Showing papers on "Audit published in 1988"

An empirical analysis of federal income tax auditing and compliance

Abstract: This paper provides empirical evidence on the relationship between compliance with the Federal Income Tax and auditing by the Internal Revenue Service. It combines a cross-section data set related to 1969 individual returns assembled by the IRS with data taken from the Annual Report of the Commissioner of Internal Revenue. We find strong support for an economic approach to tax compliance, but one that incorporates the IRS as a strategic actor. In particular, while audits may have a deterrent effect on noncompliance, we find that they are themselves, in the majority of cases, responsive to the pattern of compliance.

The Audit of War: The Illusion and Reality of Britain as a Great Nation.

Abstract: In this book, the historian Correlli Barnett places Britain's decline since the Second World War in a new perspective.

Using Social Cognition and Persuasion to Promote Energy Conservation: A Quasi‐Experiment

Abstract: A quasi-experiment was conducted to determine if the effectiveness of the R.C.S. Home Energy Audit Program could be improved by training auditors to use social-psychological principles during the audit procedure. Nine experienced home energy auditors attended two 1-day workshops in which they were trained to: (a) communicate vividly; (b) personalize their recommendations to homeowners; (c) induce commitment; and (d) frame their recommendations in terms of “loss” rather than “gain”. The effectiveness of the trained auditors was compared with a control group of experienced auditors who did not receive specific training. Both telephone interview data and utility company records pointed to the success of the auditor training. In interviews, customers served by the trained auditors reported a greater likelihood of acting on the auditors' recommendations, and a large number of these customers reported applying for utility programs to finance retrofits. Utility records validated these customer claims: A significantly larger number of customers served by trained auditors actually did apply for retrofit finance programs. A longitudinal measure of actual energy consumption showed no difference between experimental and control households. Taken as a whole, these findings demonstrate the potential for using principles uncovered in the social psychological laboratory to design applied interventions.

Linking auditing and metaevaluation : enhancing quality in applied research

Abstract: Linking Auditing and Metaevaluation Differentiating Standards, Procedures and Accepted Principles Preparing an Audit Report Constructing an Audit Trail Auditing an Inquiry Developing Other Applications

Frequency Judgments in an Auditing-Related Task

Abstract: The topic of frequency judgments is important to auditors because practically all auditing judgments use frequency data as one of the inputs in the decision-making process. For example, frequency judgments based on actual audit experience with a given company become part of audit planning on repeat engagements. In addition to the actual audit hours used in an area, the frequency of errors discovered in past audits may serve as a guide in allocating hours in the current audit plan. This possibility is supported by Kinney's [1979] results that adjustments made in prior years' audits were relatively accurate predictors of the current year's errors. Similarly, in evaluating internal controls, the auditor's judgments of the frequency with which different accounting processes generate errors should affect evaluations of the importance of control weaknesses discovered in the system. Libby, Artman, and Willingham [1985] found that the frequency with which subprocesses generate errors had a major impact on control risk assessments. The importance of frequency judgments was also demonstrated by Libby [1985], who showed that auditors rely on their judgments of frequency of occurrence of financial statement errors when generating hypotheses in an analytical review task.

The Small Company Audit Qualification: A Preliminary Investigation

Abstract: In recent years there has been much debate in the UK regarding the value and feasibility of the small company audit. The lack of formal internal control systems and the application of universal auditing standards has given rise to the use of a special ‘Small Company (Example 6) Audit Qualification’. However, doubts concerning the uniformity of practice between auditors has created difficulties for users in interpreting its meaning. This paper examines the extent to which a number of financial, organisational and auditor variables are able to explain the receipt of a ‘Small Company Audit Qualification’. The main empirical findings, using multivariate logistic analysis on a sample of 540 small company reports, are that companies audited by large audit practices, companies which had a prior year qualification, a secured loan, declining earnings, large audit lags and few non-director shareholders were more likely to receive an audit qualification than other companies.

The impact of prior working papers on auditor evidential planning judgments.

