Showing papers on "Audit plan published in 2020"

The Ethical Implications of Using Artificial Intelligence in Auditing

Abstract: Accounting firms are reporting the use of Artificial Intelligence (AI) in their auditing and advisory functions, citing benefits such as time savings, faster data analysis, increased levels of accuracy, more in-depth insight into business processes, and enhanced client service. AI, an emerging technology that aims to mimic the cognitive skills and judgment of humans, promises competitive advantages to the adopter. As a result, all the Big 4 firms are reporting its use and their plans to continue with this innovation in areas such as audit planning risk assessments, tests of transactions, analytics, and the preparation of audit work-papers, among other uses. As the uses and benefits of AI continue to emerge within the auditing profession, there is a gradual awakening to the fact that unintended consequences may also arise. Thus, we heed to the call of numerous researchers to not only explore the benefits of AI but also investigate the ethical implications of the use of this emerging technology. By combining two futuristic ethical frameworks, we forecast the ethical implications of the use of AI in auditing, given its inherent features, nature, and intended functions. We provide a conceptual analysis of the practical ethical and social issues surrounding AI, using past studies as well as our inferences based on the reported use of the technology by auditing firms. Beyond the exploration of these issues, we also discuss the responsibility for the policy and governance of emerging technology.

Does audit partner workload compression affect audit quality

Abstract: The effect of workload compression on the behavior of individual auditors has received extensive attention from regulators and scholars. We study this effect by utilizing two unique institutional f...

Continuous Auditing and Risk-Based Audit Planning—An Empirical Analysis

Abstract: Due to rapidly changing risks in companies, a continuous alignment of internal audit activities with the relevant risks is required. Continuous auditing (CA) is one possible way to meet these requirements. Specifically, the internal audit function (IAF) could use CA as a methodology in order to add a continuous perspective to their risk assessment. This study examines factors associated with the use of CA information in the IAF's risk-based audit planning (RBAP). We use survey data from 264 chief audit executives to address our research question. We find several factors having a positive influence on the use of information from CA in RBAP. These factors include the importance of data analytics, the collaboration with the audit committee and external auditor, as well as the use of IAF's results for fraud prevention. Furthermore, our additional analysis presents various positive effects of CA on potential output measures of internal auditing. JEL Classifications: G30; G32; G34; M42.

Exploring Improvisation in Audit Work through Auditors’ Response to COVID-19

Abstract: This paper explores auditors’ responses to unexpected, systematic changes in circumstances. We use the COVID-19 outbreak, a “critical incident” that disrupted all year-end audits in China, to understand this underexplored research area. Based on 24 semi-structured interviews, we first describe how COVID-19 disrupts both formal and informal aspects of audit (i.e., those documented in audit plans according to auditing standards, and those not documented in audit plans). Applying an improvisational lens, we find that in response to disruptions, auditors had to improvise by designing and executing new actions concomitantly to maintain quality and ensure timely audits: auditors modified sequence of audit process, changed format of audit procedures, and produced new behavior. We show that auditors’ improvisation is based on their mobilization of organizational memory, and we discuss consequences of auditors’ improvisation. Our findings suggest that computer-mediated communications with enhanced channels (e.g., audio or visual channels) only partially mitigate the disruption of face-to-face interactions with clients and within teams, while generating additional efforts to establish mutual understanding of files, status, and actions to be taken. Our evidence and discussion of how auditors’ improvisation changes with local versus non-local clients also provide insights regarding the role and setup of local offices.

