2 4:09:55 p.m.Thompson: Center, Alaska two-sixty-one. We are, uh, in a dive here, and I've lost control, vertical pitch.4:10:33Thompson: Yea, we got it back under control here.4:11:43Tansky: Whatever we did is no good. Don't do that again...4:11:44Thompson: Yea, no, it went down. It went full nose down.4:11:48Tansky: Uh, it's a lot worse than it was?4:11:50Thompson: Yea. Yea. We're in much worse shape now.4:14:12Public address: Folks, we have had a flight-control problem up front here, we're working on it.
3 4:15:19Flight 261 to LAX-CTR: L.A., Alaska two-sixty-one. We're with you, we're at twenty-two-five [22,500 feet]. We have a jammed stabilizer and we're maintaining altitude with difficulty...4:15:36LAX-CTR: Alaska two-sixty-one, L.A center. Roger, um, you're cleared to Los Angeles Airport via present position...4:17:09Flight attendant: Okay, we had like a big bang back there.4:17:15Thompson: I think the [stabilizer] trim is broke.4:19:36Extremely loud noise4:19:43Tansky: Mayday4:19:54Thompson: Okay, we are inverted, and now we gotta get it.4:20:04Thompson: Push, push, push...push the blue side
4 4:20:14Tansky: I'm pushing.4:20:16Thompson: Okay, now let's kick rudder. Left rudder, left rudder.4:20:18Tansky: I can't reach it.4:20:20Thompson: Okay. Right rudder, right rudder.4:20:25Thompson: Are we flying? We're flying, we're flying. Tell 'em what we're doing.4:20:33Tansky: Oh, yeah. Let me get...4:20:38Thompson: Gotta get it over again. At least upside down we're flying.4:20:54Thompson: Speedbrakes4:20:55Tansky: Got it.4:20:56Thompson: Ah, here we go.4:20:57End of recording
6 The Biological Link to Crime NeurocriminologyThe Biological Link to CrimeTwin and adoption studies-General support for hereditary basis for crimeLandmark Study-Mednick (1984)14,427 Non-familial adoptions analyzedResults:Biological and adoptive parents with no convictions= 13.5% of children had convictionsAdoptive have convictions/Biological do not=14.7% of children had convictionsBiological have convictions/Adoptive do not=20% of children had convictionsBoth Biological and Adoptive have convictions=24.5% of children had convictionsLess than 5% of individuals were chronic offendersIndicates stronger biological influence, but that environment is factor as well.Mednick, S. (1984), Raine, A. (2013)
7 Lower Function in Prefrontal Cortex for Murderers NeurocriminologyThe Biological Link to CrimeLower Function in Prefrontal Cortex for MurderersLimited FunctionNormal FunctionRaine, A. (2013)
8 The Biological Link to Crime NeurocriminologyThe Biological Link to CrimeSignificant findingsAmygdala 18% smaller in group considered psychopathsBelieved to be genetic susceptibility coupled with environmental triggersMonoamine Oxidase A (Enzyme) combined with early child abuse associated with smaller amygdala volume (emotional center of brain)Brain plasticityEarly development can have profound influences on brain activityMoral decision making elicits different neural responses in psychopathic individualsCaspi, A. & Moffitt, T. (2002); Yang, Y., Schug, R. & Raine, A. (2009)
9 PsychopathyNot a diagnosable mental disorder per the American Psychiatric AssociationPsychopathology-Science of disease of the human mindA Psychopathic Personality is known by the following traits:Amoral and anti-social behaviorInability to develop meaningful/lasting relationshipsExtreme egocentricityAbsence of empathyKnown to be “Emotionally Deaf”Most accepted test for Psychopathy is the Psychopathy Checklist (Dr. Robert Hare)
10 Psychopathy test- Score 0 if it does not apply to you, score 1 if it somewhat applies, score 2 if it fully applies to you. Please total your score at the end of the test.1. Glibness and superficial charm – smooth-talking, engaging and slick. 2. Grandiose self-worth – greatly inflated idea of one’s abilities and self-esteem, arrogance and a sense of superiority. 3. Pathological lying – shrewd, crafty, sly and clever when moderate; deceptive, deceitful, underhanded and unscrupulous when high. 4. Cunning/manipulative – uses deceit and deception to cheat others for personal gain.