Abstract: There has been significant concern in auditing about the effects of relying on prior working papers in planning audit procedures (“anchoring”). This study employed an experiment with varying information sets: prior working papers, current year information and “scenario” (summarized prior year information). Practicing auditors were asked to design a substantive audit program for a case where changes in the client's environment dictated additional procedures. A consensus program from three partners was used as a bench-mark. Experimental groups were about equally adaptive to the changing environment. However, auditors provided with prior working papers demonstrated lower efficiency. The scenario group exhibited both high relative effectiveness and efficiency, while current information subjects displayed the lowest overall level of performance.

Driver management policies and motor carrier safety

Abstract: REGRESSION ANALYSIS OF ICC SAFETY AUDIT DATA RELATING ACCIDENTS AND OPERATIONS (DRIVER TURNOVER, COMPLIANCE WITH REGULATIONS)

The effects of audit technology on auditor efficiency: Auditing and the timeliness of client earnings announcements

Abstract: The organizational theory and sociology literatures have long been concerned with the concept of structure, both as a dependent and an independent variable. Relatively recently, auditing researchers have found that public accounting firms differ in the degree of structure their audit technologies exhibit, and that the voting pattern of the Auditing Standards Board appears to be influenced by its members' firm affiliations with respect to their structure orientation. To date, however, the influence of accounting firm structure on client financial reporting characteristics has not been to subjected study. The purpose of this article is to examine hypothesized relationships between the structure orientation of public accounting firms and client earnings announcement dates, expressed in terms of “early” vs “late”. In addition, the impact of the nature of information conveyed, expressed in terms of surprise “good news” or “bad news”, is studied. Empirical evidence drawn from the Wall Street Journal Index , COMPUSTAT and a prior classification of Big Eight firm audit technologies with respect to structure, suggests that systematic relationships do exist. Implications for future research and audit practice are discussed.

Legal Liabilities and the Market for Auditing Services

Abstract: The ever-expanding scope of accountants’ liability and its alleged dire consequences have become the “talk of the town” within the accounting and legal communities. A perception of a “crisis” in the market for auditors’ malpractice insurance is also widespread. Many attribute this crisis to the seemingly persistent erosion in the privity doctrine formalized in Ultramares v. Touche, Niven and Co.’ Under this privity standard, accountants were liable to third parties who had relied on audited financial statements only if the injured parties could prove fraud. Writing for the majority in Ultramares, Judge Benjamin Nathan Cardozo noted:

An Investigation of Securities and Exchange Commission Regulation of Auditor Change Disclosures: The Case of Accounting Series Release No. 165

Abstract: The Securities and Exchange Commision (SEC) claims that prior to 1975 auditor change Form 8-K filings may have been associated with firm-delayed disclosures of "bad news."' In Accounting Series Release (ASR) No. 165 the SEC states that "in the past, when only the engagement of a new accountant triggered the reporting requirement, there was sometimes considerable delay in bringing significant disagreements to the attention of investors" (SEC Docket [1974, p. 768]). Also, a firm which delayed hiring a new auditor, and so delayed disclosing the auditor change, could not be differentiated from a firm finding a new auditor right away since the date a firm fired the predecessor auditor was not disclosed.2 The ability to differentiate delaying firms from nondelaying

