Empowering Auditors to Pursue Fraud during Evidence Evaluation

SYNOPSIS Auditors struggle to respond skeptically to fraud, diminishing audit quality. This problem is particularly prevalent during the evidence evaluation phase of the audit, when auditors perceive intense time constraints. Theory suggests that employees who feel empowered overcome constraints and produce higher quality work. We predict and find support for our empowerment theory-driven judgment model. Specifically, as auditors in the evidence evaluation phase feel more empowered, they assess fraud risk higher when fraud is present, leading them to indicate a greater need for more work and, ultimately, recommend more effective audit procedures. In further support for our theory, we find that as auditors feel more empowered, they perceive audit constraints as less restrictive. Regulators advocate for increased auditor vigilance against fraud, and this study contributes to research and practice by identifying an audit management strategy—empowerment—that successfully improves auditors’ fraud pursuit during evidence evaluation.