Showing papers on "Audit published in 1986"

Audit Fees and Auditor Size: Further Evidence

Abstract: During the past decade, the structure of the market for public accounting services-particularly audit services-has received scrutiny from regulators, practitioners, and researchers. A major focus has been on supplier (audit firm) size, and especially on the large shares of markets held by a subset of firms called the Big Eight.' One hypothesis is that the Big Eight function as a cartel and charge higher than competitively warranted fees. This hypothesis was tested by Simunic [1980], who concluded that the Big Eight as a group tended to charge lower fees than non-Big Eight firms. His conjecture was that his results were consistent with scale economies enjoyed by the larger CPA firms. He did observe, however, that one of his Big Eight firms seemed to "charge higher fees," which might reflect the higher quality of the audit services supplied by that firm.2

Measuring racial discrimination with fair housing audits: caught in the Act.

Abstract: A survey technique called a "fair housing audit" provides a direct measure of racial discrimination in housing. This paper examines the econometric issues raised by audit data, measures the discrimination uncovered by a 1981 Boston study, and tests hypotheses about the causes of discrimination. The estimated level of discrimination is high: Black housing seekers are told about 30 percent fewer available housing units than are whites. The hypothesis tests indicate that the primary cause of this discrimination is that housing agents illegally promote their economic interests by catering to the racial prejudice of their current or potential white customers.

The Effect of Nonaudit Services on the Pricing of Audit Services: Further Evidence

Abstract: Simunic [1984] examined the effect of total management advisory services (MAS) fees on audit fees and found, "the audit fees of clients who also purchase MAS from their auditors are significantly higher than audit fees of clients who do not do so" [1984, p. 681]. Simunic interpreted this result as consistent with the beneficial effects from joint supply of audit and MAS, as follows: ". . . the observed relationship would arise if the production of auditing generates knowledge useful in MAS production and/or the production of MAS reduces the marginal cost of auditing and audit demand is relatively elastic" [1984, p. 698]. But he emphasized both the preliminary nature of this result and the need for further evidence. In this paper, I report the results of a similar study of the effects of fees for specific nonaudit services on the pricing of audit services. I include all nonaudit services rendered by the incumbent audit firm, categorizing these services as tax, accounting-related MAS, and nonaccounting MAS. This decomposition of MAS allowed me to investigate whether the proximity of the service to accounting influences the existence and magnitude of any beneficial effects from joint supply. The motivation for considering these categories separately stems from the distinction in the independence literature between MAS that are related

Expertise and Auditors' Judgments of conjunctive Events

Abstract: Although research on the nature of professional audit judgment has expanded recently, surprisingly little is known about the role of education and experience. Existing post hoc analyses of the relation between performance (mostly lens model statistics) and years of experience have produced inconclusive and conflicting results (see Joyce and Libby [1982] and Ashton [1983]). In these studies, little attempt was made in advance to specify the knowledge necessary to perform the judgment task, the stage at which such knowledge would normally be acquired, or the process by which it would be brought to bear on the decision problem. Recently, it has been recognized that understanding the role of expertise in auditors' judgments will require a more detailed analysis of the nature of audit knowledge and the basic memory processes involved in learning and retrieving this knowledge (see, e.g., Weber [1980], Libby [1985], and Plumlee [1985]). This paper has two goals. The first is to develop a formal approach for examining how the auditor's memory store interacts with current audit evidence to determine judgment. The failure of less systematic efforts to examine these issues suggests the need for more formality and structure. The second goal is to use the approach to predict and demonstrate the judgmental effect of a specific knowledge difference in an abstract setting. The conflicting and inconclusive results of prior studies indicate the nontrivial nature of this task, even in an abstract setting. This study

Further Evidence on External Auditors' Reliance on Internal Auditors

Abstract: In this study I examined whether external auditors actually adjust the nature and extent of audit procedures due to reliance on internal auditors and, if so, whether any such reliance was related to the source reliability of the internal auditors (defined by internal auditor competence-work performance and objectivity). In this respect this study complements previous ones undertaken by Schneider [1984a; 1984b] who studied similar relationships using a within-subjects design. In contrast, however, I used a between-subjects design. The results of my study indicate that external auditors reduced planned audit hours if the internal auditors had a high level of competence-work performance, but they did not alter their tests in response to changes in the degree of internal auditor objectivity. Even here, however, the results did suggest that internal auditors had to perform documented work in a specific area before the external auditors would alter the amount of planned audit hours. Similarly, Schneider [1984a; 1984b] found internal auditor competence and work performance were perceived as almost equally important in reliance decisions, with objectivity less important, although not trivial. In section 2, 1 discuss the method used in conducting the study, followed

Ways of influencing the behaviour of general practitioners

Abstract: What evidence is there for the success or failure of the different methods used to influence the behaviour of general practitioners, whether in their work with patients, or in the organization of a practice? This preliminary exploration of the literature suggests that, although change is always occurring, its deliberate inducement is usually slow and laborious. Doubt is cast on the efficacy of existing financial incentives, and of unsolicited feedback about performance. There is little evidence for the influence of audit on behaviour but personal contact with doctors, nurses and other colleagues, and to a lesser extent with patients, is relatively effective, both in influencing the teamwork of a practice and in more formal education. However, it is combinations of different methods which most successfully influence general practitioners.

