Showing papers on "Audit published in 1992"

Estimating the determinants of taxpayer compliance with experimental data

Abstract: The fundamental difficulty in empirical work on taxpayer compliance is the absence of detailed and reliable information on individual compliance choices. This paper uses data from laboratory experiments to estimate individual responses to tax, penalty , and audit rate changes , as well as to changes in government expenditures . The empirical results confirm some (although not all) theoretical predictions , and compare quantitatively with other empirical work. Taxpayer reporting increases with greater audit and penalty rates; however, these responses are not large. Compliance is also greater when individuals face a lower tax rate and when they receive something for their taxes.

The Audit Report Under Going Concern Uncertainty: An Empirical Analysis

Abstract: This study explores the value of the audit report in the context of the going concern qualification (GCQ) decision along the joint dimensions of auditor competence and independence. Likelihood of company failure, auditor switch rates, the self-fulfilling prophecy argument and audit firm size are analysed as variables potentially affecting the value of the audit report in a GCQ situation. This study focuses on the outcomes of such decisions: the presence or absence of a GCQ, for a large sample of UK quoted companies over the decade 1977–86. Our results suggest that, unless the likelihood of failure is very high, the probability of a GCQ is very low. We find some evidence in support of an association between the presence of a GCQ and auditor switching but no support for the self-fulfilling prophecy argument. In addition, smaller UK audit firms do not appear to exhibit lower GCQ rates than do large firms. There is some evidence that the issues of auditor competence and independence may be a cause fo...

Auditor underreporting of time and moral reasoning: An experimental lab study*

Abstract: . This paper introduces the theory of moral reasoning as a valid determinant of the underreporting of audit time. In an experimental lab design for a sample of 88 auditors from a national public accounting firm, actual underreporting on an audit task was observed. Findings show that underreporting is systematically related to the auditor's level of moral reasoning as measured by the Defining Issues Test (DIT). Here those with relatively low DIT scores were shown to underreport most severely. Results also show that although an unattainable time budget affects behavior, peer pressure has the most significant impact on underreporting. The present study makes three important contributions to the auditing and psychology literature. First, it establishes the significance of peer pressure as an antecedent to underreporting. Second, it shows that an auditor's moral reasoning explains actual underreporting behavior under conditions of work-related pressure. Third, it reveals marked underreporting under simulated audit conditions.

Auditing Without Commitment

Abstract: I study the optimal contract when a principal cannot commit to an audit. The contract must provide incentives for the agent to comply as well as for the principal to audit. The key tradeoff is efficiency versus noncompliance instead of the familiar rent versus efficiency. Information rent is zero whether production cost is high or low. For high production cost, the agent is asked to produce greater than the amount under full information. The probability of audit is higher when the principal cannot commit compared to when he can. (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.)

Implications of Seemingly Irrelevant Evidence in Audit Judgment

Abstract: The purpose of this paper is to investigate the role that nondiagnostic evidence, which is a priori irrelevant, can have in audit judgment. In a laboratory experiment, auditor-subjects given a mix of diagnostic and nondiagnostic evidence made decisions that were less extreme (more regressive) than those made using only diagnostic evidence. The magnitude of the observed effect was in some cases directly related to the capacity of the nondiagnostic evidence to hold the auditor-subject's attention. This paper adds to the literature that explores how attributes of accounting settings affect decision performance (see Libby [1989]). Audit settings contain a mix of diagnostic and nondiagnostic evidence. But the focus in judgment research is typically on the relation between the importance (or relevance) of evidence in judgment and its predictive value. My results indicate that such a focus is too narrow, as judgments are influenced by evidence devoid of predictive value. The chosen research focus typically influences the types of evidence researchers include in experimental materials; that is, they typically include only the evidence they expect subjects to use.

Auditor independence, dismissal threats, and the market reaction to auditor switches

Abstract: The article presents information on the effect of auditor changes on security prices in both a mechanical decision rule and in the possibility that an adverse audit opinion may lead to dismissal. The analysis implies that the stock price response to the announcement of an auditor change depends on the preswitch audit opinion. The author contends that his research proves auditor switches can be good for investors and that even when they are costless, and there is no collusion between auditor and firm, market reaction can be negative.

