hypotheses than interacting teams. Nominal teams also generate higher-quality fraud hypotheses. We provide evidence that social loafing by less experienced auditors in interacting teams drives the differences between nominal and interacting teams in the fraud hypothesis generation task. In addition, less experienced auditors have less developed mental simulations for frauds in interacting teams compared to those in nominal teams. A key contribution of our study is that it identifies the underlying mechanisms of the differential fraud brainstorming outcomes between nominal and interacting teams.

Original languageEnglish (US)
Pages (from-to)175-198
Number of pages24
JournalAccounting Review
Volume90
Issue number1
DOIs
StatePublished - Jan 1 2015

Keywords

  • Fraud brainstorming
  • Mental simulation
  • Nominal versus interacting teams
  • Social loafing

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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