Determining the Quality of Audit Result with Risk-Based Audit Planning As a Moderating Variables in Regional Inspectorate of Klungkung

Abstract: The risk-based audit plan undertaken by APIP is carried out to ensure the audit of high-risk activities that can affect the achievement of organizational goals. In addition, risk-based audit planning will greatly assist APIP in allocating limited resources most effectively. This study aims to determine the test and analyze the effect of independence, objectivity, and competence on the quality of audit results at the Inspectorate of the Klungkung Regency. As well as testing the role of Risk-Based Audit Planning in moderating the influence of independence, objectivity, and competence with the quality of the results of audits in the Klungkung Regency Regional Inspectorate. Data collection using a questionnaire. The number of respondents was 41 people using total sampling. Data analysis techniques using SEM-PLS. The results showed that Independence had a significant effect on the quality of audit results at the Klungkung Regency Inspectorate. Competence affects the quality of audit results at the Klungkung Regency Inspectorate. Objectivity affects the quality of inspection results at the Klungkung Regency Inspectorate. Risk-based audit planning can moderate the influence of independence on the quality of inspection results at the Klungkung Regency Inspectorate, Risk-Based Audit Planning can moderate the influence of competence on the quality of inspection results at the Klungkung Regency Inspectorate. Risk-Based Monitoring Planning can moderate the effect of objectivity on the quality of inspection results at the Klungkung Regency Inspectorate.

How Blockchain Innovation could affect the Audit Profession: A Qualitative Study

Abstract: Blockchain is transforming not only the way of recording, processing and storing financial transactions and information, but also the way audit firms can practice their profession. The purpose of this article is to examine how this technology will affect the audit profession. Based on a qualitative study carried out on a sample of 17 auditors, this research shows that this technology could affect audit firms at six key levels. Blockchain will allow an auditor to (1) save time and improve the efficiency of their audit, (2) favor an audit covering the whole population instead of an audit based on sampling techniques, (3) focus the audit on testing controls rather than testing transactions, (4) set up a continuous audit process, (5) play a more strategic audit role and (6) develop new advisory services. The results underline the need for the establishment of a clear and coherent legislative system and new audit standards, allowing auditors to embed this technology and enhance audit practices. JEL Codes: M42

The formation of separate risk management committee and the effect on modified audit report

Abstract: The aim of the paper is to examine the formation of a separate risk management committee (RMC) and its effect on the modified audit report among the non-banking and financial companies listed in Bursa Malaysia. Data was collected from the annual reports of a sample of 300 companies from 2004 until 2009. Both descriptive and multivariate analyses were employed to address the research objectives. The results indicate that a separate RMC is negatively related with the acceptance of the modified audit report. Further, the RMC’s members with independent non-executive status and members with accounting and financial background will also probably reduce the acceptance of the modified audit report. However, losses recorded for previous financial years are likely to increase the issuance of modified audit report by the auditor. The period of auditor engagement with the client and client size will also affect the modified audit report. The findings provide empirical evidence on the development and importance of a separate RMC for the modified audit report.

Assessing the effectiveness of internal Sharīʿah audit structure and its practices in Islamic financial institutions: a case study of Islamic banks in Yemen

Abstract: Purpose – This study aims to explore and assess the key Shariʿah governance factors that may have an influence on the internal Shariʿah audit structure and its practices in Islamic financial Institutions in Yemen, particularly in the Islamic banking sector Design/methodology/approach – To do so, the study adopts a qualitative approach employing case study analysis, and both primary and secondary data are used to formulate the appropriate interview questions and achieve the objectives of the study Findings –The authors observed that the key factors that help in assessing the internal Shar�iʿah audit structure and its practices are Shar�iʿah auditor charter, audit plan and audit manual In addition, the authors observed that, in general, internal Shar�iʿah audit tends to be subjective in Yemeni banks because they depend on the internal Shar�iʿah auditor’s qualifications and experience more than formal guidelines and regulations This is because there are no detailed internal Shar�iʿah audit plans or detailed audit manual Moreover, the internal Shar�iʿah auditor charter is not comprehensive in explaining the duties required of the internal Shar�iʿah auditor, and it is mixed with the Shar�iʿah Supervisory Board (SSB) duties This means the internal Shar�iʿah auditor lacks the critical tools that enable him to achieve the desired audit manual objectives where the effectiveness of internal Shar�iʿah audit can be measured Practical implications – One of the important implications of this study is providing very important guidance about enhancing the areas where shortfalls are found within the Shar�iʿah governance process in the Yemeni banking system This enhancement process of the internal factors of Shar�iʿah governance can be achieved by increasing the awareness of the enhancing internal Shar�iʿah audit structure as it reflects ultimately on the internal Shar�iʿah auditor’s role and his practices Originality/value – Understanding the effectiveness of internal Shar�iʿah audit structure among internal auditors will improve the Shar�iʿah audit framework standards, enhance the Shar�iʿah knowledge among internal auditors and provide general guidelines to design audit programmes for Shar�iʿah governance auditing process

