Auditing and Assurance (KKP1-11)
- What are three common pitfalls that should be avoided during brainstorming sessions? How can these problems be avoided?
|Four common pitfalls can hinder an audit team’s brainstorming effectiveness: group domination, “social loafing,” “groupthink” and “groupshift.”
Group domination is one of the most corrosive problems. Because the goal of a brainstorming session is to have audit team members share thoughts and ideas, one or two participants dominating the process can quickly squelch the creative energies of the group as a whole, reducing the likelihood the team will identify any actual fraud risks.
Audit teams are especially susceptible to this pitfall because of their traditional hierarchical structure. Senior team members may intimidate less experienced staff who look to them to lead the discussion. Other team members may defer to those assigned to lead the audit planning, believing they have had an opportunity to think in more detail about potential fraud risks. Furthermore, as in any group setting, there may be one or two vocal individuals with great confidence in their own ability and a determination to present their views. If any of these conditions are present, the intended benefits of fraud risk brainstorming—an exchange of ideas among the entire team—may never materialize.
Social loafing, also called free-riding, is another potential pitfall of brainstorming activities. It occurs when participants disengage from the process, expecting that other team members will pick up the slack. Given their size and geographic dispersion, large audit teams may be particularly susceptible. Other reasons for such “loafing” may include the “why bother” feelings that stem from group domination, the absence of compelling incentives to actively participate in the discussion and an individual’s failure to make a sufficient personal investment in the group’s task. It may be that members of the engagement team are juggling numerous client engagements or some team members may be working on a specific aspect of the engagement, such as IT or tax specialty work and thus may “check out” when the discussion does not directly address their specific aspect of the engagement.
Fear of losing credibility also may prevent individuals from participating. If individuals feel they need to protect their standing, they will be less likely to voice an unpopular idea or opinion. This may be a problem for less experienced audit staff members or others recently assigned to the client engagement. They may feel unqualified to speak openly about engagement-specific risks or be reluctant to do so in front of more experienced engagement team members, who eventually will play a role in their performance evaluations. Such self-censuring behavior can hinder a group’s ability to handle the complex nature of the fraud-risk-assessment process—the very type of problem for which “outside the box” thinking is critical.
Groupthink is another pitfall to avoid. This phenomenon occurs when team members become so concerned with reaching consensus that they fail to realistically evaluate all ideas or suggestions. Audit teams can be particularly susceptible to this as auditors generally are very sensitive to time/budget pressures. Thus, they quickly may align with the group’s view of fraud risks in an effort to complete the task efficiently. Also, because the brainstorming requirement is new, there may be a lack of “buy in” that prompts team members to embrace the group’s views quickly in order to move to other tasks perceived as being more critical.
Groupshift is the fourth pitfall. While a purpose of brainstorming sessions is to help the audit team collectively arrive at conclusions about fraud risks, team leaders must exercise caution to avoid allowing the team to take an extreme position on fraud risk. For example, a group whose members generally are conservative might shift toward a more conservative position while a group of risk-takers might lean toward even riskier positions. With the recent emphasis on fraud detection, there is some cause for concern audit teams will assume the risks are high in all engagements.
There are costs of such overreacting. For example, if there is an overrated risk of fraudulent activity within inventory, an auditor may expand audit procedures related to inventory observation, inventory pricing, and cutoff, leading to excessive and unnecessary audit work. Worse yet, an auditor may rush to judgment and accuse client personnel of wrongdoing without the proper basis for doing so. Given groupshift’s potential impact on audit effectiveness and efficiency, all audit teams should be concerned about it.
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