11 5. Lack of remorse or guilt no feelings or concern for losses, pain and suffering of others, coldhearted and unempathic. 6. Shallow affect / emotional poverty – limited range or depth of feelings; interpersonal coldness. 7. Callous/lack of empathy – a lack of feelings toward others; cold, contemptuous and inconsiderate. 8. Fails to accept responsibility for own actions – denial of responsibility and an attempt to manipulate others through this.
12 9. Needs stimulation/prone to boredom – an excessive need for new, exciting stimulation and risk-taking. 10. Parasitic lifestyle – Intentional, manipulative, selfish and exploitative financial dependence on others. 11. Poor behavioral controls – expressions of negative feelings, verbal abuse and inappropriate expressions of anger.12. No realistic long-term goals – inability or constant failure to develop and accomplish long-term plans.
13 13. Impulsiveness – behaviors lacking reflection or planning and done without considering consequences. 14. Irresponsible – repeated failure to fulfill or honor commitments and obligations. 15. Juvenile delinquency – criminal behavioral problems between the ages of Early behavior problems – a variety of dysfunctional and unacceptable behaviors before age thirteen.
14 17. Revocation of Conditional Release – Violating probation or other conditional release because of technicalities. 18. Promiscuity – brief, superficial relations, numerous affairs and an indiscriminate choice of sexual partners. 19. Many short-term relationships – lack of commitment to a long-term relationship. 20. Criminal versatility – diversity of criminal offenses, whether or not the individual has been arrested or convicted.
15 Common Steps of a Psychopath in an Organization Organizational Entry (Charming the interviewer)Assessment (Gauging utility of organizational members, establishing a network, charm people in powerManipulation (Spread disinformation to disparage others and enhance own image)Confrontation (Abandon pawns that are no longer useful)Ascension (Reach upper echelon at company and abandon those who facilitated his rise to power(Ramamoorti, 2008)
16 Behavioral ProfilingFBI Behavioral Analysis Unit (BAU)/ White Collar CrimeFocus on:Developing behavioral profiles based by comparing details of the crime with behavioral details of the offender“investigation phase” –after a crime has occurredRecognition of people likely to cooperate/act as informantsConflicting assessments as to effectiveness
17 Why not use profiling before a crime occurs? Behavioral ProfilingWhy not use profiling before a crime occurs?FBI uses known data from a crime to draw correlations with past events and infer characteristicsThis is much different than inferring data for a crime that hasn’t occurred and for which details are unavailableEven for experts, predicting behavior is statistically little better than chance
18 Why does this matter?We subconsciously assign tremendous weight to our assumed outcomes and automatic character assessmentsThis assessment causes profound biases our perceptionsColors our judgmentResults in automatic assumptions and predictionsCauses susceptibility to seek incorrect subliminal information(Dan Ariely, Duke University)
21 Adoption study of 14,427 adoptions-Most individuals that committed crimes had no genetic history 13.5% versus 20% convictions rate means high biological correlationBut, consider If 95% of biological parents had no convictions 14,427 X .95=13,705 X 13.5% = 1,850And 5% of biological parents had convictions 14,427 X .05=721 X 20% = 144
22 Nearly 90% of those convicted of occupational fraud never Charged previouslyAnd more than 90% of those not previously charged had also never been reprimanded2012 ACFE Report to the Nations
23 Study: Auditor Prioritization Fundamental Attribution Error-A cognitive bias of over emphasizing personality characteristics and under-emphasizing situational awareness.Apostelou (2001) ; Wilks and Zimbelman (2004)
24 Sticky First Impressions Trait being judged.10 sec1 secTrustworthy.73.74Competent.52.59AggressiveLikable.63Unlimited exposure times were highly correlated with briefest exposure timesEkman & O’Sullivan (1991)
25 Distinguishing Truth from Deception GroupAccuracy Rate (%)College students52.82CIA, FBI, and military55.67Police investigators55.79Trial judges56.73Psychiatrists57.61U.S. Secret Service agents64.12*Ekman & O’Sullivan (1991)
26 Prediction Challenges A small percent of the population may be predictable, while the majority of crime is committed by those who aren’tUnlike some violent offenders-prefrontal cortex activity can look normal in “financial” psychopathsSubtle contextual differences change decision processes making behavioral predictions difficult for “normal” population (Johns, 2006)(Dan Ariely, Duke University)
27 Cheating Research The 18,000 “little” cheaters stole $36,000 The 12 “BIG” cheaters stole $15030,000 test takers18,000 cheat a little12 cheat a lot(Dan Ariely, Duke University)
28 Neuroscience and Decision Making Instead of a conscious reasoning process to arrive at a judgmentUsually have immediate and sub-conscious intuitionFollowed by conscious reasoning to support that intuitionLogic versus emotion in decision making (J. Greene research)Haidt (2001)
