An Empirical Analysis of the Likelihood of Detecting Fraud in New Zealand

Abstract

This paper reports on the perceived effectiveness of 56 fraud-detecting audit procedures used in the stock and warehousing cycle, and the factors that influence the likelihood of detecting fraud in this transaction cycle in New Zealand. We surveyed New Zealand auditors to ascertain their opinion on the effectiveness of these audit procedures. While respondents perceive less than half of the 56 audit procedures as being “more effective” in detecting fraud, more than half are perceived as “moderately effective”. A total of 15 audit procedures are perceived as being “less effective” in detecting fraud. The perceptions of respondents are not affected by the location of their employers in New Zealand, and the type of audit firm employing them. A logit regression analysis suggests that size of audit firm, auditor’s position tenure, and auditor’s years of experience are statistically significant predictors of the likelihood of detecting fraud in the stock and warehousing cycle.