Showing papers on "Audit published in 1998"

The AUDIT Alcohol consumption questions (AUDIT-C) : An effective brief screening test for problem drinking

Abstract: cording to the Diagnostic and Statistical Manual of Mental Disorders, Revised Third Edition, criteria; and (3) either. Results: Of 393 eligible patients, 243 (62%) completed AUDIT-C and interviews. For detecting heavy drinking, AUDIT-C had a higher AUROC than the full AUDIT (0.891 vs 0.881; P = .03). Although the full AUDIT performed better than AUDIT-C for detecting active alcohol abuse or dependence (0.811 vs 0.786; P<.001), the 2 questionnaires performed similarly for detecting heavy drinking and/or active abuse or dependence (0.880 vs 0.881).

The Effect of Audit Quality on Earnings Management

Abstract: This study examines the relation between audit quality and earnings management. Consistent with prior research, we treat audit quality as a dichotomous variable and assume that Big Six auditors are of higher quality than non-Big Six auditors. Earnings management is captured by discretionary accruals that are estimated using a cross-sectional version of the Jones 1991 model. Prior literature suggests that auditors are more likely to object to management's accounting choices that increase earnings (as opposed to decrease earnings) and that auditors are more likely to be sued when they are associated with financial statements that overstate earnings (as compared to understate earnings). Therefore, we hypothesize that clients of non-Big Six auditors report discretionary accruals that increase income relatively more than the discretionary accruals reported by clients of Big Six auditors. This hypothesis is supported by evidence from a sample of 10,379 Big Six and 2,179 non-Big Six firm years. Specifically, clients of non-Big Six auditors report discretionary accruals that are, on average, 1.5-2.1 percent of total assets higher than the discretionary accruals reported by clients of Big Six auditors. Also, consistent with earnings management, we find that the mean and median of the absolute value of discretionary accruals are greater for firms with non-Big Six auditors. This result also indicates that lower audit quality is associated with more “accounting flexibility”.

Integrated care pathways

Abstract: Integrated care pathways are structured multidisciplinary care plans which detail essential steps in the care of patients with a specific clinical problem. They have been proposed as a way of encouraging the translation of national guidelines into local protocols and their subsequent application to clinical practice. They are also a means of improving systematic collection and abstraction of clinical data for audit and of promoting change in practice. The degree to which they succeed in realising this potential for improving patient care is still uncertain, but enough evidence exists in their favour to justify more widespread evaluation of their impact. Here we describe integrated care pathways, show how to create and use them, and review the evidence of their effectiveness. Many initiatives have been introduced in the past two decades to improve clinical effectiveness and thereby patient care. Foremost among these have been clinical guidelines and clinical audit. Concern is regularly expressed, however, that the commitment and enthusiasm of the groups publishing their experience is a major determinant of their success. There are also related concerns about the opportunity costs of audit and guidelines projects. Guidelines development—literature review, critical appraisal, multidisciplinary consultation, and grading of recommendations by level of evidence—is labour intensive. Support is now available from several sources,1 2 but less attention and support is given to translating established guidelines into local management protocols and their subsequent implementation.3 even though the impact of clinical guidelines in improving clinical practice will largely be determined by progress in these areas. Audit projects often fail to realise their potential because the improved practice identified by the audit is not implemented or, if implemented, its effect is not evaluated. Integrated care pathways—also known as coordinated care pathways, care maps, or anticipated recovery pathways—are task orientated care plans which detail essential steps …

Alcohol screening questionnaires in women: a critical review.

