Showing papers on "Audit plan published in 2022"

Key audit risks and audit procedures during the initial year of the COVID-19 pandemic: an analysis of audit reports 2019-2020

Abstract: Purpose The purpose of this study is to explore audit procedure disclosures related to key audit risks, during the prior year and the initial year of the COVID-19 outbreak, by reporting on matters published in over 3,000 Australian statutory audit reports during 2019 and 2020. Design/methodology/approach This study partially uses latent semantic analysis methods to apply textual and readability analyses to external audit reports in Australia. The authors measure the tone of the audit reports using the Loughran and McDonald (2011) approach. Findings The authors find that 3% of audit procedures undertaken during 2020 were designed to address audit risks associated with the COVID-19 pandemic. As a percentage of total audit procedures undertaken during 2020, the authors find that smaller practitioners reported much less audit procedures related to COVID-19 audit risks than most larger audit firms. Finally, the textual analysis further found differences in the sentiment or tone of words used by different auditors in 2020, but differences in sentiment or tone were not found when 2020 was compared to the prior year 2019. Originality/value This study provides early evidence on whether auditors designed audit procedures to deal specifically with audit risks that arose due to the COVID-19 pandemic and on the extent and nature of those audit procedures. The study will help policymakers to better understand whether Key Audit Matters provided informational value to investors during a time of global crisis.

Differential spillover effects of different non-audit fees on audit report lag

Abstract: PurposeRegulators treat all non-audit services the same by using a broad-brush approach which is reflected in the study of total non-audit fees in the same analyses or different non-audit fees in isolation by prior studies. To know whether the non-audit services have different effects and hence, should be regulated separately, this paper compares their effects on audit report lag and examines whether they follow the implied hierarchy of the Securities and Exchange Commission.Design/methodology/approachThe effects of audit-related non-audit fees, tax fees and other non-audit fees are compared in an audit report lag model to determine whether they are the same statistically. Supporting tests for audit quality use discretionary accruals and the reporting of a small profit or small positive change in profit.FindingsThis paper finds that different non-audit fees do not have the same effects on report lag and partial support for the implied hierarchy of the Commission. Specifically, for large accelerated filers, audit-related fees and tax fees have the same negative effects on report lag but other non-audit fees are unrelated to report lag. Tests of audit quality suggest that auditors do not compromise audit quality.Research limitations/implicationsDifferent non-audit services are unique in their spillover effects and deserve individual attention. Audit practitioners could be more comfortable in providing audit-related non-audit or tax services for audit clients since these services could facilitate audit work without compromising independence. On the other hand, they should be cautious about the provision of other non-audit services because the services do not enhance the efficiency of audit work and without such a benefit to audit clients, the provision may create issues of perceived independence.Practical implicationsInsight is limited by the types of disclosure of non-audit fees available and the lack of internal measures of audit efficiency.Originality/valueThe results provide deeper insight into the knowledge spillover theory and prior studies which implicitly assume all non-audit services having the same effect. The results suggest that the services should be regulated each on its own but not in a bundle. Last, this paper provides the first evidence that audit-related non-audit fees reduce report lag.

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

Overseeing the External Audit Function: Evidence from Audit Committees' Reported Activities

Abstract: SUMMARY Recently, in response to calls for more transparency, many firms have begun reporting the activities undertaken by their audit committees in overseeing the work of the external auditor. We use a composite measure of audit committees' reported oversight activities for a sample of S&P 1500 firms and examine the extent to which these reported activities are associated with audit quality. We find that when firms' audit committees report exerting strong oversight, they have higher audit quality as proxied by audit fees, discretionary accruals, the likelihood of meeting or beating earnings benchmarks, and restatements. We also find that the market reacts positively to reports indicating strong oversight, consistent with perceptions of higher audit quality. This study extends prior literature on audit committees by introducing a new comprehensive measure of audit committees' reported oversight activities and sheds light on how these activities map into audit quality. JEL Classifications: M41; M42; G18.

