Showing papers on "Audit plan published in 1990"

Experience and the Ability to Explain Audit Findings

Abstract: This study investigates how experience-related differences in the content and structure of auditors' knowledge of financial statement errors can contribute to the effectiveness and efficiency of their audit decisions. Different audit decision tasks are performed by auditors with differing levels of training and experience. Such differential assignment is specifically mandated in the first standard of fieldwork (AU Section 210), and observations of practice (e.g., Haskins [1987]) indicate some consensus in assignment patterns. The appropriateness of these differential assignments has economic consequences because of the higher salaries paid to more experienced auditors. The existence of differential costs and presumed performance differences increases the importance of appropriately linking training, experience, and the promotion selection process. Nevertheless, researchers have yet to document both reliable experience-related performance differences and the ability' and knowledge differences2

The Effects of Time Pressure and Audit Program Structure on Audit Performance

Abstract: This paper addresses three questions. First, in auditing tests of details, do effectiveness and efficiency increase as time pressure is imposed? Second, does adding structure increase effectiveness, efficiency, and consistency? Third, are the effects of structure on audit effectiveness and efficiency constant across increasing time pressure? While psychology research relates to the independent performance effects of time pressure and program structure, both pressure and structure are imposed, for legal and economic reasons, in the audit environment (Cushing and Loebbecke [1986]). Therefore, this research attempts to determine whether and how the joint imposition of program structure and time constraints affects auditors' performance. One hundred seventy-nine staff auditors from a national public accounting firm participated in an experiment that involved implementing a partial year-end audit program testing details of inventory, a task which is an analogue of those normally performed by auditors under time pressure. Four levels of time pressure and two types of audit programs (structured and unstructured) were manipulated between subjects. Re-

Determinants of Fee Cutting on Initial Audit Engagements

Abstract: This study extends Simon and Francis' [1988] estimates of average cross-sectional fee cutting on initial audit engagements by describing the distribution of percentage fee changes reported by 389 client firms which switched auditors from 1983 through 1987.1 In addition, this study attempts to explain cross-sectional variance in fee cutting for a subset of 163 client firms for which required data are available. Prior research suggests that cross-sectional variance in fee cutting may exist if (1) auditor "low balling" varies with the financial health of clients; (2) new auditors differ from old auditors on fee-relevant dimensions such as auditor class, industry expertise, and technological efficiency; and (3) the number of auditors bidding differs across engagements. Our results support the importance of these factors in determining percentage fee cuts, with the exception of the financial health of clients. Section 2 discusses background literature and identifies factors potentially associated with fee cuts. Section 3 describes the sample and variables. Statistical tests are presented in section 4, and section 5 summarizes the results.

Manufacturing Audit in the Process of Strategy Formulation

Abstract: The need to develop manufacturing strategies which are consistent with and supportive of overall business strategies is now widely accepted. A manufacturing audit approach which has been found useful in the process of manufacturing strategy formulation is described. Within manufacturing strategy, the need for a manufacturing audit is identified and the current approaches to audit are reviewed. These existing approaches do not provide an adequate audit process for use in strategy formulation. A structured audit approach based on established frameworks is developed and preliminary results of its use are presented. The approach has been successfully used in several companies; however, there is need for further work in looking at the social aspects of the process.

The Meaning of Audit Reports

Abstract: This paper reports the results of a study of how the various stylised forms of audit report used in the UK are interpreted by both accountants and professional users of audited financial statements. The results indicate that both accountants and users distinguish between the various audit reports, although users found less difference than accountants. The greatest divergences of interpretation concerned the qualification relating to lack of internal control (small companies qualification) and the going concern qualification.

Leadership and Corporate Audit Committee Effectiveness

Abstract: Audit committees are standing committees of corporate boards of directors with responsibility for overseeing the company's annual audit and coordinating the efforts of external auditors, senior man...