Accounting for the audit commission

Abstract: THE Audit Commission for Local Authorities in England & Wales (the Commission) was established under the Local Government Finance Act 1982 (the Act) and took up its responsibilities in early 1983. The aim of external auditing of local government, under the direction of the Commission, is now not merely the continuation of traditional financial and regularity audits, but also to judge the “economy”, “efficiency”, and “effectiveness” of local authorities’ operational arrangements and accomplishments. In its first four years, the Commission claims to have identified f492 million of potential savings by local authorities, and forecasts further savings in excess of f150 million annually. The Commission was established, and functions, in a period of considerable controversy about the performance, roles, size, and funding of local government and the wider public service. Its aims, analyses, audit findings, recommendations and emphasis have been the focus of widescale attention and some controversy. To what extent has the establishment of the Commission and the new value for money (VFM) audits been a radical change from the past? Was, and is, there evidence that such extended audits are feasible? Were VFM audit techniques already established and proven in the private sector? What were the context and conditions of possibility which permitted and precipitated the Commission? What are the aims and characteristics of the Commission’s approach? What limitations and barriers does it confront? Does it aim only to evaluate or more fundamentally to change local authorities? What are its accomplishments? What is its future? External auditing of local activities wholly or partly funded by a local levy on the public has a long history. With the dissolution of the monasteries and the termination of their charitable role, poor relief (locally administered and financed by local taxation) emerged and with it checks that the proceeds of such taxation were properly expended.’

The Association Between Client Factors and Audit Fees: a Comparison by Country and by Firm

Abstract: This study investigates whether the factors identified by prior research as being associated with intra-country Big Eight audit fees are consistent (i) among countries (across the Big Eight) and (ii) among Big Eight auditing firms (across countries). Fees from 410 audits in five countries were analysed. Results indicate a similarity in the influence of client size and complexity variables among four of the five country audit-fee models and among seven of the Big Eight audit-fee models.

The importance of accounting to the shakers

Abstract: A desire to be self-sustaining and a dedication to communal property required the Shakers to place great importance on accounting. This importance was underscored by the fact that the spiritual covenants of the Shakers were revised to require accounting procedures and policies including an annual audit. The Shakers circulated manuscripts concerning bookkeeping, and recorded transactions and events in three types of journals: financial, “family,” and spiritual. The Shakers also prepared financial reports. Temporal transactions were a means of maintaining the “gospel order” which elevated accounting procedures to a means of creating and protecting consecrated property.

Inherent risk: an investigation of auditors' judgments.

Abstract: The assessment of inherent risk is a judgment required of auditors by Statement on Auditing Standards 47 (Auditing Standards Board, AICPA, New York, 1983) that normatively affects the scope of work performed on audit engagements This study explores the judgments of auditors concerning inherent risk in inventory Four inherent risk factors were examined: turnover of the controller, financing pressure, the amount of complexity of overhead in inventory, and the quality of the personnel responsible for the inventory calculation A human information processing approach employing ANOVA was utilized to determine the relative reliance on these factors in the inherent risk judgments of 65 practicing auditors Correlation techniques were used to measure consensus, reliability, and self-insight The results suggest that although all four inherent risk factors were important to auditors, quality of personnel was the most significant Reliability was slightly lower than in previous research, but was still fairly high Self-insight was moderate

A Structural Equation Model for Tax Compliance and Auditing

Abstract: In this paper. we estimate a three equation model for taxpayers' reported income and tax liability and for the probability of an audit. Our work differs from previous studies in that our dependent variables in the compliance equations are taxpayer reports rather than a variable related to auditor estimates of noncompliance and in that we estimate a structural equation for audits. We find that audits stimulate compliance although the effect is not large and is not statistically significant for all groups. Audits are more effective at inducing accurate reporting of subtractions from income than of income. Reduced-form results suggest that IRS activities other than audits have significant compliance effects. Results for the sociodemographic variables are interesting and help to explain some seemingly incongruous findings in the literature. We find compliance to be higher, if anything. in areas with less educated and older taxpayers, a large proportion of households headed by females. and a mostly native born population.

The Quality Audit: A Management Evaluation Tool

Abstract: The Quality Audit. Types of Quality Audits. Applications of the Quality Audit. Managing the Quality Audit. Initiating the Quality Audit. Planning the Quality Audit. The Quality Auditor. Systems Analysis. Working Papers. Quality Audit Sampling Plans and Decision Sampling. Analysis of the Quality Audit. Corrective Action and Follow with the Auditee. Reporting the Quality Audit. Measuring and Improving the Effectiveness of the Quality Audit. Conclusions.

Audit of a surgical firm by microcomputer: five years' experience.