Abstract: Objective.—To describe the performance of alcohol screening questionnaires in female patients.Data Sources.—We searched MEDLINE from 1966 to July 1997 for alcoholism or alcohol-drinking and for CAGE, AUDIT, BMAST, TWEAK, T-ACE, MAST, SMAST, or SAAST; Citations Indexes for newer screening questionnaires and those without acronyms; and MEDLINE from 1996 to July 1997 for alcoholism or alcohol-drinking and screening.Study Selection and Data Extraction.—Reviewed studies presented data for women comparing brief alcohol screening questionnaires with valid criterion standards for heavy drinking (≥2 drinks per day) or alcohol abuse or dependence in US general clinical populations. Sensitivities, specificities, and areas under receiver operating characteristic curves (AUROCs) were extracted.Data Synthesis.—Thirteen articles (9 studies) were reviewed. The CAGE questionnaire had AUROCs of 0.84 to 0.92 for alcohol abuse and dependence in predominantly black populations of women, but using the traditional cut point of 2 or more resulted in low sensitivities (38%-50%) in predominantly white female populations. The TWEAK and Alcohol Use Disorders Identification Test (AUDIT) questionnaires had high AUROCs (0.87-0.93) for past-year alcohol abuse or dependence in black or white women, but had sensitivities less than 80% at traditional cut points. For detecting heavy drinking, the AUDIT questionnaire had AUROCs of at least 0.87 in female primary care patients. The TWEAK and T-ACE questionnaires had higher AUROCs (0.84-0.87) than the CAGE questionnaire (0.76-0.78) for detecting heavy drinking before pregnancy was recognized in black obstetric patients.Conclusions.—The CAGE questionnaire was relatively insensitive in predominantly white female populations. The TWEAK and AUDIT questionnaires have performed adequately in black or white women, using lower cut points than usual.

Why Firms Comply Voluntarily with IAS: an Empirical Analysis with Swiss Data

Abstract: In Switzerland, the use of International Accounting Standards (IAS) is allowed as an alternative to national rules for the preparation of consolidated financial statements. This opportunity has been widely used, since about 40% of Swiss listed companies do comply with IAS. Because of permissiveness and low disclosure requirements of the Swiss accounting regulation, compliance with IAS implies additional disclosure and renouncement of a considerable discretion in accounting practices. The aim of this paper is to determine the characteristics of firms which voluntarily choose to incur theses additional costs. On the basis of prior literature on voluntary disclosure and auditing, we formulate a set of hypotheses which are tested on a sample of 133 Swiss listed companies. The results suggest that political costs and pressures from outside markets play a major role in the decision to apply IAS but do not validate the hypothesis that voluntary compliance with stringent accounting standards is used to solve monitoring problems resulting from agency relationships between managers, stockholders and creditors.

A Study of The Link Between a Corporation's Financial Performance and Its Commitment to Ethics

Abstract: A number of studies have tested the relationship between a corporation's social and ethical performance and its financial performance. In contrast, this is the first study to demonstrate a link between overall financial performance and an emphasis on ethics as an aspect of corporate governance. It identifies the 26.8 percent of the 500 largest U.S. public corporations that, in their annual report to shareholders, commit to ethical behavior toward their stakeholders or emphasize compliance with their code of conduct. The financial performance of these corporations ranks higher than that of those who do not at a significance level of p = < 0.005, using the 1997 Business Week ranking which averages eight publicly-reported measures of historical financial performance. These findings should motivate more corporations to utilize the principles of Social and Ethical Accounting, Auditing and Reporting (SEAAR).

Mining audit data to build intrusion detection models

Abstract: In this paper we discuss a data mining framework for constructing intrusion detection models. The key ideas are to mine system audit data for consistent and useful patterns of program and user behavior, and use the set of relevant system features presented in the patterns to compute (inductively learned) classifiers that can recognize anomalies and known intrusions. Our past experiments showed that classifiers can be used to detect intrusions, provided that sufficient audit data is available for training and the right set of system features are selected. We propose to use the association rules and frequent episodes computed from audit data as the basis for guiding the audit data gathering and feature selection processes. We modify these two basic algorithms to use axis attribute(s) as a form of item constraints to compute only the relevant ("useful") patterns, and an iterative level-wise approximate mining procedure to uncover the low frequency (but important) patterns. We report our experiments in using these algorithms on real-world audit data.