Determinants of auditor change in the public sector

Abstract: This study investigates determinants of auditor change in the public sector using data from public school districts in Texas. The results indicate that audit fees, reports of material internal control weaknesses, and reports of noncompliance with laws and regulations are significantly related to auditor change in the public sector. The significant relation between reductions in audit fees and auditor change is of particular interest given the conflicting findings of prior research regarding the impact of auditor change on audit fees.' Section 2 summarizes prior research regarding auditor change and the structure of audit fees. Section 3 develops the public-sector auditor change model. Section 4 describes the sample, data collection, and research methodology. Section 5 presents an analysis of the results, and section 6 discusses our conclusions.

A Multiperiod Audit Staff Planning Model Using Multiple Objectives: Development and Evaluation*

Abstract: The audit staff planning problem, a specific type of manpower planning problem, has been modeled using goal programming and, more recently, multiple objective linear programming. Prior studies developed single-period models and did not go beyond the model building stage. This study develops a multiperiod audit staff planning model and evaluates the model using a test application involving actual decision makers (partners in public accounting firms). The multiperiod model includes seven objectives to be optimized: profit (to be maximized), late completion of work, work declined, staff augmentation, staff reduction, underutilization of the work force, and shortfall in meeting professional development targets (all to be minimized). Over a four-quarter planning horizon with one “busy season,” the model is subject to constraints with respect to the projected audit work load, ability to substitute personnel and to perform interim audit work, available staff hours (including overtime limitations), supervisory requirements, and professional development targets. Results of the test application showed that the model was capable of producing a range of values for each objective. The participants were exposed to much of that range when making their decisions. The results also showed that all objectives were important and that participants were consistent in choosing their preferred level of each objective over several runs of the model. These results and the reactions of the participants demonstrate that the model is usable by actual decision makers and has potential for a number of specific applications.

Structuring the Assessment of Audit Evidence -- An Expert Systems Approach

Abstract: The article informs that in conducting an audit, the auditor is required to express an opinion concerning a client's financial statements. The construction of an audit plan or the evaluation of a completed or partially completed audit program usually requires the auditor to make a large number of interrelated judgments. However, since much of the previous research into the construction and validation of expert systems has been concerned with the construction and validation of knowledge-bases, the methodology is directly derived from expert system development methodology.

Public Sector Auditing: Practical Techniques for an Integrated Approach

Abstract: Part 1 The audit environment and current issues: the environment what is the public sector? who are the auditors? who is the client? current auditing issues. Part 2 The nature of audit: the audit function the audit assignment the essential audit process types of assignment assistance to management internal and external auditors. Part 3 Strategic and business planning: strategic planning strategic planning for an individual client lack of resources business planning components of a business plan. Part 4 Planning the assignment: the need for planning the audit objectives materiality and risk preparations for planning the detailed plan time needed to plan. Part 5 Controlling and recording the assignment: credence controlling and recording in general controlling and recording in action. Part 6 Gathering audit evidence - the systems based approach: audit evidence internal controls the systems based approach. Part 7 Exploiting financial relationships: directional testing practical application of directional testing other financial relationships physical relationships. Part 8 Audit selection and sampling: selection and sampling methods statistical sampling conditions the population characteristic monetary unit sampling. Part 9 Fraud and corruption: what are fraud and corruption? the size of the problem the auditor's role guarding against fraud and corruption conducting investigations. Part 10 Value-for-money audit: what is "value-for-money"? background the auditor's role by-product VFM work arrangements review carrying out an arrangements review detailed VFM performance review carrying out a performance review project sources of comparative figures follow-up work after VFM assignments other roles of the auditor. Part 11 An overview of computer audit: the role of computer auditors systems development audit applications audit applications audit common databases use of computers in general audit work computer assisted audit techniques. Part 12 Forming final opinions and reporting: Auditing Standards and Guidelines opinion forming more complex opinions regularity final opinions reporting.