Pengaruh pengalaman dan kemampuan pemeriksa investigatif terhadap efektivitas pelaksanaan prosedur audit investigasi dengan skeptisme sebagai variabel moderasi

Abstract: In this study, the effectiveness of the implementation of audit procedures in the disclosure of fraud means that audit procedures must be passed and carried out properly, starting with the initial information review stage, audit planning, conducting audits in accordance with standards, using audit techniques, as well as reporting and following up to with proof in court, all of which are guided by established audit standards. The main objective of this study is to examine and analyze the Effects of Investigative Investigators' Experiences and Capabilities on the Effectiveness of Audit Procedures in Revealing Fraud. This study has a formula: Does the experience and ability of investigative investigators have a positive effect on the effectiveness of the implementation of audit procedures in exposing fraud.

Qualified Audit Reports of Local Authorities in the Northern States of Malaysia

Abstract: The reliability of information presented in the financial reports of local authorities is of utmost importance to enable the public to measure their performance in terms of efficiency and effectiveness in using public resources. The task to provide such an assurance lies with the Auditor General, who has been entrusted to enforce the auditing compliance regulations. A certificate in the form of “unqualified,” “qualified,” “adverse,” or “disclaimer” accompanied by a report on the financial affairs of the local authorities concerned will be issued after the Auditor General completes the audit of the local authorities’ financial statements. Our study on 14 local authorities comprising municipal and district councils in the Malaysian States of Perlis, Kedah and Penang found that the Qualified Certificate is the common type of audit certificate issued to the local authorities concerned during the period 1997-2001(inclusive of both years). Discrepancies in “Fixed Assets Register” ranked first among the audit incidents that led towards non-compliance to the audit procedures. This was followed by discrepancies in “Other Receivables” and “Cash Flow Statements” which ranked second and third positions respectively. Our finding also shows that size does not grant any advantage to the bigger local authority in reducing the number of audit incidents.

Concept of importance in audit planning and execution

Abstract: This article defines "materiality" based on international auditing standards. The procedure for planning, conducting and using this concept in the audit process has been completed. In addition, the concept of "materiality" and the impact of "audit risk" on the "audit report" presented to the client at the end of the audit were considered on the basis of the opinions of leading scientists in the field of an international audit.

The Power of Political Connections: Review on the Impacts of Audit Committee and Corporate Governance

Abstract: In this paper, the study summarizes the major studies addressing on the power of political connections that have impacts on the role of audit committees and corporate governance in the companies. The question addressed by this paper is how the political connections and audit committee role may influence the corporate governance variables as reflected in audit fees and corporate governance behavior through auditor’s assessment process. This is what has been lacking in the literatures.This paper is an attempt to identify the gaps and contribute to the political connections and corporate governance literature by showing the political connection influences on audit committee especially in an economy in which the government has coercive power in the firms. In the different context, the paper provides avenue to potential research to understand firm’s agency conflicts between the majority shareholder and the management as well as political connections that providing external resources to the firms affect auditor’s decision on audit fees, audit plan and assessment process and audit opinions.

