| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 11-27 |
| Abstraksi Narasi | : | Auditors are faced with the dilemma of inferring materiality based, in part, on whether a given level of financial misstatement will affect the decisions of statement users. Misstatements in accounting information that are below the materiality threshold are not expected to change users` assessments of a company`s economic condition. While the auditing profession accepts materiality in concept, its application in practice is more controversial. In certain settings, the nature of a misstatement, such as changing a small profit into a loss, may affect an auditor`s materiality judgment. However, in many cases the magnitude of the misstatement is a critical factor in judging materiality. We focus solely on the issue of magnitude and examine whether financial misstatements that are at or below commonly applied materiality thresholds result in market prices that differ from those resulting from correctly stated information. we conduct a series of 12 axperimental asset markets each consisting of 12 independent three-minute trading periods with six traders in each market. We then compare prices for companies generated by markets that are provided either correctly stated information, information containing misttatements. Results indicate that undisclosed misstatements within materiality thresholds that are consistent with current audit practice do not affect market prices, while messtatements well above these thresholds do. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 125-138 |
| Abstraksi Narasi | : | Given the growing interest in the topic, both in practice and academia, it is timely and important to examine the concept of continuous assurance(CA) and the possible paths along which such services will evolve. There has been a tendency to see CA purely from the point of view of its technological enablers. As such, it has virtually been taken for granted that CA will follow as a matter of course. What has been less thought through is the business architecture that must underlie CA. In particular, we show that the key driver of CA is the demand for it. While there may be many economis transactions between the company and its stakeholders that could benefit from the provision of CA, there is no guarantee that CA is either cost effective--the only way of enhancing efficiency--or actually has to be continuous. Other factors that will affect the development of CA are the need for a new infrastructure to pay for it, as well as concerns about the independence of the assurors. We also identify some important research issues. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 147-163 |
| Abstraksi Narasi | : | The digital economy has significantly altered the way business is conducted and financial information is communicated. A rapidly growing number of organizations are conducting business and publishing business and financial reports online and in real-time. Real-time financial reporting is likely to necessitate continuous auditing to provide continuous assurance about the quality and credibility of the information presented. The audit process has, by necessity, evolved from a conventional manual audit to computer based auditing and is now confronted with creating continuous electronic audits. Rapidly emerging information technology and demands for more timely communication of information to business stakeholders requires auditors to invent new ways to continuously monitor, gather, and analyze audit evidence. Continuous auditing is defined here as "a comprehensive electronic audit process that enables auditors to provide some degree of assurance on continuous information simultaneously with, or shortly after, the disclosure of the information." This paper is based on a review of related literature, innovative continuous auditing applications, and the experiences of the authors. An approach for building continuous audit capacity is pressure on audit data warehouses and data marts are described. Ever improving technology suggests that the real-time exchange of sensitive financial data will place constant pressure on auditors to update audit techniques. Most of the new techniques that will be required will involve creation of new software and audit models. Future research should focus on how continuous auditing could be constantly improved in various auditing domains including assurance, attestation, and audit services. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 67-78 |
| Abstraksi Narasi | : | Recently, the SEC has called for research regarding the relationship between audit tenure and audit failures. In this study, we address this issue by examining prior audit reports for a sample of companies entering into bankruptcy during the period 1996-1998. We use a multivariate analysis to test for the association between the type of audit opinion issued on the financial statements immediately prior to bankruptcy and the length of auditor tenure. Our results indicate that there were significantly more audit reporting failures in the earlier years of the auditor/client relationship than when auditors had served these clients for longer tenures. The results do not support the arguments of those who propose mandatory auditor rotation and suggest that, contrary to the concerns expressed by the SEC, there is an inverse relationship between auditor tenure and audit reporting failures. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 79-93 |
| Abstraksi Narasi | : | This experimental study investigates the efficacy of lawyers` letters in providing auditors with corroborating evidence about litigation contingencies. Fifty second- and third-year law students indicate their willingness to provide auditors with estimates of the likelihoods of unfavorable outcomes and potential damages for two realistic litigation cases. The findings indicate that (1) the potential loss of attorney-client privilege and (2) likelihoods of unfavorable litigation outcomes that approach auditors` lower bound for accrual both may inhibit lawyers` responses to auditors. Overall, these findings raise doubts about the efficacy of this widely utilized auditing procedure and lead to concerns about whether litigation contingencies and corresponding losses may be underreported in financial statements. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 47-65 |
| Abstraksi Narasi | : | This paper examines how features of the task environment interact with task knowledge to affect auditors` generation of financial reporting alternatives. We study this issue in a setting in which an audit client proposes an aggressive financial reporting alternatives for a complex revenue-recognition issue. Companies` aggressiveness in financial reporting is an important contemporary topic (e.g. ,Levitt 1999, 2000). For auditors, aggressive financial reporting increases litigation exposure (e.g., Palmrose and Scholz 2001) and attracts regulatory attention (e.g., Public Oversight Board 2000; Securities and Exchange Commision 1999). By proposing less aggressive financial reporting alternatives, auditors` increase the likelihood that clients will report less aggressively, thereby reducing auditors` risks of litigation and regulatory exposure. We study the effects of two common features of auditors task environment (the level of engangement risk and the availability of previously generated alternatives) on financial reporting alternative generation, investigating whether these effects are contingent on auditors` task knowledge. Our results support interactive effects for both task environment features. Higher engangement risk enhances generation of alternatives only among higher knowledge auditors, while the presence of an inherited alternattive inhibits generation of alternatives only among lower knowledge auditors. |