29 Stability of Moral Position Study: “Large scale governmental surveillance of and internet traffic ought to be forbidden as a means to combat international crime and terrorism”Hall, L. Lund University
30 Stability of Moral Position Study: “Large scale governmental surveillance of and internet traffic ought to be permitted as a means to combat international crime and terrorism”69% of people gave well constructed arguments for one of two altered statements after taking a moral position.Hall, L. Lund University
31 Economic Theory Assumption-Theory of Expected Utility: Assumes we will follow a logical process, weighing the expected gain from a crime against the likelihood of getting caught and severity of punishment.Does cheating increase/decrease relative to:The amount that can be stolen?The likelihood of getting away with it?The severity of the punishment?The research says…
32 The Precipice of Fraud Situational factors: Research shows when factors like these…Meeting debt covenantsMeeting sales projectionsA surprise loss, legal problem, or business challengeA severe personal challengePressure for aggressive accounting treatment of any kind (starts a cycle)Are mixed with factors like these…
33 The Precipice of FraudOver-optimism- A bias that causes a person to believe that they are less at risk of experiencing a negative event compared to others.Overconfidence- An over-estimation of one’s abilities or exhibiting greater certainty than warranted by existing circumstances.Loss Aversion- The motivation to avoid losing what you already have is even stronger than the motivation for additional gains.Framing errors-(Exercises)
34 The Precipice of Fraud Framing Imagine that the U.S. is preparing for the outbreak of an unusual Asian disease, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume that the exact scientific estimate of the consequences of the program are as follows:
35 The Precipice of Fraud Framing Imagine that the U.S. is preparing for the outbreak of an unusual Asian disease, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume that the exact scientific estimate of the consequences of the program are as follows:If program A is adopted, 200 people will be saved.If program B is adopted, there is a 1/3rd probability that 600 people will be saved, and a 2/3rds probability that no people will be saved.If program C is adopted, 400 people will die. (Same as A)If program D is adopted, there is a 1/3rd probability that nobody will die, and a 2/3rds probability that 600 people will die. (Same as B)
36 Do we Cheat More in Groups than as Individuals? Group PsychologyLike Taking Candy…..Do we Cheat More in Groups than as Individuals?Study observed 1,300 children visiting 27 homes around SeattleSome alone-some in groupsSome asked names/where they lived-Some were notChildren were asked to take one piece of candy then left alone as hidden observers watchedChildren in groups took the most candyIn groups and not asked identity took even moreIndividuals asked identity were least likely to cheat/mirror(Beaman et al. 1979; Diener et al., 1976)
37 The overwhelming power of belonging Group PsychologyThe Science Behind CollusionThe overwhelming power of belonging“Need to belong”-Affiliation with similar others is a fundamental human motive.Pervasive drive to form and maintain relationships (Baumeister & Levy, 1995)Social connection is crucial for mental and physical well beingOnce in a group, these motives shape our perceptions and interpretationsThreat of breaking a relationship causes great stressExternal threats trigger fear and strong motivation to affiliate (Schacter, 1959)Especially with others who face a similar threat
38 The Science Behind Collusion Group PsychologyThe Science Behind CollusionResearch studies and real life repeatedly show the desire to affiliate with those facing similar threatsProvides emotional support and cognitive clarityHospital patients waiting for open heart surgery prefer to wait with those who have been through the surgery or those also waiting (Kulik & Mahler, 1989).Strangers band together after natural disasters or terrorist attacks.Study participants expecting painful shocks chose to wait with other nervous participants (Schacter, 1959)
39 The Science Behind Collusion Group PsychologyThe Science Behind CollusionGroup AssimilationNorms-Unspoken rules of conductInformal rules (culture) more powerful than formal rulesA sense of what it means to be a good group memberFiguring out the rules takes time and causes anxiety (investment)Once learned- breaking group norms is difficult and even traumatic from fear of social consequencesStudies show that co-workers are very reluctant to report unethical behavior of others on their work teams (Benoit Monin, 2008).Individuals that go against group norms are strongly disliked by fellow participants-even when the norm was immoral and not personally accepted by other participants (rejection)People fear being divisive (Whistleblowers) (2008 financial collapse)
40 The Science Behind Collusion Group PsychologyThe Science Behind CollusionGroup Cohesiveness-Forces that push members closer togetherMore group related prideEngage in frequent and sometimes intense interactionsStrong similarity features-similar backgrounds-homogenousBreaking group norms is especially difficult in highly cohesive groupsConformity bias-The power that pushes us to conform to our reference group.
