Auditor Ethical Judgement in Fraud Investigation: Development of Hypothetical Cases for Experimental Study Approach

Abstract

Ethical judgement is a cornerstone of auditing, particularly in fraud investigations, in which auditors encounter complex dilemmas influenced by the nature and intricacies of the cases. In this paper, two hypothetical real-world scenarios with varying levels of complexity are developed, that is, a high-complexity case and a low-complexity case, to examine the ethical judgement of auditors under varying conditions relating to fraud investigations. The high-complexity case features multilayered transactions, ambiguous evidence and collusion among multiple parties, which require advanced analytical and ethical reasoning skills. By contrast, the low-complexity case involves straightforward fraudulent activities with few variables, which underscores the need for vigilance to prevent ethical complacency. The hypothetical cases are developed based on real-case scenarios, with input gathered from forensic accounting experts and investigative auditors. Both cases are further refined through expert validation to ensure their relevance and applicability for future empirical testing.