The recent history of corporate audit committees

Abstract: This article explores factors in the financial, legal and social environments that have significantly influenced the development of corporate audit committees. Particular emphasis is given to the actions of the Securities and Exchange Commission and the American Institute of Certified Public Accountants.

Managing New Technology

Abstract: 1. Technical change audit 2. Characteristics of the new technology 3. The reasons for change 4. Organizing for change: equipment and facilities 5. Organizing for change: work 6. Organizing for change: management information systems 7. Organizing for change: structure 8. The changing role of management 9. Managing the implementation of new technology 10. Monitoring progress.

Accounting rationality and financial legitimation

Abstract: The quantitative measurement of value is a central requirement in capitalist production and exchange relations. A major role in this measurement has been played by public accounting since its establishment as a profession in the United States and Great Britain at the turn of the century. Public accountants see themselves as the monitors of world economic order. Their metaphor is the system, in which rationality and unity are assumed and all accounts are monetary and quantitatively measurable in precise, constant terms. Their method is positivist. Uncertainty in financial markets is reducible through objective analysis of the relations of capital in a value-free environment. Their mandate is to provide to the public a periodic independent examination of corporate financial accounts in the form of an annual audit. These audits were instituted by governments following violent fluctuations in the business cycle, particularly the world depression of the 1930s, largely in response to public demand for more comprehensive information. However, despite this charge, public accountants serve primarily the interests of their clients. Not only do they monitor actual expenditures of capital, but they are also gatekeepers of capitalist ideology. The social organization of their work, the organizational and career structures they inhabit, the body of knowledge they control, all serve to legitimate political, economic, and social arrangements.

Effective Financial Management in Public and Nonprofit Agencies

Abstract: Financial management has emerged as a critical force in everyday management. Revenue flow has suffered from three years of economic decline on the rising costs of governmental programs, along with citizens' demands for more cost-effective delivery of goods and services-even as they resist tax and fee increases. Public managers and not-for-profit organizations are forced to make creative use of their scarce financial resources. This new and updated edition retains the best of its predecessor. Attention is focused on the Government Performance Act of 1993 and how it has influenced the development, use, and implementation of performance measures to maximize accountability. The Government Accounting Standards Board Rule #34, which has had a revolutionary impact on government financial reporting, is carefully examined. A comprehensive and holistic approach to auditing shows how to minimize manipulation and increase reliability to users. Readers are also introduced to the application of e-government, cash flow analysis, expanded revenue forecasting analysis, and evolving techniques for evaluating fiscal health. New measurement indicator terms that have recently entered the literature are introduced, showing how they are linked to accountability and TQM. Recent developments in revenue, purchasing and inventory, cash, risk management borrowing, and debt management are also incorporated. Particular emphasis is given to performance measurements, and their linkage to budgeting and management. The PPBS system that developed in response to dissatisfaction with traditional line-item and performance budgeting is given its own in-depth chapter and analysis. An important section of the book addresses fraud, waste, and abuse. Because financial management is the only activity that touches every employee in an organization, this is an indispensable book for managers on the state and local levels. This volume is imperative reading for managers of any kind, as well as administrators, scholars, teachers, and students of financial management of public and not-for-profit organizations, including the health care industry, public affairs, political science, and schools of public health and social work.

Combined computer generated discharge documents and surgical audit.

Abstract: A computerised audit system using a commercially available database program and a word processing program was devised to produce discharge documents close to the time of discharge. The data were available for audit of the surgical unit's work. It was found that secretarial time was more efficiently used and general practitioners received more information about their patients earlier than before.

Optimal Timing of Account Audits in Internal Control

Abstract: This paper calculates the minimum required frequency between audits of a given type to meet prespecified accuracy goals for a given type of account. Both "100 percent," as well as sampling type audits are addressed. The effectiveness of a given audit type includes the mean and standard deviation of any residual error that may remain in the account after the audit has been performed and after account balances have been adjusted. The accuracy goals consist of the maximum accumulated error that is considered by management to be tolerable between audits, and the prescribed likelihood that this tolerance level will not be exceeded. The model assumes that certain parameters of the error process have been estimated, but no distributional information is required. Closed form, easy to use, lot-size type formulae are derived which calculate the required frequency or upper bounds between audits. The model also provides insights as to the relative cost-effectiveness of various types of audits.