| Nama Pengarang | : | Ganesh Krishnamoorthy, Johnstone, Karla M. , Biggs, Stanley F., Jack L. Krogstad, Taylor, Mark H. , Maribeth J. Stock, Geiger, Marshall A., Zabihollah Rezaee dkk, Vasarhelyi, Miklos A., Michael G. Alles, Alexander Kogan, Brad Tuttle, Maribeth Coller, R. David Plumlee ... [et.al], Krishnan, Jayanthi, Robert K. Elliott |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 94-121 |
| Abstraksi Narasi | : | External auditors are continually facing intense pressure to be more efficient in conducting audits without compromising quality and effectiveness. Optimal utilization of internal audit work can improve both the efficiency and the effectiveness of external audits and can enhance the value of internal auditors to the client organization. The objective of this study is to understand how the three factors (objectivity, work performance, and competence of the internal auditors) identified by auditing standards and by prior research interact in determining the strength of the internal audit function. Most prior studies have attempted to undertand external auditors` rank ordering of the importance of the three factors, without an explicit attempt to model the interactions among the factors. The results from these studies are mixed and inconclusive. Hence, prior studies have not produced aa consensus about how external auditors seem to weight and combine these factors in order to make assessments relating to the strength of the internal audit function. This study employs analytical methods based on Bayesian probability to model external auditors` evaluation of the internal audit function. Specifically, models based on multistage (cascaded) inference theory are developed and analyzed using numerical sensitivity analysis. The modeling contribution is significant in the sense that it is the only study that provides a theoretical model for the decision process. Results reveal that the importance of the three factors varies with the type of evidence (convergent or conflicting) observed and is contingent on the interrelationships among the three factors. A major conclusion of this study is that in the Bayesian context, it is futile to attempt a ranking of the factors since no single factor will dominate under all conditions. The study also provides avenues for future research and for improving the guidance provided by professional auditing standards that relate to the evaluation of internal audit work. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 157-168 |
| Abstraksi Narasi | : | The AICPA has indicated that the use of small monetary incentives might be an effective technique for improving confirmation response rates. A significant body of accounting and nonaccounting research supports the AICPA`s position; however, studies in marketing and public opinion polling suggest that the quality of survey-based responses can either increase or decrease with the use of monetary incentives. Existing auditing research has not looked at the potential effect of monetary incentives on response quality in the context of confirming account receivable balances. This study was designed to investigate this important issue. In this field experiment, four large, independent newspaper organizations mailed a total of 7,200 trade accounts receivable confirmations. The experiment employed a three (no misstatement, understatement, and overstatement) by three (no incentive, quarter, and dollar) between-subjects, full-factorial design. Consistent with prior research, the use of monetary incentives improved response rates in all misstatement conditions and response quality was higher for overstated, when compared to understated, accounts. However, monetary incentives did not close the quality gap between overstated and understated accounts and, suprisingly, the use of incentives was associated with an overall decrease in response quality. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 169-185 |
| Abstraksi Narasi | : | Over 40 years ago both Deming (1954) and Arkin (1957) expressed concerns that the composition of samples chosen through haphazard selection may be unrepresentative due to the presence of unintended selection biases. To mitigate this problem some experts in the field of audit sampling recommend increasing sample sizes by up to 100 percent when utilizing haphazard selection. To examine the effectiveness of this recommendation 142 participants selected haphazard samples from two populations. The compositions of these samples were then analyzed to determine if certain population elements were overrepresented, and if the extent of overrepresentation declined as sample size increased. Analyses disclosed that certain population elements were overrepresented in the samples. Also, increasing sample size produced no statistically significant change in the composition of samples from one population, while in the second population in creasing the sample size produced a statistically significant but minor reduction in overrepresentation. These results suggest that individuals may be incapable of complying with audit guidelines that haphazard sample selections be made without regard to the observable physical features of population elements and cast doubt on the effectiveness of using larger sample sizes to mitigate the problem. Given these findings, standard-setting bodies should reconsider the conditions under which haphazard sampling is sanctioned as a reliable audit toll. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 147-155 |
| Abstraksi Narasi | : | An area of significant importance and risk exposure during an audit of a financial institution is assessing the uncollectible portion of the client`s loan portfolio. Auditing the collectibility of a commercial loan can be difficult because this complex judgment is semi-structured and many kinds of information can be relevant. However, timely judgment process and outcome feedback are available and may improve the quality of an auditor`s conclusions over time. Therefore, to test for the benefits of task-specific experience, I compare loan judgments provided by inexperienced seniors, experienced managers, and more experienced junior partners and senior managers to a criterion based on the conclusions of senior audit partners. While previous research usually does not indicate performance improvements beyond the level of an audit senior (e.g., Tan and Libby 1997) for this complex task with timely feedback, consiastent and substantial performance improvements are reported here. Auditors provided increasingly more appropriate and less biased judgments, and they achieved greater judgment consensus. |
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