A Quantitative Approach of Professional Skepticism and Fraud Detection among Malaysian Internal Auditors

Abstract

Purpose: This study examines how professional skepticism traits influence internal auditors’ fraud detection.
Design/methodology/approach The participants in the study were internal auditors employed in Malaysia. Survey questionnaires including six characteristics of professional skepticism based on Hurtt's (2010) paradigm were disseminated. The traits are classified into three categories: evaluation of evidence (inquisitive mindset, suspension of judgement, pursuit of knowledge), comprehension of evidence providers (interpersonal insight), and auditor initiative to act on evidence (self-assurance and self-determination), serving as the independent variables. The dependent variable was the identification of fraud by internal auditors. Numerous studies have examined the correlation between these attributes and fraud detection, predominantly concentrating on external auditors, with few investigations into internal auditors. A total of 150 replies were collected and considered valid. Pearson correlation and multiple linear regression were conducted to fulfill the research goals.
Findings The findings, grounded in attribution theory, indicated substantial positive correlations among enquiring mindset, pursuit of knowledge, interpersonal comprehension, self-determination, and fraud detection. Nonetheless, the correlations between the suspension of judgement and self-confidence in respect to fraud detection, albeit positive, were deemed inconsequential.
Originality/value This study enhances Attribution Theory by associating attributes of professional skepticism with fraud detection, offering empirical proof of their influence on internal auditors. This expands the theory's applicability beyond social psychology to organisational behaviour and forensic accounting, enriching our comprehension of auditors' cognitive and behavioural processes. The findings provide directives for internal auditors in Malaysia and regulatory authorities, highlighting the cultivation of professional skepticism attribute to enhance fraud detection. Regulatory entities such as IIA Malaysia ought to contemplate amending standards, instituting training programs, and fostering awareness to augment auditors' competencies and mitigate fraud threats.