Under audit standards, auditors are required to conduct brainstorming sessions on every audit so they can discuss the potential for fraud and how to respond to the risk of fraud. The Public Company Accounting Oversight Board has already expressed concern about the quality of brainstorming sessions where people didn't turn up to the sessions or where the sessions were held after all the planning and fieldwork had been done.
In this paper, Auditors' Use of Brainstorming in the Consideration of Fraud: Reports from the Field, researchers say brainstorming sessions do make a difference – fraud was detected in 24% of cases – but there was tremendous variation in the quality of the sessions. The researchers found that bigger clients who pay more will typically get better quality sessions. Similarly, there will be sessions where there is there are fears of potential fraud. Which means brainstorming is not the magic bullet. Sometimes it works, sometimes it doesn't.
The important thing about this paper is that it shows there is no universal standard for brainstorming sessions. If we had that, it could be applied to all companies and reduce the likelihood of fraud. In the wake of the financial meltdown, this should be a priority for standard setters.
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