42 The Science Behind Collusion Group PsychologyThe Science Behind CollusionIngroups and OutgroupsStrongly favor our ingroup -During conflict or unstable situations, opposing groups are fearedOutgroups perceived as foreignDehumanize outgroups-lack normal human qualitiesDehumanization and “Us” versus “Them” =easier to attack outgroup members (used in military conflict, politics)Use behavior from ingroup as a cue (Ariely)
43 The Science Behind Collusion Group PsychologyThe Science Behind CollusionGroupThink-The tendency to seek concurrence among group members creating a dangerous bias in decision making like a social disease (Janis, 1984)-more likely in:Highly cohesive groups that reject deviant opinions and outgroup views (“US” verus “THEM”)Groups with strong leader that lacks procedures to review decisionsGroups with similar backgroundsStressful situationsUnder stress/ambiguity, urgency overrides accuracy and the reassuring support of other group members becomes highly desirable
44 The Science Behind Collusion Group PsychologyThe Science Behind CollusionGroupthink leads to Biased SamplingTendency to spend more time discussing shared information-information already known by most of the group rather than information only known by a fewPeople tend to share knowledge most likely to be known/acceptedFailing to consider important information that is not common knowledgeLeads to decisions based on flawed or incomplete information(Stasser, G., 1992; Stasser & Titus, 2003)
45 The Science Behind Collusion Group PsychologyThe Science Behind CollusionResearch into NASA 1986 Space Shuttle Challenger DisasterVP of engineering objected to launch due to cold weatherCause “O”-rings in rocket boosters to failNeeding unanimous vote to launch, manager told VP to “take off your engineer hat and put on your management hat”. (Framing)The pressure worked and the VP changed his vote-sealing the tragic fate of the Challenger and her crewBiased Sampling-those who ultimately made decision to launch we not aware of all relevant information about risk of low temperatures
46 The Science Behind Collusion Group PsychologyThe Science Behind CollusionResearch into February 1, 2003 NASA Space Shuttle Columbia DisasterTeam of engineers review video of foam breaking off and hitting left wingMay have damaged heat-shielding tilesEngineer Rodney Rocha makes more than 6 requests to seek images from spy satellites/powerful telescopes to review damage prior to reentryHis manager says he “refuses to be a Chicken Little” and Flight Director sends chilling to Rocha saying further investigation is a “dead issue”.Space Shuttle Columbia disintegrates on reentry (Glanz & Schwartz, 2003)
47 The Science Behind Collusion Group PsychologyThe Science Behind CollusionResearch into 1961 Bay of Pigs failure by President Kennedy’s “best and brightest”President Kennedy assembles one of most impressive groups of advisors in U.S. historyPlan to invade Cuba in effort to spark a people’s revoltPlan reliant on invaders receiving support from Cuban Guerillas hiding in mountainsMountains were 80 miles away from landing spot and separated by swampInvaders massacred and Cuba aligns with RussiaPresident Kennedy “How could we have been so stupid?”