Current Planning for Internal Audit of Risk Assessment of the Company Activities

Abstract: Lack of management control of the activity risks creates critical operating conditions for the enterprise, in which the financial indicators may change unexpectedly and unfavorably. Avoidance of the risks of an entity's activity is possible if effective interaction is made primarily between economic security and internal audit departments. Productive work of internal auditors to identify, evaluate and reduce the impact of risks on the performance of the enterprise is possible with its proper organization. The article describes the key principles for planning the activities of internal auditors to ensure the quality of audit procedures. Approaches to the organization and planning of the Internal Audit Department's work on identifying risks of the entity's activities, minimizing them and preventing them in the future are disclosed. A working plan for the application of audit procedures in the department of accounting, cashier and warehouse is presented, which demonstrates procedures for identifying and assessing such types of risks as market, payment, currency, financial, tax, credit, loss of assets. The working plan of the audit procedures developed contains the most effective procedures, depending on the objects of the audit, determines the scope of the audit, the procedure of its carrying out, responsible executors, the terms of the procedures. The use of the following suggestions for the planning of internal audit allows to apply qualitatively different forms and methods of audit, types of audit procedures, specialize the audit activities, correctly establish the order of audits, take into account the results of audit in the preparation and approval of various types of enterprise reports.

Engagement partners participating in auditing standard setting and audit quality

Abstract: In this study, we investigate whether engagement partners who participate in the national auditing standard setting can provide better audit quality, and explore the underlying cause in the context...

Industrial Energy Audit Methodology for Improving Energy Efficiency - A Case Study

Abstract: This study aims to highlight a methodology for implementing an energy audit plan within industries. Today, international competitiveness involves optimizing companies’ production costs. This necessarily requires the implementation of rigorous energy saving policies. These savings are measures taken to limit energy consumption or to avoid energy losses. The energy audit is a methodical review and analysis of the use and consumption of energy; which attempts to identify energy flows and information on all the company’s energy consumption patterns. According to the information obtained in audit potential improvements in energy efficiency are carried out. In this paper, we present the results of an energy audit conducted within a company operating in the agri-food sector in the eastern region of Morocco. It has been shown that, in this case, the database resulting from the energy audit has contributed significantly to the development of a systematic approach to decision-making and consequently to the improvement of the energy efficiency.

Risk Based Approach Dan Tren Mendatang Dalam Internal Audit Tools & Techniques

Abstract: Internal auditors have begun to shift from a traditional approach to risk-based approach. This article will review the previous literature on risk based audit approach, risk based audit plan and the forthcoming trends for internal audit tools and techniques (TTs) based on Common Body of Knowledge (CBOK) survey in 2007 and 2010. Based on surveys conducted by IIA in 2007 and 2010 the risk based audit plan continues to occupy the top position in the TTS used by internal auditors. It is argued that the risk-based audit plan will continue to be used by auditors in the future, because internal auditors conceive that if the internal audit plan is based on key risks that exist within the organization, it will enhance Chief Audit Executive (CAE)'s ability to match the audit plan to organizational needs..

Continuous Auditing and Risk-Based Audit Planning

Abstract: Due to rapidly changing risks in companies, a continuous alignment of internal audit activities with the relevant risk is required. Continuous auditing (CA) is one possible way to meet these requirements. Specifically, the internal audit function (IAF) could use CA as a methodology in order to add a continuous perspective to their risk assessment. This study examines factors associated with the use of CA information in IAF’s risk-based audit planning (RBAP). We use survey data from 264 chief audit executives to address our research question. Consistent with our expectations, we find several factors having a significant positive influence on the use of information from CA in RBAP. From an IAF’s perspective, these factors include the importance of data analytics, the collaboration with audit committee and external auditor, as well as the use of IAF’s results for fraud prevention. Furthermore, our additional analysis presents various effects of CA on potential outputs of the IAF. Finally, we discuss the implications of these findings for research and practice.