On the Frequency, Quality, and Informational Role of Mandatory Financial Reports

Abstract: In this paper we study the relation between the frequency of mandatory financial disclosures, the amount of information voluntarily disclosed by privately informed managers, and the resulting informational efficiency of stock prices. Our analysis emphasizes the "confirmatory role" of mandatory financial reports and uses frequency to highlight the difference between this view of reporting and the prevailing view of mandatory disclosures as "primary" sources of information. We model the mandatory financial disclosures as verifiable but noisy and, possibly, late signals of management's private value-relevant information. Accordingly, financial statements may be of little use as a timely, primary source of information for the purpose of valuing the firm. However, since the audited statements can be used to evaluate the truthfulness of management's past voluntary disclosures (i.e., to "confirm" that they are indeed truthfully, they may be useful in creating an environment in which management

Evidence on Discrimination in Consumer Markets

Abstract: Economists have contributed to the measurement of racial and ethnic discrimination in consumption and to the identification of its causes, especially in housing markets and car sales. To test the hypothesis that discrimination exists, economists have turned to regression analysis and to audits, a matched-pair survey technique. Economists also have developed audit-based measures of the incidence and severity of discrimination. Audit studies find continuing high levels of discrimination against minorities in the marketing of available housing and in car prices. Audit studies also find that discrimination can be caused both by economic agents' prejudice and by their search for profits.

The AUDIT alcohol consumption questions : Reliability, validity, and responsiveness to change in older male primary care patients

Abstract: Objectives: To determine the reliability, validity, and responsiveness to change of AUDIT (Alcohol Use Disorders Identification Test) questions 1 to 3 about alcohol consumption in a primary care setting. Patients: Randomly selected, male general medical patients (n= 441) from three VA Medical Centers, who had 5 or more drinks containing alcohol in the past year and were willing to be interviewed about their health habits. Measures: Three self-administered AUDIT consumption questions were compared with a telephone-administered version of the trilevel World Health Organization interview about alcohol consumption. Results: Of 393 eligible patients, 264 (67%) completed interviews. Test-retest reliability—Correlations between baseline and repeat measures 3 months later for four dimensions of consumption according to the AUDIT, ranged from 0.65 to 0.85, among patients who indicated they had not changed their drinking (Kendall's Tau-b). Criterion validity—Correlations between AUDIT and interview for four dimensions of alcohol consumption ranged from 0.47 to 0.66 (Kendall's Tau-b). Discriminative validity—The AUDIT questions were specific (90 to 93%), but only moderately sensitive (54 to 79%), for corresponding criteria for heavy drinking. Responsiveness to change—The AUDIT consumption questions had a Guyatt responsiveness statistic of 1.04 for detecting a change of 7 drinks/week, suggesting excellent responsiveness to change. Conclusions: AUDIT questions 1 to 3 demonstrate moderate to good validity, but excellent reliability and responsiveness to change. Although they often underestimate heavy alcohol consumption according to interview, they performed adequately to be used as a proxy measure of consumption in a clinical trial of heavy drinkers in this population.

An analysis of experience effects on audit committee members' oversight judgments

Abstract: This paper examines whether experience affects audit committee members' oversight judgments. A sample of 87 audit committee members completed an internal control oversight task to evaluate whether experience facilitated comparability with a criterion group of external auditors. The results indicate that both general domain and task specific experience made a significant difference in audit committee members' internal control assessments. Of primary importance, members with experience made internal control judgments more like auditors than did members without experience. Ancillary results reveal that experienced members made more consistent judgments, had higher self-insight, higher consensus, and higher technical content levels for additional items offered than did the members without experience. These findings provide some initial empirical support for suggestions that prior work experience can make a difference in audit committee member oversight and highlight the need for additional research across the diverse range of audit committee tasks.