Selection of auditor firms by companies in the new issue market

Abstract: Some empirical evidence on the question of product differentiation in the market for audits is presented. Using agency cost and signalling frameworks we posit that there will be a demand for varying levels of audit quality. Because audit quality is not directly observable to investors we postulate that quality will be proxied by the auditor's brand name reputation. Big Eight auditors are categorized as being high quality producers. Using data on companies newly listing on the New Zealand Stock Exchange we test the derived models of auditor choice. Auditor choice is a dummy variable (0,1) partitioned on the basis of non Big Eight and Big Eight accounting firms. The results provide support for the idea of product differentiation in the market for audits.

Communication between general practitioners and consultants: what should their letters contain?

Abstract: OBJECTIVE--To canvass the views of all general practitioners and consultants working in Newcastle upon Tyne on the content of referral letters and replies, the feasibility of standardising certain aspects of referral letters, and the use of communications data for audit purposes. DESIGN--A postal questionnaire was sent to all general practitioners and consultants in Newcastle upon Tyne in May 1991. Questions were asked about the clinical and administrative content of letters, the utility of standard categories to state the reason for referral, the idea of using letters for feedback purposes, and communications as a potential topic for professionally led audit. SETTING--Area served by Newcastle upon Tyne Family Health Services Authority and District Health Authority. RESULTS--Replies were received from 274 (77%) doctors (115 general practitioners and 159 consultants). A majority (225; 82%) were in favour of items defined as "always important" forming a minimum requirement for referral letters and for consultants9 replies. Using standardised categories to state the reason for referral was not endorsed: 102 (89%) general practitioners and 132 (83%) consultants preferred referrers to use their own words. Using referral communications to provide feedback was less popular with consultants (54; 34%) than general practitioners (72; 63%). Finally, a majority of doctors (179; 65%) were in favour of using written communications as a topic for professionally led audit. CONCLUSIONS--A high degree of consensus exists among clinicians about the content of referral communications. Although doctors may still reject the concept of standardised communications, they have unambiguously endorsed a standard for communication that they can aspire to, and they are prepared to use it as a yardstick for their actual performance.

Perceptions of new AICPA (American Institute of Certified Public Accountants) audit guide.

Abstract: A survey was conducted by authors Bitter and Cassidy to assess hospital providers' and auditors' perceptions of the reporting requirements of the new Audits of Providers of Health Care Services guide published by the American Institute of Certified Public Accountants. Responses indicated that there is still much dissent in the healthcare community as to what is useful information and what the effects of the new guide will be on hospital providers, auditors, and users.

The Effect of Education on the Audit Expectations Gap

Abstract: : This paper examines the effect of education on students' perceptions of the meaning of audit reports and the responsibilities and duties of auditors. A research instrument, utilising semantic differential scales designed to measure the messages communicated through audit reports, was administered to two groups of undergraduate students at the beginning and end of a semester and to auditors. The experimental group consisted of final year undergraduate accounting students enrolled in their first auditing unit. The control group consisted of final year undergraduate marketing students not enrolled in the auditing unit. The results of the study suggest that education may be an effective approach to narrowing or eliminating the audit expectation gap.

The European accounting guide

Abstract: This work offers a comprehensive coverage of European financial accounting and reporting practices. It charts the progress of harmonization within the Community, extending its coverage to major non-member states like Sweden, Hungary, Poland, Czechoslovakia and Turkey. Each chapter covers a particular country and is written by a specialist from that country, offering detailed information on their financial, legal and economic environments. At the same time, each country's accounting conventions are illustrated through examples of financial statements, auditors' reports and edited notes from publicly listed companies.

Audit and research.