Using Audit Programs to Improve Auditor Evidence Collection

Abstract: Auditors experience difficulty auditing accounts on which it is difficult to identify in advance all the evidence necessary to perform an effective audit. These accounts are challenging because they commonly require auditors to collect additional, relevant evidence in response to new information received during evidence collection. We address this experimentally by examining whether changing the focus of audit programs from plan-focused (i.e., focused on the planned audit procedures) to goal-focused (i.e., focused on the task goal) improves auditors’ collection of relevant evidence that is not identifiable at audit program creation. We expect goal-focused auditors to remain open to more ways to achieve their goal. Consequently, we expect and find that goal-focused auditors collect more effective evidence than plan-focused auditors and follow-up more effectively on this evidence. This suggests that a goal-focused approach improves audit quality on tasks requiring auditors to flexibly respond to new information.

Revising Audit Plans to Address Fraud Risk: A Case of ‘Do As I Advise, Not As I Do’?

Abstract: Prior research documents that auditors fail to revise audit plans to effectively address identified fraud cues. While auditors may understand what evidence would address such cues, we propose that auditors fail to apply this understanding because they use implemental mindsets when making decisions for themselves (i.e., deciding). However, we also propose that auditors use deliberative mindsets when advising. To test our predictions, we assign auditors to a decider or an advisor role in a realistic case that contains seeded fraud cues and asks them to consider revising last year’s plan. We also manipulate whether the case prompts auditors to revise the plan unconventionally. Results indicate decider-condition auditors use implemental mindsets: Prompted deciders follow the unconventional plan without regard to underlying fraud risk and unprompted deciders stick with the same-as-last-year (SALY) plan. Advisor-condition auditors use more deliberative mindsets: In the prompt and no prompt conditions, they identify plans that are strongly linked to their own fraud risk assessments and that better align with experts’ recommended plan for effectively addressing the seeded fraud cues. Supplemental analyses suggest deciding and advising auditors both follow experts’ plan when they believe in its potential effectiveness but, after controlling for the influence of perceived effectiveness, deciding auditors follow it to a greater extent simply because they believe the PCAOB wants it. By contrast, advising auditors do not exhibit signs of excessive PCAOB influence. Our findings provide evidence that seeking informal advice (or thinking like an advisor) helps auditors to effectively revise audit plans in response to identified fraud risk – it helps when a prompt is present or not, suggesting it complements rather than merely substitutes for interventions meant to improve auditors’ judgment and decision-making.

PRACTITIONER SUMMARY How Fraud Risk Decomposition Affects Auditors' Fraud Risk Assessments

Abstract: In this paper, we provide a practitioner summary of our paper "The Influence of Judgment Decomposition on Auditors' Fraud Risk Assessments: Some Tradeoffs" (Simon, Smith, and Zimbelman 2018). In th...

Industry influence on materiality level determination in the process of financial statements audit

Abstract: Materiality levels are being used by auditors in different financial statement audit planning, procedure performance and results measurement stages. Thus, ensuring that financial statements are not significantly distorted. International standards on auditing contain extensive levels in materiality interpretation however, when determining materiality, it is underlined that auditor must be versed about audited company‘s sector and industry. The aim of the research is to analyze the industry factors which influence materiality determination levels in financial statement audit process and to establish the scheme of industry influence on materiality level determination. An article applies information collection, systematization and interpretation methods, analysis of Lithuanian and foreign scientific literature, audit regulatory legal acts. The analysis enabled to determine that industry significantly influence both planning and performance materiality also the allocation of the latter for accounting articles. The influence is determined by qualitative and quantitative industry factors. Theoretical model of industry influence on materiality determination is submitted in the framework below.