Expert and novice problem solving behaviour in audit planning: An experimental study

Abstract: This study compares the decision-making processes of 52 expert and novice auditors in an audit planning task A process tracing method is used to monitor auditors' information search behavior Three dimensions of information search behavior are examined using a new method of analysis: information search strategy, information acquisition behavior and search duration In general, experts and novices exhibited different information search behavior Experts exhibited a more global search pattern guided by an overall planning strategy They also acquired significantly less information on internal control but attached more importance to these controls, indicating that they might acquire information more efficiently Finally, experts were more efficient than novices in terms of information search time and required significantly less time to perform the task

The need for integration of data audit into research and development operations

Abstract: (1990). The need for integration of data audit into research and development operations. Accountability in Research: Vol. 1, No. 2, pp. 119-128.

Employee Relations Audits

Abstract: This book, first published in 1990, is a practical manual which presents guidance on how to carry out and evaluate an employee relations audit. This title also provides audits for five key areas of employee relations, including communication and consultation, equality of opportunity and disciplinary matters. This book should be of interest to lecturers, post-graduate students and practitioners of management, personnel, employee relations and industrial relations.

The concise guide to auditing standards and guidelines

Abstract: Part 1 Introductory framework: explanatory foreword applicability to the public sector fraud and other illegal acts the auditors operational standard. Part 2 Audit and practice management: quality control professional independence engagement letters groups - reliance on other auditors planning, controlling and recording. Part 3 Systems audit: accounting systems internal control reliance on internal audit sales and purchases cycles: Part 4 Obtaining audit evidence: audit evidence audit sampling auditing in a computer environment analytical review reliance on other specialists bank reports for audit purposes attendance at stocktaking reports to management. Part 5 Audit completion: review of financial statments the auditor's considerations in respect of going concern amounts derived from preceding financial statements fianancial information with audited fianancial statements events after the balance sheet date reports to management. Part 6 Audit reports: audit reports. Part 7 Specialized areas charities: trade unions and employers' associations housing associations the impact of regulations on public sector audist prospectuses and the reporting accountant.

A study of internal auditor perceptions of selected audit activities performed during the design phase of systems development

Abstract: Little evidence exists concerning the criteria which Internal auditors consider when selecting activities to perform during systems design. Likewise, knowledge concerning the perceived role(s) of the internal auditor in systems design is limited. This dissertation examined the perceptions of internal auditors who have assisted in the development of a system and have, therefore, participated in the choosing of activities to perform during systems development. Nine systems design audit activities were selected from the literature to represent the different levels of involvement recommended in the literature. Internal auditors' judgments of the similarity of the nine audit activities were collected in two questionnaires, representing two areas of internal auditor Involvement: 1. The Controllability Questionnaire assumed that activities are chosen to provide assurance that adequate EDP application controls are designed into a system. 2. The Auditability Questionnaire assumed that activities are chosen to provide assurance that audit needs are designed into a system. Respondents were approximately equal between the above groups. Internal auditors judged the similarity of each pair of the audit activities and then rated the activities on attributes chosen by the researcher, a priori, as factors influencing these similarity judgements. The survey results were analyzed using multidimensional scaling (MDS) and canonical correlation techniques. Internal auditors' perceptions o£ systems design audit activities were modeled in two-dimensional MDS solutions for both groups of respondents. The attributes found to significantly affect the perceptions of systems design audit activities in the auditability MDS solution differed from those in the controllability MDS solution. Both models identified the activities which each respondent group perceived as the most and least appropriate.