Abstract: every 1000 consults for refractive problems each year.' Currently most refractive problems are dealt with by optometric services. With corneal laser surgery, however, the treatment of myopia,8 hyperopia, and astigmatism could become the responsibility of ophthalmologists.\"' When these new techniques have been perfected the NHS will have to decide whether to provide them for patients-at a cost of about £200000 per machine. A RALPH ROSENTHAL Professor of Ophthalmology, University of Leicester School of Medicine, Leicester LE2 7LX I Sheldrick JH, V'ernon SA, Wilson A, Read SJ. Demand incidence and episode rates of ophthalmic disease in a defined urbani population. BIfJ 1992;305:933-6. 2 Chiapella AP, Rosenthal AR. One year in an eve casualty clinic. Brj7 Ophthalmol 1985;69:865-70. 3 Office of Population Censtuses and Survevs. Iational populations projcctions 1989 based. London: HMSO, 1991. (Series PP2 No 17 appendix 1.) 4 'I'hompson JR. The demand incidence of cataract in Asian imtmigrants to Britaita anid their descendants. Brj Ophthalmol 1989;73:950-4. 5 Steele ADMcG. Cataract management. Brj Ophthalmol 1992;76:32 1. 6 Schneider A, Kaboth MS, Neuhauser MS. Detection of subretinal neosascular membranes with indocvanine green and an infrared scanning laser ophthalmoscope. Am 7 Ophthalmol 1992;113:45-51. 7 Migdal C, Hitchings R. Control of chronic simple glaucoma with primary medical, surgical and laser treatment. Eye 1986;105:653-6. 8 Bechara SJ, 'rhompson KIP, Waring (GO. Surgical correctiota of nearsightedness. BAM7 1992;305:813-7. 9 Marshall J, 'I'rokel SL, Rothery S, Krueger RR. Long term healing of the central cornea after photorefractise keratectomy using an Excimer laser. Ophthalmology 1988;95:1411-21. 10 Niemz AMH, Klancnik EG, Billie JF. Plasma-mediated ablation of corneal tissue at 10)53 nm using a Nd:YLF oscillator/regenerative amplifier laser. Lasers Sur Med 1991;11:2-6.

From common sense to expertise: reflections on the prehistory of audit sampling.

Abstract: This essay argues that sampling emerges as a claimed “technique” in auditing in both the U.K. and U.S.A. much later than is commonly imagined. While practical auditing texts provide evidence that auditors were selective in testing prior to 1900, this is not explicitly articulated as sampling at least until the 1930s. Accordingly, statistically based sampling develops to rationalise practices that had been in place for some years and to invest auditing with a new scientific authority. The essay further suggests that the history of development in auditing technique may be decoupled from changes in audit objectives. Overall, the argument represents a preliminary stage in a wider programme for understanding auditing in its social and organisational context.

Sociological Perspectives on Modern Accountancy

Abstract: The profession contemporary accounting roles the work experiences of practitioners accountancy, legitimation and ideology financial accounting management accounting auditing management consultancy summary and conclusions.

Explaining Variability in External Audit Fees

Abstract: This study examines the effect of several factors on the level of external audit fees using a multiple regression model. Audit fee data were provided by 95 US publicly held companies for the years 1983 to 1985. Variables measuring client industry membership and auditor involvement in the security registration process were proxies for client regulatory aspects. These variables were significant and provide support for the hypothesis that scale economies and/or specialization effects accrue to audit firms in dealing with the regulatory complexities faced by clients. Variables measuring auditee size and complexity, auditee/auditor loss sharing risk, and audit firm size were also significant in explaining variability in external audit fees.

Vaccination Levels and Missed Opportunities for Measles Vaccination: A Record Audit in a Public Pediatric Clinic

Abstract: A record audit of 254 children attending a public clinic in Los Angeles was conducted to assess immunization levels prior to a measles outbreak in the community. Coverage with all vaccines appropriate for age decreased from 67% at 3 months to 25% at 19 months. Delay in initiating vaccination was associated with increasing risk for delayed measles-mumps-rubella vaccine beyond age 2 years (P less than .05). In one third of children, health care providers missed an opportunity to administer measles-mumps-rubella vaccine. Recall systems and elimination of missed opportunities may increase vaccination levels in clinic populations. Record audits should be considered for use in guiding the management of immunization programs.

Local audit of surgical pathology. 18 month's experience of peer review-based quality assessment in an English teaching hospital.