Factors Associated with the Incidence of Reduced Audit Quality Behaviors

Abstract: The purpose of this study is to develop and test a more comprehensive model of factors that explain reduced audit quality (RAQ) behaviors. Specifically, this study investigates the relationship between the incidence of RAQ behaviors and auditors' personality characteristics, auditors' professional characteristics, auditing firms' quality control and review procedures, auditing firm structure, and auditors' perceptions of time budget pressure. The results suggest that auditors' perceived strength of their firm's quality control and review procedures and auditors' perceived strength of their firm's penalties for committing RAQ acts are inversely related to incidences of RAQ behaviors. Also, auditors' need for approval and need for achievement are inversely related to RAQ behaviors. No other significant relationships between RAQ behaviors and other potential explanatory factors were found. These findings suggest that firms should evaluate their control, review, and disciplinary procedures over audit program execution and improve their auditors' understanding of procedures and penalties.

Balancing Performance, Ethics, and Accountability

Abstract: Practical mechanisms for aligning performance, ethics, and accountability are urgently needed. The context for this includes the organisational, technological, and regulatory transformations underlying current patterns of globalisation. These factors, combined with the associated emergence of civil action concerned with corporate accountability and deeper value-shifts, make such realignments a practical possibility. Social and ethical accounting, auditing, and reporting provides one of the few practical mechanisms for companies to integrate new patterns of civil accountability and governance with a business success model focused on deepening stakeholder relationships around core non-financial as well as financial values and interests. Experience over the past decade has enabled viable and effective methods to evolve and to lay the foundation of "standards-in-practice" against which future accounting, auditing, and reporting, will be benchmarked. Institutions are emerging to regularise this arena of actions, in the first instance through voluntary codes and process standards. A number of challenges exist in securing social and ethical accounting and auditing as a legitimate and effective framework within which organisations can achieve an appropriate balance of financial and non-financial interests, aims, actions, and outcomes. The emerging experience, expertise, methodologies, and institutions provide the basis for these challenges to be effectively met.

Ethics Management: Auditing and Developing the Ethical Content of Organizations

Abstract: Introduction: 1. Confidence as Key. 2. The ABC of Business Ethics. 3. Three Research Questions. 4. Structure of the Study. Part I: Defining the Ethical Content. 1. The Corporate Mission. 2. Ethics Management. 3. The Ethical Company. Part II: Auditing the Ethical Content. 4. The Ethical Qualities Model. 5. The Ethics Audit in Practice. Part III: Developing the Ethical Content. 6. The Ethics Process. 7. The Ethics Mix. 8. Summary and Conclusions. References. Appendices. 1: Agenda for Follow-Up Research. 2: The Ethics Thermometer. 3: Ethics Profiles of Four Organizations. Index.

Alcohol Use Disorders Identification Test (AUDIT)

Abstract: Adults □ Adolescents Groups for which this instrument might be especially helpful? Populations appropriate for a screening program using the AUDIT include primary care, emergency room, surgery, and psychiatric patients; DWI offenders, criminals in court, jail, and prison; enlisted men in the Armed Forces; workers encountered in employee assistance programs and industrial settings; and college students.

The Relation between Going-Concern Opinions and the Auditor's Loss Function

Abstract: In this study I explore whether auditor incentives influence the decision to issue a going-concern disclosure to a financially distressed client. Auditor incentives have been suggested as a "missing link" between the literatures on financial distress prediction and going-concern assessments. While previous research has focused primarily on client financial ratios, I model the auditor's going-concern as a function not only of the client's financial condition and prospects, but also of factors associated with the auditor's loss function, including prospective audit fees, the length of the auditor-client relationship, recent auditor litigation, client losses, and the existence of previously disclosed evidence of goingconcern difficulties.