Discussion of Assessing Audit Risk from Errors and Irregularities

Abstract: This paper uses the three-part model which identifies audit risk as IR CR . DR, where IR is the inherent risk that a material error or irregularity exists in an account, CR is the risk that the control system does not catch an error given that it exists, and DR is the risk that the auditor's procedures do not identify an error given that it exists and has been missed by the internal control system. The paper also takes as given that the auditor will use a hypothesis-testing framework for decision making. These assumptions are inspired by generally accepted auditing standards. As such, the paper takes an institutional setting as given and derives the behavior implied by the institution, rather than deriving an optimal institution. Analytically, the author's methods resemble those of Fellingham and Newman [1985] (hereafter FN) and Newman and Noel [1989] (hereafter NN).1 Similar to FN, the current paper shows how the equilibrium auditee strategies may be used to determine the analogue of the prior probability distribution used in decision-theoretic analyses of audit risk. Similar to NN, the author develops comparative statics on the equilibrium strategies with respect to auditor and auditee payoffs. A key feature distinguishing this paper from the other analyses is the addition of substantive testing to the audit setting; this allows the determination of DR in a strategic setting. Consequently, the three-part

Discussion of A Cognitive Computational Model of Risk Hypothesis Generation

Abstract: 1. Introdutction This paper reports on an ambitious project which attempts to model the auditor's risk hypothesis generation process that occurs during audit planning. Peters constructs a theory of this process, develops a computational model of the process using a computer program, and evaluates the model using a small group of practicing auditors. The apparent longrun objective of the project is to construct a decision aid or expert system to assist auditors during audit planning (Dhar, Lewis, and Peters [1988]). The conference discussion of the paper revolved mainly around two major issues: (1) the objective of the model and (2) the approach to evaluating the model. While I shall discuss each of these issues separately, they are interdependent. That is, the objective for developing the model directly affects how the resulting program is tested.

12 Information systems and audit in antenatal care

Abstract: Summary The obstetric record as initiated at the antenatal booking clinic essentially identifies the degree of risk engendered in that pregnancy so that consequent obstetric and paediatric management is tailored appropriately Whether carried by the patient or based in the hospital with a summary carried by the patient (shared-care card), this record should be exhaustive, the emphasis being on quality, not quantity, of information recorded To obviate human error in history-taking, patient management or record transcription, we believe on-line computerization of patient records with spin-off paperwork to be the only patient management system to fulfil the above criteria User-friendly software can be designed with highly branching programmes which provide clinical action suggestions in high-risk cases Various ‘error traps’ enhance the accuracy of information recorded Such systems can be operated by medical and midwifery staff with minimal keyboard skills and are well accepted by patients and staff Inexpensive and versatile microcomputer networks are excellent for such systems The operational effects are discussed Audit means different things to different people and one's view on the subject depends on which definition is selected Obstetricians are quick to take credit for instituting audit in the form of local and national data collection exercises, such as statistics on perinatal mortality, birthweight, etc While these exercises certainly constitute observational studies, they cannot be used to make conclusions about the quality of care There is no sound inference that can be made from a review of information contained in amalgamated databases of hospital statistics Audit, as properly defined, hinges on inference: the inference that the quality of care was or was not of a high standard Descriptive statistics, therefore, can be used to generate hypotheses but should not be used as a form of audit, at least not in obstetrics Auditing the quality of care involves a study of process It therefore depends on the assumption that we know which practices maximize beneficial outcomes This exercise is therefore only relevant when we have good evidence linking the process of care with these outcomes In some cases the accepted standard against which the process of care can be compared is very obvious In other cases, however, the accepted standard should itself be audited to ensure that it is based on sound evidence

Reliance on Internal Audit Departments

Abstract: Statement on Auditing Standards No. 9 (SAS 9) discusses the role of a client′s internal audit department (IAD) in the independent auditor′s examination. Despite the benefits of reliance on the client′s IAD to both the auditor and client, evidence indicates that SAS 9 has not been effectively implemented in practice. This article illustrates the use of the Analytic Hierarchy Process to develop a judgement aid for determining the overall reliance to be placed on a client′s IAD. The judgement aid illustrated may represent an initial step towards effectively implementing auditing standards requiring a great deal of subjective judgement in practice.

Practical principles of medical audit.

Abstract: The practical principles have been highlighted to help doctors avoid pitfalls in audit, especially when starting to carry out formal systematic audit. As these principles are mastered, audit activity can be expanded as desired with a firm and appropriate basis established for the activity.