Abstract: In order to assess the performance of a surgical pathology laboratory in a university hospital, we have established a comprehensive system of quality audit based on peer review. Each month, 2% of cases received are selected at random and assessed retrospectively by two senior pathologists. The system, which uses semi-quantitative scoring, examines diagnostic accuracy, identifies delay at any stage in the production of reports, evaluates the overall quality of the slides, the presentation of the final report, and the accuracy of the SNOMED coding. Each of these parameters is graded as "satisfactory," "borderline," or "unsatisfactory." In 20 of 518 cases (3.9%) analyzed in 18 months, the microscopic report was unsatisfactory; in six of these cases, the error could have affected patient management. Remediable faults were detected in the macroscopic description of specimens and in the speed and accuracy of report typing by the secretarial staff. In 13 of 18 months, greater than 10% of reports were delayed because of the time taken in microscopic reporting by pathologists. Some (but not all) of this delay was attributable to the "checking out" of pathologists in training. We conclude that this audit system has uncovered substantial deficiencies in our departmental performance, some of which could affect the clinical course of patients. These surprising results suggest that a system of peer review should be adopted more widely.

The Demand for Tax Return Preparation Services

Abstract: In this paper we focus on taxpayer choices of return preparation services. Using aggregate nested logit techniques, we find that the demand for third party preparation responds to many factors: age, education, employment status, federal auditing, and tax return characteristics. Perhaps most important among these is federal auditing. Higher federal audit rates increase the demand for tax practitioner services, but do not affect the demand for other modes of third party assistance. More generally, as the tax burden increases, or as uncertainty about true tax liability increases, the demand for all modes of third party assistance increases.

Discrimination in urban housing markets: Lessons from fair housing audits

Abstract: This paper examines the use of fair housing audits to study housing market discrimination and summarizes the key findings of the Department of Housing and Urban Development's two national fair housing studies—the Housing Discrimination Study and the Housing Market Practices Survey. Fair housing audits provide a uniquely effective tool for analyzing discrimination, for monitoring compliance with fair housing law, and for assembling evidence of discrimination in individual circumstances. Because of the findings from fair housing audits, there is widespread recognition that housing discrimination remains a serious problem. In order to combat discrimination more effectively in the 1990s, the audit methodology should be further refined and extended to all stages in the housing market transaction.

Audit: the third clinical science?

Abstract: In summary, we believe that if clinical audit is accepted and prosecuted as the third clinical science, it has the potential to deliver substantial benefits to patients and health professionals.

Evaluating the efficiency of nonprofit organizations: an application of data envelopment analysis to the public health service

Abstract: In this paper we have tried to evaluate the usefulness of the DEA model as a management tool when applied to the measurement of the efficiency of health centres. We have chosen the DEA model because it does not need prior specifications. This could be very useful when we lack data on costs. The overall evaluation of a number of health centres provides information on the distinctive features and comparative advantages of the most efficient ones. The information gathered could also be of great use in the selection of those centres in which operational audits should be carried out.

Schematic evaluation of internal accounting control systems

Abstract: The design and evaluation of internal accounting control system has always been a major task to auditors and managers. This study intends to develop a theoretical foundation for building a knowledge-based system, which can accept a model of an internal accounting control system as input and produce the identification of fraud potentials as output. It takes a schema-based reasoning approach in addressing the theoretical issues of domain knowledge, representation scheme, and inference engine. The approach integrates the schema theory of knowledge representation from the cognitive psychology literature and pattern recognition from the artificial intelligence field. The specific issues of interest include: (1) designing the representation formalism for modeling internal accounting control systems, (2) extracting audit rules and audit patterns based on auditing literature, and (3) developing a prototype system to validate the proposed approach. The formalism of Petri Nets is adopted to represent the two most significant elements of internal accounting control systems: plan of organization and accounting procedures. Past and hypothetical fraudulent cases are surveyed to derive control patterns, audit patterns and audit rules, which form the knowledge base for automatic evaluation. To validate the proposed approach, a prototype system is developed for the evaluation of the purchase and payment cycle. The prototype system uses the CASE/EDI shell as the developing tool and provides users a graphical editing interface to model an internal accounting control system. This study has both theoretical and practical contributions. Theoretically, this study proposes and validates an approach for developing a knowledge-based system for automated identification of fraud potential. An internal control theory consisting of significant control weaknesses and their fraud ramifications can be acquired from employing such an approach. Practically, a knowledge-based system developed by this approach can serve as a useful aid for auditors and managers in identifying fraud potentials.