Abstract: From 1982 to 1986 inclusive work of one surgical firm was audited with a microcomputer. Data were recorded on 4336 patients having 3355 operations, who were under the care of one consultant in a general surgical unit; fifty items of information were recorded on each patient, allowing a wide range of analyses to be performed—for example, the number of admissions and operations, grades of operation, diagnostic grouping, complications, and complication rates associated with individual surgeons. Data collected for the audit provided a valuable baseline for the unit, defining aspects of practice that could be reviewed and improved. During the audit the overall rate of complications as a percentage of admissions fell significantly from 13% to 9% and the rate of postoperative complications decreased significantly from 16% in 1982 to 11% in 1986. The incidence of chest and wound infections also decreased significantly. The system was improved by using the data to produce discharge summaries as well as audit; the microcomputer thus became an integral part of the office work of the unit.

Some Implications of Auditor and Client Lobbying Activities: A Comparative Analysis

Abstract: This paper examines the degree to which auditor and client lobbying is related in a UK context. This may help to identify any linkage between the wealth of clients and auditors that is affected by accounting standards, as propounded in the ‘economic consequences’ literature. It also might have some implications for the independence question. Three tests are conducted to see if auditors tend to support the lobbying position of the majority, or the most financially influential, of their clients. The third test is also used to identify any evidence that the comments of smaller clients tend to follow the lead of their audit firms/professional advisors. Auditor and corporate client written submissions on 22 proposed accounting standards are included in the study. The analyses are conducted both at an aggregated and also at a disaggregated level. The results do not indicate that auditor and client collusion took place. In particular, the results are consistent with the view that auditors are independen...

Attestation research opportunities: 1987

Abstract: . A brief review of some precursors of modern auditing scholarship and changes in the current environment and their implication is provided with the intent to stimulate future research in auditing. After distinguishing between the attestation and checking functions, the paper offers some research questions which may be considered by auditing researchers in the future.

Communication Satisfaction in the Bank: An Audit Evaluation:

Abstract: This study sought to evaluate some structural influences on perceived commu nication adequacy in a multi-branch banking organization. Since communica tion satisfaction affects employee job satisfaction as well as productivity, this study explored factors which may impede effective information transmission. This study used a communication audit to determine which groups within the banking system were experiencing dissatisfaction with communication received. Analysis of variance showed that part-time employees were signifi cantly less satisfied than hourly workers. Explanations of rising expectations, as well as local interference with corporate-based communication efforts are explored, and the audit approach is recommended for similar eualuations.

Audit of Principal Effectiveness: A Method For Self-Improvement

Abstract: The principal must constantly strive to obtain feedback data that can be translated into improvement strategies. To that end, these writers have developed an effectiveness audit.

Can audit improve patient care? Effects of studying use of digoxin in general practice.

Abstract: A survey of monitoring of digoxin treatment in five practices examined the indications for prescribing digoxin, its long term use, and how its use could be monitored. These data were used to generate a protocol for monitoring treatment with digoxin in general practice. The findings of the survey and the protocol were distributed to and discussed with all the partners in the practices participating in the study. One year later similar analysis showed that record keeping (recording of pulse rate and rhythm) had improved significantly in the group of principals carrying out the audit but not in other principals in these practices. Audit may change only the auditors.

A knowledge-based model of audit risk

Abstract: Within the academic and professional auditing communities, there has been growing concern about how to accurately assess the various risks associated with performing an audit. These risks are difficult to conceptualize in terms of numeric estimates. This article discusses the development of a prototype computational model (computer program) that assesses one of the major audit risks -- inherent risk. This program bases most of its inferencing activities on a qualitative model of a typical business enterprise.

A Guide to Understanding Audit in Trusted Systems

Abstract: : This publication, "A Guide to Understanding Audit in Trusted Systems," is being issued by the National Computer Security Center (NCSC) under the authority of and in accordance with Department of Defense (DoD) Directive 52151 The guidelines described in this document provide a set of good practices related to the use of auditing in automatic data processing systems employed for processing classified and other sensitive information