How Fraud Risk Decomposition Affects Auditors' Fraud Risk Assessments

Abstract: In this paper, we provide a practitioner summary of our paper ‘‘The Influence of Judgment Decomposition on Auditors’ Fraud Risk Assessments: Some Trade-Offs’’ (Simon, Smith, and Zimbelman 2018). In that study, we investigate potential unintended consequences from current auditing guidance on risk assessments. Specifically, auditing standards recommend separate assessments of the likelihood and magnitude of risks (hereafter, LM decomposition) when auditors assess risk. Our study involved several experiments, including one with experienced auditors, where we found evidence that LM decomposition leads auditors to be less concerned about high-risk fraud schemes relative to auditors who make holistic risk assessments. Our other experiments involved nonauditing settings and replicated this finding while exploring potential explanations for it. After providing a summary of our study and its results, we offer concluding remarks on the potential implications of our findings.

Drug audit support device, drug audit support system, and drug audit method

Abstract: The present invention pertains to a drug audit support device 3 which supports audit of drugs collected by a drug collection device 2 and/or collected manually, the support device 3 being characterized by: having a plurality of drug audit means; being capable of implementing a plurality of drug audit plans having different degrees of precision by selectively carrying out the drug audit means; having an information acquisition means for acquiring first information and second information, the first information being information related to drug collection pathways and/or equipment involved in drug collection, and the second information being information relating to workers participating in drug collection; and having a plan selection means for selecting the drug audit plans on the basis of the first information and the second information, the drug audit plan selected by the plan selection means being carried out.

Planning the Audit of Financial Resources in a Non-Profit Organization

Abstract: Internal auditing of non-profit organizations represents the first line of defence against inadequate use of non-profit organization?s funding sources. In the European legal system, the purpose of a non-profit organization is to meet the needs of stakeholders with different products and services and public works that the state or other profit organization cannot satisfy and to affect the policy of the state or the economy. Non-profit organizations due to their nature are not able to acquire their own sources of financing, which is why they largely depend on subsidies, grants, membership fees, revenue from the sale of services and products that are not necessarily sold at market price. Therefore, the correct usage of these sources is all the more important. One way of checking the correctness of the use of sources of financing is internal audit, which must be carefully planned. The purpose of the chapter is to present the planning of the internal audit in the case of a non-profit organization, the most important part of which is the definition of audit objectives, the organization's risk analysis and the preparation of the audit plan.

The impact of audit quality in rights offerings

Abstract: Using audit quality as our core focus, we take a fresh look at the tradability and standby status in rights offerings, and the market reaction during the subscription period in the US market. We find that firms with high audit quality are more likely to choose tradable or full standby rights issues. We also find that the subscription period price reaction is positively related to audit quality and negatively related to issue price discount. These results demonstrate an important role played by the choice of auditors in the design of rights offerings, particularly in mitigating the negative price reaction during the subscription period.

The Implementation of Risk Based Internal Audit During The Corona Virus Diseases Pandemic Conditions Case Studies Indonesia Deposit Insurance Coorporation

Abstract: During the pandemic of Corona Virus, the government of Indonesia had reinforced the law of Indonesia Deposit Insurance Corporation (IDIC) authority to secure the stability of Indonesia banking sector. The IDIC has a significate role to take active action in order to maintain bank’s liquidity and solvability, especially during the pandemic. Due to the pandemic economic recession, IDIC will continue to optimize its performance, it takes extra work of every working unit in IDIC to out performs its duties including the internal audit unit. The internal audit has a crucial role to support and strengthen the Indonesia Deposit Insurance Corporation (IDIC) to conduct its function. In order to strengthen internal audit and increase added value, it is necessary for IDIC to implement risk based internal audit (RBIA). This study is aim to support IDIC on implementing an effective risk based internal audit. To execute this, IDIC must do risk maturity assessment and conduct audit paling referring to the organization major risk as a priority area of auditing. This paper analysis and evaluate IDIC risk maturity and areas which are high risk due to the pandemic condition that can be propose as part of the IDIC audit plan. Keywords: Internal Audit, Risk Based Internal Audit, Risk Maturity