[Fraud Deterrence] Professional auditing standards suggest that auditors incorporate an "element of predictability" in the selection of auditing procedures to be performed so that they ensure the same areas are tested in the same manner during each audit.

The statement is incorrect. Professional auditing standards, such as those from the AICPA and PCAOB, mandate the exact opposite. Auditors are required to incorporate an "element of unpredictability" into their audit plans and procedures. The purpose of unpredictability is to prevent management or employees from anticipating the audit tests, which could allow them to conceal fraudulent activities. Performing the same tests in the same areas each year would make the audit predictable and therefore less effective as a fraud detection and deterrence tool.

The statement claims that standards suggest "predictability" to ensure consistency. This is fundamentally wrong. While audits must be systematic, the element of surprise and variation in testing (nature, timing, and extent of procedures) is a critical component of responding to the risks of material misstatement due to fraud. A predictable audit is an ineffective one in the context of fraud deterrence.

1. Public Company Accounting Oversight Board (PCAOB)

Auditing Standard AS 2401

Consideration of Fraud in a Financial Statement Audit.

Paragraph .50(c) explicitly states that the auditor's responses to assessed fraud risks should include: "Incorporating an element of unpredictability in the selection of the nature

timing

and extent of audit procedures."

Paragraph .51 provides examples of incorporating unpredictability

such as "Performing audit procedures at locations or on a basis (for example

on a surprise or unannounced basis) that would not otherwise be expected" and "Varying the nature

timing

or extent of audit procedures from year to year."

2. American Institute of Certified Public Accountants (AICPA)

AU-C Section 240

Consideration of Fraud in a Financial Statement Audit.

Paragraph .30(c) requires the auditor to "incorporate an element of unpredictability in the selection of the nature

timing

and extent of audit procedures" as part of the overall response to assessed fraud risks.

3. Association of Certified Fraud Examiners (ACFE)

Fraud Examiners Manual

International Edition (2023).

Section 1.409

"Incorporate Unpredictability into the Audit Plan

" states: "Auditors should incorporate unpredictability into the audit plan. For example

they can test areas that are not normally tested

use different sampling methods

or perform tests on a surprise basis. The purpose of this requirement is to make it more difficult for those who are committing fraud to conceal their actions."

4. Albrecht

W. S.

Albrecht

C. O.

Albrecht

C. C.

& Zimbelman

M. F. (2019). Fraud Examination (6th ed.). Cengage Learning.

In discussing the auditor's fraud-related responsibilities under current standards (which replaced SAS 99)

the text emphasizes the need for auditors to brainstorm fraud risks and design unpredictable audit tests to address those risks. Chapter 11

"Financial Statement Fraud

" details how predictable audit tests are a weakness that can be exploited by perpetrators.