The Role of Economic Trade-offs in the Audit Opinion Decision: An Empirical Analysis

Abstract: We extend existing audit opinion models by incorporating economic trade-offs that arise in the auditor's qualification (modification) decision. Prior qualification studies (e.g., Dopuch, Holthausen, and Leftwich [1987]; Bell and Tabor [1991]) do not investigate whether the opinion issued is influenced by particular trade-offs facing an auditor. On the one hand, the audit firm faces the risk of losing the client if it issues a qualification, and on the other, failing to qualify exposes the auditor to lawsuits and reputation loss. We model the auditor's qualification decision as a two-stage model. We estimate a bivariate model that breaks down the probability of qualifying into two components: (1) the probability that the client deserves a qualified opinion based on the audit and (2) the probability that the auditor reports a qualified opinion, given it considers that the client deserves such an opinion. We hypothesize that the second stage decision to qualify or not is influenced by factors such as the auditor's risk of litigation, the type (Big Six or not) of auditor, the extent of outsider ownership, the share of public debt in total debt, the relative importance of the client in the auditor's portfolio, and the future growth rate of the client. Our results indicate that the auditor's litigation risk, the extent of outsider ownership, the relative importance of the client in the auditor's portfolio, and future growth are important factors in the audit opinion decision. Estimated mean and median probabilities indicate significantly higher values of reporting probabilities for qualified as compared to unqualified firms, suggesting that the second stage is an important component of the qualification decision.

Efficiency audit: An assembly of rationalities and programmes

Abstract: This paper focuses on the insertion of accounting and auditing knowledge into wider areas of practice, and examines the processes of auditing change through studying the development of “efficiency auditing” using events in one jurisdiction, the Province of Alberta, Canada, as an exemplar. These developments are interpreted through use of Miller and Rose's (1990; Rose & Miller, 1992) theoretical concerns with governmentality, and especially the links between generally stated political rationalities and more specific programmes for action. In studying the association of ideas of efficiency with auditing, and the developing belief that efficiency could be investigated or procured through audit scrutiny, it is argued that these events can be understood in terms of an intersection between wider discourse (concerning, for example, best management practice, appropriate auditing roles, etc.) and local circumstance. The specific interpretations that result are understood as providing one set of conditions by which auditing (and accounting are linked to the social (Burchell et al., 1985). Further research (Radcliffe, 1995) attends to the logistics of how one might audit for efficiency, using fieldwork to trace the technologies which provide practitioners with particular mechanisms for action (Miller & Rose, 1990). © 1998 Elsevier Science Ltd. All rights reserved.

