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Better Brainstorming

Having studied which aspects of the first SAS no. 99 brainstorming sessions are most effective, academics, regulators and practitioners reveal
their recommendations.

October 2008
by Mark Landis, et al./Journal of Accountancy

In a report issued in January 2007, the PCAOB raised concerns about accounting firms falling short of brainstorming requirements in auditing standards. It cited three issues: brainstorming sessions sometimes occurred after the planning phases of the audits; some audits did not include a brainstorming session; and key members of the audit team did not always attend the brainstorming sessions.

Two auditing standards — SAS no. 99: Consideration of Fraud in a Financial Statement Audit and SAS no. 109: Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement — mandate brainstorming sessions. SAS no. 99 requires that auditors brainstorm to determine possible fraud risks, while SAS no. 109 requires that auditors brainstorm to identify additional causes of potential material misstatements in the financial statements.

Generating Ideas

One surprising finding (not specific to the auditing profession) consistently documented by psychologists is that people participating in brainstorming sessions tend to produce fewer unique ideas than when those people act alone. In a study conducted by Tina Carpenter at the University of Georgia, this phenomenon was observed in auditors when brainstorming teams and individual auditors were asked to identify fraud risks for the same company Brainstorming sessions, on average, generated fewer unique ideas than auditors acting individually.

This article has been excerpted from the Journal of Accountancy. Read the full article here.