Lessons from leveraging technology in auditing during COVID-19: an emerging economy perspective

Abstract: Purpose This study aims to examine the challenges posed by COVID-19 restrictions for audit processes in India and explore the perceptions of the profession on how technology was leveraged to conduct audits during this period. The opinions of auditors on future changes in post-COVID-19 audit practices and processes are also explored. Design/methodology/approach Semi-structured interviews were conducted with senior auditors working in various audit firms in major business centers in India and subjected to content and thematic analysis using the institutional theory perspective. Findings The auditing profession used technology to respond to COVID-19-imposed disruptions of established audit process and practices while maintaining the legitimacy of audit reports. The findings indicate that auditors now seem to strongly support the integration of emerging technologies into their auditing practices post-COVID to ensure data accuracy and transparency. The interviewees displayed keen interest in continuing remote and in-person audits to maintain audit quality in the future. The experience of COVID-19 appears to have forced the auditing profession to overcome their reluctance to adopt technologies that were previously used by only Big 4 and large audit companies. Practical implications The results will be of particular interest to various stakeholders concerned with aspects of the acceptance of technology-assisted audit reports such as legitimacy, required infrastructure, cost involvement and resistance to change. The findings will also assist professional bodies and policymakers in both developed and developing economies in devising useful strategies to promote technology-aided auditing during and after COVID-19. Limitations posed by inadequate infrastructure and resistance to changes must be overcomed before implementation of technology-aided audits. Originality/value As COVID-19 pandemic is a recent phenomenon, to the best of the authors’ knowledge, this study is one of the first few studies that have examined the use of technology to facilitate audits during the COVID-19 period, more specifically from a developing economy perspective.

Female audit team leaders and audit effort

Abstract: Auditing is a collective process conducted by a professional accounting team with a wide range of skills and experience. Audit work is labor-intensive, and audit team diversity, particularly gender diversity, is considered to have both auditing and economic effects. However, there is scant empirical research on the way that audit engagements are conducted and the role of audit team leaders (ATLs), specifically female ATLs, in the audit effort, because they and other audit team members mainly develop audit strategies in practice during the planification period. A hand-collected private data set was gathered from Spanish small and medium-sized audit firms from 2001 to 2015. After controlling for endogeneity, the analysis shows a more efficient audit effort by female ATLs and their audit teams when task complexity increases. Furthermore, the findings show a masculinization process by female ATLs when their experience rises, which may be interpreted as intrinsic motivation for future promotions. Additional analyses also reveal differences in female ATLs’ behavior when there are shorter audit firm tenures and larger audit firm sizes. Overall, our empirical evidence is in line with the idea that gender diversity is positive for audit efficiency. Our study responds to calls from regulators to consider audit team attributes as a relevant factor in the quality of audit quality practices.

Impact of the COVID-19 Pandemic on Audit Quality: Lessons and Opportunities

Abstract: This study aims to identify the impact of COVID-19 on audit quality based on the investigation of three auditing aspects, namely: audit fees, audit procedures, and auditors' salaries in Saudi Arabia and Yemen. For data collection, fifty-five (55) questionnaires were distributed to internal auditors, external auditors, managers of audit offices, and financial managers. Eleven managers of audit offices and auditors were interviewed. A descriptive, regression analysis, and T-test were used. The study results reveal that the audit quality has been significantly affected due to the devastating effect of COVID-19 on audit fees, audit procedures, and audit staff salaries. In addition, the results show that Yemen is severely affected due to several factors, which include a lack of modern auditing systems. Also, private ownership of establishments and the absence of laws for determining audit fees negatively impacted the audit quality. Being the first of a practical kind, this study provides a significant contribution to the existing literature on the impact of COVID-19 on the quality of auditing. This would be useful for corporations, audit offices, auditors, and researchers. Moreover, this study can bridge the identified research gap on this topic and provide empirical evidence about the impact of COVID-19 on audit quality. Doi: 10.28991/esj-2022-SPER-06 Full Text: PDF