Organizational and Economic Explanations of Audit Committee Oversight

Abstract: Corporate governance plays an important role in the production of corporate results. The setting of corporate objectives, and the concomitant measuring and reporting of results, depend in fundamental ways upon the caliber of corporate oversight. Although considerable attention has been focused on the forms that are necessary for such direction, less is known about their effectiveness. The establishment of audit committees in the United States was recommended by the Securities and Exchange Commission (SEC) as early as 1940. However, the place of audit committees in the corporate governance structure has increased dramatically only over the past twenty-five years (Birkett, 1986; Braiotta, 1994). Studies show that the percentage of firms with audit committees has gone from nearly ten percent in 1958 to nearly forty percent in 1972, to over ninety percent in 1982 (as summarized in Harrison, 1987, Figure 1, p. 110). Similar findings were shown in two early studies of audit committees by Mautz and Neumann (1970, 1977). In their first study (1970), they found one-third of their sample to have adopted audit committees. In their second study (1977), eighty-seven percent of responding chief executive officers indicated their corporations had audit committees. Thus, an increasingly rapid adoption of audit committees took place from the late 1950s through the early 1980s. The genesis of audit committees suggests that their inclusion in the structure of corporate governance should be understood as part of the reaction to corporate abuses occurring over the last three decades. Instances of fraudulent financial reporting, defalcations, accounting method choice abuses, and opinion shopping served as evidence that management was not effectively accountable to the full board of directors. The audit committee was an attempt to specifically designate responsibility for accounting-related matters, to provide a reporting structure for insiders that would circumvent managerial retribution, and to supervise relations with the external auditor. In fact, the SEC has forced a number of corporations to adopt audit committees as a remedial measure (see Birkett, 1986). Although many large companies had voluntarily formed audit committees by the mid-1970s, pivotal points occurred when audit committees were mandated for New York Stock Exchange firms in 1978, and for those listed on the National Market System by the National Association of Security Dealers in 1989. This article contrasts two competing theoretical orientations. Agency theory, now considered mainstream thought on control, proposes a primarily economic explanation of the existence and form of control mechanisms. Institutional theory offers a sociological approach that questions the sufficiency of technical rationality for understanding corporate governance. A review of previous empirical studies in the audit committee literature suggests that traditional agency cost measures do not provide an adequate basis to explain the formation of audit committees. Further, the studies on audit committee formation require a presumption that audit committees actually will reduce information asymmetry between principals and agents (i.e., audit committees are effective in carrying out their responsibilities). Other empirical studies link audit committee effectiveness to factors internal to the corporate governance and organization structure, but do not determine the extent to which these internal factors are influenced by external monitoring demands. In the next two sections, agency theory and institutional theory approaches are extended to analyze the contribution of each theory to understanding audit committee activities and effectiveness. Then, the hypotheses, design and results of a study are described. The empirical evidence suggests that neither theory alone is as useful as their synthesis. The last section discusses the results and their implications for the management of corporations. …

Method and system for reducing the volume of audit data and normalizing the audit data received from heterogeneous sources

Abstract: A method of reducing the volume of native audit data from further analysis by a misuse and intrusion detection engine is disclosed. Typically, more than ninety percent of the volume of audit information received from heterogeneous operating systems does not need to be analyzed by a misuse and intrusion detection engine because this audit information can be filtered out as not posing a security threat. Advantageously, by reducing (eliminating) the volume of audit information, a misuse and intrusion engine can more quickly determine whether a security threat exists because the volume of data that the engine must consider is drastically reduced. Also, advantageously, the audit information that is forwarded to the engine is normalized to a standard format, thereby reducing the computational requirements of the engine. The method of reducing the volume of native audit data includes comparing each of the native audits against at least one template and against at least one native audit. By matching the native audits against templates of native audits that do not pose security threats, the native audits that do not pose security threats can be reduced out from further consideration. The native audits that are determined to pose potential security threats are transformed into a standardized format for further analysis by a misuse and intrusion detection engine.

Sweeping it under the carpet: The role of accountancy firms in moneylaundering

Abstract: White-collar crime is increasing in the Western world It has been estimated that some £500 billion of hot money is laundered through the world's financial markets each year Such huge amounts of money cannot be successfully laundered without the involvement of accountants (and other professionals) who use their expertise to create the complex webs of transactions whose purpose it is to conceal and obscure illegal activity Despite this involvement, accountants and auditors are expected to play a leading role in the reporting of fraud and moneylaundering Through a detailed consideration of a case in which a small accountancy firm was judged by the UK High Court to be involved in moneylaundering, the paper explores the relationship between regulators and errant accountants The reluctance or inability of the regulators to pursue other accountants and larger accounting firms involved in this case suggests that the current regulatory apparatus operates to shield the activities of accountancy firms from critical scrutiny

Reinventing auditing, redefining consulting and independence

Abstract: This paper deals with recent developments in auditing, taking KPMG's ‘business measurement process’ as its example. From this example it is discussed how and why auditing is currently being ‘reinvented’. The ‘reinvention’ of auditing, it is argued, represents a fundamental break with the established epistemological dualism between auditing and management advisory services,1 that is central to most literature on auditor independence, including the European Commission's Green Paper. Consequently, it is not only auditing that is being reinvented, it is also consulting and independence, and the consequences of this rupture are finally discussed. The paper concludes that the auditor cannot be independent because auditing is no longer independent.