48 Group Psychology The Science Behind Collusion Famous Examples of GroupthinkResearch into the Manipulation of LiborEurodollar contract starts trading-early 80’s-at CME (direction of interest rates)CME did own calculations, surveying banks to determine benchmarkTo make product more popular-CME suggests to CFTC to use BBA Libor-more commonly used rate-“Made sense”-other swaps used LiborMarcy Engel (Lawyer with Solomon Bros) writes to CFTC-since banks that set rates in London can also take position in CME contract-”might provide an opportunity for manipulation”-”bank might be tempted to adjust its bids to benefit its own positions”CFTC Division of Economic Analysis- Libor “does not appear readily susceptible to manipulation”Becomes “business as usual” to manipulate Libor at Barclays Bank
49 The Science Behind Collusion Group PsychologyThe Science Behind CollusionReducing GroupthinkUnspoken norms more powerful than written codesReduce group pressure to conform by encouraging criticismLeaders should NOT take a strong stand early in discussionsEstablish a norm of critical review-”second chance” meetings to reconsiderDiscourage the search for concurrenceConsult with outsiders
50 Group Psychology The Science Behind Collusion Do members of groups “average” their views or tend to the extremes?Group Polarization-Presence of others triggers Dominant ResponseThe presence of others creates physiological arousal-energizes behavior. Happens in all animals, especially similar species-more similar=greater effect (Zajonc, R. 1965, 1980)Increased arousal enhances tendency to perform “Dominant Response”-that which is automatic.Performance and judgment quality depends on taskEasy task=dominant response usually successfulUnfamiliar or complex task=dominant response is often incorrect (Lambert et al., 2003;Perk & Catrambone, 2007)
51 Group Psychology The Science Behind Collusion Do members of groups “average” their views or tend to the extremes?Group PolarizationGroups exaggerate their initial tendencies (more than individuals)More cautious on “Gain” related decisionsMore risky on “Loss” related decisionsThrough discussion, group norms, support of group members(Moscovici & Zavalloni, 1969; Myers & Lamm, 1976)
52 The Science Behind Collusion Group PsychologyThe Science Behind CollusionThe tangible the close and the near term- Vivid factors and people “now” have a larger impact on decision making than abstract and distant factors.Diffusion of Responsibilty-Deindividuation-In a group, we feel that responsibility is shared by all, lessening our role. Also, if something were wrong, someone else would say somethingSmall Steps Phenomenon-Redefine normality-subconsciously lower the bar over time. German doctors during holocaust-IPO accounting fraud-Enron tradersObedience to authority-The “draw” of following orders (diminishes self-responsibility)-Milgram experiments-60% continued to 450 volts-High status increases obedience
53 Group Psychology Cult of Personality High Status Authority increases obedience-Penn State, Catholic Church, German Doctors during the Holocaust-Andrew Fastow (Enron) and David Duncan raised so called “good nazi” defense-Enron Energy TradersLong Term Capital ManagementStarted in 1994 by John Meriweather-Head of bond trading at Solomon Bros.David Mullins Jr Vice Chairman of Federal Reserve PhD MIT potential successor to Alan Greenspan2 Nobel Prize winners in economics (Robert Merton-Leading scholar in finance PhD MIT & Myron Scholes PhD Prof at Stanford)4 more arbitrage geniuses with PhD’s from MITClients clamored to invest and enjoyed 40%+ returns first few yearsIn 1998 LTCM lost $4.6B, requiring intervention by the Federal Reserve
55 Why Does Fraud Continue to irrational lengths? Group PsychologyWhy Does Fraud Continue to irrational lengths?Escalation EffectsEscalation of commitmentCommitment to a failing course of action is increased to justify investments already made (Haslam et al., 2006; Keil et al., 2007; Staw, 1997)Groups are more likely than individuals to escalate commitment to a failing project and to do so in more extreme ways.Numerous groups, businesses, governments have incurred huge costs on projects that should have terminated long before they did (Ross & Staw, 1986)
56 Why Does Fraud Continue to irrational lengths? Group PsychologyWhy Does Fraud Continue to irrational lengths?Escalation EffectsCases of Escalation of commitmentNick Leeson-Barings BankConcorde Fallacy-French-British consortium“Too much invested to quit”Boston’s “Big Dig”-High speed underground tunnelStarted in 1983 to be completed by 1995 at budget of $2.6BFinished in 2008 for $22BNumerous labor strikes, lawsuits that continued beyond all economic viability for either side
57 Why Does Fraud Continue to irrational lengths? Group PsychologyWhy Does Fraud Continue to irrational lengths?Escalation EffectsSunk Costs- Focus on lost investment of time/money-Decision makers often honor sunk costs by increasing their commitment to a failing course of actionBattle between self-justification and regret fuel the escalationContinues beyond bounds of rationalityOccurs in groups-experiments show that a second decision-maker will invest further in the failing program of an initial decision-maker.Gunia, Sivanathan & Galinsky (2009)
59 How did we miss it?Confirmation Bias- The tendency of people to favor information that confirms their beliefs or hypotheses. Studies show we tend to seek information that confirms rather than properly tests the validity of what we are toldSelective Perception-A cognitive bias wherein individuals are subconsciously attracted to stimuli that falls in their range of reasonable expectation and are oblivious to other stimuli.Belief Perseverance- Our tendency to seek information that is consistent with our pre-existing beliefs.Biased Processing of Disconfirming Information- The subconscious bias towards being more critical of evidence that disconfirms our initial beliefs than evidence that confirms it.