A decision support system for audit-staff scheduling with precedence constraints and due dates

Abstract: A versatile computer model for audit-staff scheduling based on a zero-one integer program was presented by Balachandran and Zoltners [19811 (BZ). This paper extends the work of BZ by demonstrating how precedence constraints, due dates, penalty costs, resource leveling, and other audit considerations can be added to the zero-one integer program for audit scheduling. These additional features help improve the realism of the scheduling model, thus making the model more practical for applications. W ITH rising audit costs, client resistance to audit fee increases, and the growing complexity of audit operations, emphasis must be placed on improving audit planning and control. Since the scheduling of audit activities and manpower is an important aspect of audit planning and control, decision support systems that improve audit scheduling can help provide a better quality and a more cost-effective service. This paper extends the integer programming model developed by Balachandran and Zoltner [1981] (BZ) for audit-staff scheduling. We add mainly (a) precedence constraints among audit tasks, (b) due dates and penalty costs for missing audit deadlines, and (c) a constraint that an auditor cannot process more than one audit task at a time into the integer programming model that serves as the basis of a decision support system.' The objective is to accommodate additional important, practical considerations into the original BZ model so that it can be more practically applied. In the next section, the proposed extensions will be elaborated upon, followed by a section explaining the mathematical formulation of the extended BZ model. Then a numerical example demonstrating the implementation of the extended model is provided. The final section provides the concluding remarks. As explained by BZ [1981, esp. pp. 807-8091, the integer programming approach is superior to the approaches based on linear programming [Summers, 19721 and goal programming [Bailey, Boe, and Schnack, 1974; Balachandran and Steuer, 19821 for audit scheduling. Another heuristic approach was proposed by Chan, Lam, and Cheng [19781 which considers precedence constraints. However, it did not incorporate the variety of audit considerations of the integer programming model. K. Hung Chan is Associate Professor of Accounting and Bajis Dodin is Assistant Professor of Management Science, both at the University of California, Riverside. Manuscript received July 1985. Revision received January 1986. Accepted March 1986.

How important is information format? An experimental study of home energy audit programs

Abstract: Among alternative regulatory responses, information provision programs are receiving increasing attention despite the decidedly mixed evidence about their effectiveness. This paper provides detailed experimental evidence to demonstrate that for one important example of an information program, the use of energy audits to stimulate residential energy conservation, the effectiveness of the program is highly sensitive to the information processing behavior of the users of the information. Simple changes in the format of the information provided to homeowners produced marked improvements in the efficiency of consumer choices. The study illustrates Stern's conclusion in a recent issue of this journal that laboratory experimentation provides a useful alternative to model-based analysis of natural experiments, especially for policy design issues involving information acquisition and processing. The paper also offers conclusions about improving the effectiveness of home energy audits, as well as the entire class of information provision programs.

Capital Budgeting Practices of Non-Industrial Firms

Abstract: This paper reports The results of a survey research study of The capital budgeting practices on non-Indus trial (service) corporations, specifically firms in the 1983 Fortune Service 500 Listing. The survey questionnaire was designed to provide data regarding the entire capital budgeting process - from searching for investment opportunities through post auditing implemented projects. Also, It elicited ‘opinions’ as to the degree of difficulty and degree of importance of various phases of the capital budgeting process. The results indicate that, overall, large service corporations are not as sophisticated in regards to capital budgeting as theory would allow. The most serious weaknesses seem to be the areas of risk assessment, risk adjustment and use of post audits.

Statistical Techniques for Analytical Review in Auditing

Abstract: OVERVIEW: The Audit Environment Analytical Review BASIC CONCEPTS OF REGRESSION ANALYSIS: The Simple Regression Model The General Regression Model The Audit Interface AUDITING APPLICATIONS OF REGRESSION ANALYSIS: Designing Audit Models Completing Audit Applications MORE ADVANCED STATISTICAL CONCEPTS AND TECHNIQUES: Statistical Tests and Transformations Computation of Multivariate Regression Functions Appendixes.

An audit of the management of patients with epilepsy in thirty general practices.

Abstract: An audit of the management of epilepsy in 30 general practices is presented. A total of 377 patients from widely dispersed practices in the UK independently completed questionnaires which mirrored similar questionnaires answered by their doctors. A lack of detailed awareness by the doctor of how epilepsy was affecting the patient was detected. Many patients were found to have difficulty in communicating anxieties and problems associated with the disease to their general practitioner. Use of drug monotherapy and anticonvulsant blood level monitoring was sub-optimal. This multi-centre study supports previous single-centre reports of certain deficiencies in long-term management of epilepsy in general practice.