This study aims to examine the moderating effect of the contextual fraud risk level on the relationship between the external auditors‟ ability to assess fraud risk and their ability to detect the likelihood of fraud. This study uses an experimental approach by sending case materials to audit partners or audit managers attached to auditing firms operating in Malaysia. The result shows that the contextual of fraud risk level has a significant effect on the relationship between the external auditors‟ ability to assess fraud risk and their ability to detect the likelihood of fraud.