60 Situational Awareness Attractors and DistractorsWe must be able to filter relevant information from a sea of irrelevant stimuliRequires balancing task and stimulus related factorsBalance is governed by working memory and selective attentionResearch shows that the more extraneous contextual stimuli that exists, the harder our brains work to tune that stimulus out and focus on the original subject (U.S.)Sometimes that extraneous stimuli has significant implications on the context of the subjectTime Limitations (seminary students)Ability to attend to limited number of stimuli
64 Pattern Seeking and Professional Skepticism Two types of errors in pattern seekingType I-False Positive- Finding a pattern that doesn’t existType II-False Negative- Failing to detect a pattern that existsSignal to noise ratio (Attractors)Too low- Miss obvious patternsToo high- See false patterns everywhereWhat causes pattern detection errors?
69 Negotiation Research in Auditing The more ambiguous the accounting issue, auditor likely to accept clients preferred treatment.The more important/increased pressure surrounding the accounting issue, auditor more likely to concedeThe greater number of possible alternative treatments, the less likely the auditor was to insist on their judgmentClients perceive they are more likely to persuade auditors if firm has short tenure (retention)Auditors are much more likely to waive smaller adjustments that aggregate to a material amount than those that are individually materialBrown & Wright (2008)
70 Choice Complexity and Professional Judgment Study on bias in professional decision-making using DoctorsDecision to send patient-a 67 year old farmer for hip replacement surgeryFirst group of doctors told they forgot to try one drug-Ibuprofen. Would they call patient back from surgery to try the drug? 50% said pull then backSecond group of doctors told they forgot two drugs-Ibuprofen & Piroxicam. Would they call patient back from surgery? 72% let patient go on to surgeryWhy? Choice complexity increases chance of going with default optionRedelmeier & Shafir (1995)
72 Critical Thinking “Rules based thinking” type Spurs automatic responses to “recognized” patternsNarrows our thinking to specific and narrowly applicable rules and patternsEntails simple recognition of the situation and retrieving a typical responseDoes not address:How situational assessment is accomplished in new or changing circumstancesHow to deal with conflicting or unreliable dataHow to change your mindIn unusual circumstances, our recognitional process needs to be supplemented by using“Attentional Control”We do this by shifting our attention from simply reading the cues in a situationTo our expectations and the conclusionUse “As-If” reasoning by developing hypothetical or counter-factual ideasImagine that the possibility is true and pose queries about what would happen
73 Critical Thinking “Real Time” Critical Thinking CURIOSITY is KING!-Situational AwarenessQuestion underlying assumptionsReveal new connections in dataLead to new questionsThink critically about the results of recognition on an ongoing basisPose questions about those resultsLook at information from different perspectives“Assume” your assumptions are correct but conclusion is not
76 Principles or Rules?Does the inherent nature of rules make it more difficult to decide to do the right thing?Control the tendency to act only in our self interest (Self protection-Good Samaritan laws)The tendency to focus on the letter of the rule rather than the spirit.Is tendency to interpret rules narrowly due to the characteristics of the rules themselves?Principles versus Rules based accounting standardsCFO’s less likely to make aggressive accounting choices under “Principles” based system (Agoglia, 2009)CFO’s came to more similar conclusions under principles than rules based systemU.S. accounting standards have become so precise as to invite opportunistic interpretation by corporate executives (Agoglia, 2009)
77 Principles or Rules?“Research-NASA’s culture of bureaucratic accountability emphasized chain of command, procedures, following the rules, and going by the book. While rules and procedures were essential for coordination, they had an unintended but negative effect. Allegiance to hierarchy and procedure had replaced deference to NASA engineers’ technical expertise”National Aeronautics & Space AdministrationREPORT OF THE COLUMBIA ACCIDENT INVESTIGATION BOARD (2003)
78 Behavioral Research and Interviewing Skills Style and content of interaction with the subject dramatically affects the quality, depth and scope of information you receiveBehavioral science allows you torecognize important cuesIllicit more and higher quality informationFocus on the information you really need to know