The efficacy of Dementia Care Mapping as an audit tool: Report of a 3-year British NHS evaluation

Abstract: Dementia Care Mapping (DCM, Kitwood & Bredin, 1994a) was incorporated into the Quality Assurance Strategy of an urban British Mental Health (NHS) Trust. Its role as an audit of the outcome of the care process in formal dementia care settings was evaluated. DCM was used in two day hospitals, an assessment ward, two respite care units and four continuing care units over three annual evaluation cycles. This equated to approximately 1,614 hours of mapping over the three cycles. The way in which DCM was used is described in detail. The results were generally very positive with improvements in the quality of care practice being demonstrated. Although anxious about the observational nature of DCM, staff viewed it as a positive means of improving quality of care. DCM is seen as being a highly appropriate audit tool to use in NHS formal dementia care settings. Information on the experience of managing a DCM project is shared.

Errors in Accounting Estimates and their Relation to Audit Firm Type

Abstract: We assess accuracy and bias in the accounting estimate of outstanding claim losses reported in the audited statutory financial statements of 197 property-casualty insurers during 1979-1983. Our analysis shows that claim loss estimation errors exceed materiality in over 90% of our sample. For errors that exceed materiality, the average absolute error, determined with the benefit of hindsight, is over 17 times materiality and over 8% of assets. Regression models generally do not support differences in estimate accuracy or bias across audit firm type, and therefore suggest that estimation error characteristics are not a basis for differentiating among auditors.

The expectation gap in auditing

Abstract: There is concern that auditors and the public hold different beliefs about the auditors’ duties and responsibilities and the messages conveyed by audit reports. In recent years, some spectacular and well‐publicised corporate collapses and the subsequent implication of the reporting auditors have highlighted the audit expectation gap. Apparently, public misperceptions are a major cause of the legal liability crisis facing the accounting profession. Given the significance of the expectation gap, it is not surprising therefore that prior research on the expectations problem is substantial. The objective of this paper is to review the literature on the audit expectation gap along the following lines: definition of the expectation gap; nature and structure of the expectation gap; and ways to reduce the expectation gap. It is hoped that such an attempt can provide insights into the audit expectation gap.

Information Systems Control and Audit

Abstract: From the Publisher: This book provides a comprehensive up-to-date survey of the field of accounting information systems control and audit.Presents the most up-to-date technological advances in accounting information technology that have occurred within the last ten years. New material reflects the latest professional standards. The book covers essential subjects and topics, including conducting an information systems audit; frameworks for management and application controls; audit software; concurrent auditing techniques; and evaluating data integrity, system effectiveness, and system efficiency. An essential resource on information systems management for accounting professionals.

Audit market competition: auditor changes and the impact of tendering

Abstract: Increased competition within the external audit market and the recent phenomenon of audit tendering has renewed interest in the factors influencing auditor changes. In this paper, a questionnaire instrument is used to elicit perceptions of the factors which influence auditor–client realignments in this new environment and to indicate the relative influence of economic and behavioural factors. Positive, statistically significant associations were found between unsolicited approaches and the consideration of either a change in auditor or the conduct of a competitive tender. Fees are both the most frequently cited reason for considering auditor change and the most frequently cited factor influencing the selection of a new auditor. The chemistry of the relationship with senior audit firm personnel was ranked as more important than service issues in new auditor selection. Several significant associations between the reasons for change and both company size and type of change are identified. In particular, smaller companies, and companies changing from a non-Big Six firm, were more likely to change due to the need for a wider range of services and the influence of third parties. Findings indicated that 55% of auditor changes were effected by means of a tender, with the incumbent auditor having only an 18% chance of retaining the client. The various stages of the tender process appear to be dominated by the finance director, with audit committees having a restricted role. Tenders resulted in significant fee reductions in the year of change.