79 Behavioral ResearchCommunication during the interview one of the most important soft-skillsProvides situational information that cannot be obtained through data analysisMakes rest of audit more efficient and effectiveEstablishes future sources of information and directions of inquiry
80 What an Interview IsA professional conversation with a specific purposeHave a clear understanding of what you want to achieveA vehicle for collecting accurate, useful, complete and relevant informationGather evidence through information supplied by the interviewee
81 What an Interview Is Non-threatening format Non-accusatory tone Goal to gain information about processesOccurs within a limited time frame
82 What an Interview Is Not A lectureWhere either party dominates the process and limits questions and the path of the interviewA general conversationThe interview is limited in time and not for discussion of off-topic subjectsThe interview should have goals and flowAn interrogationWhy isn’t an interview like an interrogation?
83 What an Interview Is Not Not an interrogation because an interrogation:Seems involuntaryHas a threatening formatAccusatory in toneGoal to gain information that may be used to take action against interviewee or othersTime frame is open, may take hoursPhysical setting is critical and interrogation should never occur aloneContrary to goals of an interview
84 Eight Stages of the Interview Defining the purposeIdentifying the information neededIdentifying the people to interviewWho has the information needed?Preparing for the interviewConducting the interviewRecording the interviewAnalyzing the resultsFollow-up
85 Defining the Purpose of the Interview Do you define the purpose? What is it?DefineWhat are your audit objectives?What information do you need?Who might have that informationWhat position levels will you interview to get that information?
86 Purpose of the Interview Assess what kind of information the interviewee knows and does not know and the extent of that knowledgeObtain referrals to other sourcesIf the interviewee doesn’t have the knowledge, who does?What do we want to know aboutPeople? Processes? Documents? Custody and flow of documents? Communication processes and flow?
87 Characteristics of an Effective Interview Being prepared before the interviewA controlled interview processFocusing on information that the interviewee should know as opposed to guessing during the interviewInterviewer is impartialDoes not poison the results with the interviewers biases
88 Interviewer BiasConfirmation Bias- The tendency of people to favor information that confirms their beliefs or hypotheses. Studies show we tend to seek information that confirms rather than properly tests the validity of what we are told Selective Perception-A cognitive bias wherein individuals are subconsciously attracted to stimuli that falls in their range of reasonable expectation and are oblivious to other stimuli. Belief Perseverance- Our tendency to seek information that is consistent with our pre-existing beliefs. Biased Processing of Disconfirming Information- The subconscious bias towards being more critical of evidence that disconfirms our initial beliefs than evidence that confirms it.
89 Conducting the Interview The physical environmentStarting the interviewDetermine the appropriate types of questions and question sequenceControlling the interviewTaking notes?Analyzing the answers
90 Conducting the Interview The Physical Environment What kind of physical environment do you want for an interview?Your office or theirs?Desk or no desk?Attire?
91 Conducting the Interview The Physical Environment Professional environment-Interview frequently occurs at office of subjectMinimum of distractionsNo Desk-Best if entire person is visible (Leakage)Interviewee should be positioned nearest the door. Exit should not be blocked by interviewer.
92 Conducting the Interview How to Start the Interview How would you start?Before questioning begins
93 Conducting the Interview How to Start the Interview Establish rapportOpportunity to establish “baseline” behaviorSet non-threatening tone for open dialogueComfortable + Non-threatening=More Info!IntroductionsState purpose and what you will review
94 Conducting the Interview Types of Questions Informational questionsInformation gathering questions that are non-confrontational and non-threateningOpen questions –questions where a yes/no answer are not appropriate. Encourages free narrative.Begin with “What….”, or “What about….” or “How….”Do not interruptClosed questions- When you want a precise yes/noAvoid during rapport building/informational stageTips hand of interviewer as to what you want and limits responses so you may miss information that is important and unknown to you.
95 Conducting the Interview Types of Questions Leading questions –Contain an answer as part of the questionCan be used to confirm what is already believedAttitude questions-To gain an understanding of the viewpoint of the subject (Can also be used to convey attitude of interviewer in forensic interviews) Interviewer should never display internal emotions unintentionally.
96 Conducting the Interview Assessing Risk How do you ask about fraud/Risk?Consideration of fraud in a financial statement audit“Seen any fraud around here?”Inquire aboutProcedures being followedDocumentary issuesWhere risks may be greatest, or least (opinion)(take a break from note taking-use silence as a tool)
97 Conducting the Interview Question Sequence In what order would you put your questions?
98 Conducting the Interview Question Sequence Generally start with general information and move towards specific informationCan move from known facts and then ask about things that are unknownSkilled interviewers willmove between open and closed questionsAdvance the information gathering process by sensing gaps or conflicts in information and seeking additional information and new lines of inquiry
99 Conducting the Interview Question Sequence Skilled interviewers willAsk logical follow-up questionsAdapt to new lines of inquiry when circumstances warrantMove between open and closed questions
100 Conducting the Interview Controlling the Interview Stop interruptions or stop the interviewKeep control of the line of inquiryNote takingShould you take notes? Why?
101 Conducting the Interview Understanding the “subject” Adjust to their communication styleUse their languageIf they use terms you don’t understand, don’t hesitate to ask-(You are there to understand, not impress)Seek understanding: Ask them to “treat you like you know nothing about their job”Repeat the answer to clarify, when appropriate (“So are you saying…?”)
102 Conducting the Interview Barriers to an Effective Interview Language (terminology)FearPoor preparation by the interviewerLack of clear purposeLack of control over interview process
103 Detecting Deception Non-Verbal cues (What are they?) Body languageVerbal cues (What are they?)Changes in speech patternSpeed of speechWord choiceTone
104 Detecting Deception Verbal Clues of Deception Changes in speech patternsSpeed up or slow down in reaction to certain topics of inquiryToneMaking repeated excusesSpeaking in third person instead of first personBeing unaware of events, people or processes where there should be some awarenessGuilty people give truthful responses but evasive answers-not really answering the question
105 Detecting Deception Verbal Clues of Deception Non-relevant commentsCharacter testimony“Anyone will tell you I’m a good guy”Answering a question with a questionEvasive answers-Lying by omissionDistancing languageLying by referral“Like I told Mark….”
106 Detecting Deception Verbal Clues of Deception Audio clipWhat are the indicators of truthfulness?What are the indicators of deceit?
107 Detecting Deception Behavioral Clues of Deception What does it mean and what should my response be if they…Tell a story in random order?Give an unsolicited denial?Are overly friendly?Are sweating?Body language doesn’t match answers?Won’t make eye contact?Are fidgeting?Are sitting perfectly still?Suddenly change their willingness to cooperateSmile at inappropriate times?
108 Detecting Deception Behavioral Clues of Deception Tricks of the tradeAsk to repeat the story in reverse orderPeople rehearse what they say but rarely rehearse body languageSurprise them with something (as interviewer) you know
109 Truthful Composed Concerned Cooperative Direct and spontaneous Open Sincere
111 Ending the Interview Summarize the interview Polite Thankful Leave the door open for further communication by either party
112 Documenting, analyzing and Preparing for Follow-up Arrange and review documents and notes as soon as possible after the interviewIdentify items that weren’t properly supportedGapsInconsistenciesMissing documentationGet collaboration/agreement on topic from others?Search for disconfirming information
113 Psychology of Fraud Contact: Tgroves@Tgroves.com LinkedIn: TobyGroves More about the story and research:Hear the story on National Public Radio at NPR.ORG (search “all dates” for Toby Groves)Read the research article in: CPA Journal (December issue)Links and further information available through tgroves.comContact:LinkedIn: TobyGroves