The Relationship between Internal Audit Factors and the Audit Quality: Insights from External Auditors of Bangladesh

Abstract: The purpose of this study is to investigate the perceptions of external auditors regarding internal audit factors on audit quality to ensure the effectiveness of the audit process. This study also measures the influence of different internal and external audit attributes on audit quality. The study is descriptive in nature and both quantitative and qualitative data have been collected and analyzed to examine the insights of external auditors concerning the impact of internal audit competency, objectivity, and work performance on the effectiveness of audit quality. This study considers a convenience sampling method in collecting data and a semi-structured questionnaire referring to possible attributes of auditing has been given to the external auditors and requested to provide their valuable judgments with seven response choices on the level of importance of each indicator for audit quality. The results of the study highlighted that audit attributes like standardization, work performance, timeliness, objectivity, and competency are highly important measures of audit quality. The results also reveal external auditors prefer educational qualifications with professional certification of internal auditors can enhance the competency function while auditors' accountability, freedom to access all financial aspects, and unconstrained communication with management will ensure the objectivity of internal auditing. According to the findings, external auditors believe that proper documentation, adequate staffing, a well-defined audit plan can improve the work performance of internal auditing. The study also recommends that the concerned shareholders and other policymakers of organizations improve the effectiveness of internal auditing for strengthening their decision-making capability to make the financial reporting accurate and error or bias-free. Keywords: Internal auditing, External auditing, Audit quality. DOI: 10.7176/RJFA/13-6-08 Publication date: March 31 st 2022

External Audit Quality and Value Creation: What Relationship in the Cameroonian Context

Abstract: A financial statement audit is an essential tool for reducing information asymmetry and maintaining an efficient market environment. However, if the audit strives to improve financial performance, there must be credibility and reliability. This research verifies the link between external audit quality and value creation while controlling for other exogenous factors (the size and age of the firm). Given that most research on this relationship has been carried in the context of developed countries and much more on listed companies, this study adopts a new approach to investigate the contribution of external audit in improving the value creation by unlisted companies like Cameroon. The audit quality was captured by the competence and the independence of the auditor. The creation of value is measured by the evolution of turnover and net income. Using the logistic regression analysis on data collected on a sample of 97 public limited companies in Cameroon, it is proved that audit quality has a positive and significant influence on value creation. Belonging to the Big Four, providing services other than external audit and the evolution of audit fees have no significant impact on value creation. As control variables, the company’s size does not explain value creation, but the firm’s age does. It is recommended that the management hire a competent auditor who respects the steps of the audit process to create more value. Due to the importance of having a high-quality audit, further studies should explore other external audit quality variables such as co-auditing, adherence to the audit timetable, and the time allowed for audit assignments.

The effect of audit firm attributes on audit delay in the presence of financial reporting complexity

Abstract: Purpose This study aims to examine the effects of audit firm attributes on audit delay associated with financial reporting complexity (FRC). Design/methodology/approach The authors use regression models with a sample of public firms with distinct monetary eXtensible Business Reporting Language tags to test the research hypotheses. Findings The authors find that two audit firm attributes (audit firm tenure and non-audit services performance) moderate the effect of FRC on audit delay. Practical implications The study provides insights to regulators, practitioners and investors into how firms may reduce audit delay from FRC by keeping their long-tenured auditors and allowing their auditors to gain more knowledge about the firms by providing non-audit services. The results, therefore, have implications for mandatory audit firm rotation. Originality/value To the best of the knowledge, this study conducts the first comprehensive analysis of this topic, exploring the impact of three audit firm attributes on audit delay caused by FRC. It attempts to illustrate the impact of external audit firms on reducing the adverse consequences of FRC.

Internal audit: A case study of impact and quality of an internal control audit

Abstract: Traditionally, when companies needed assistance regarding internal controls, they turned to an external auditor (EA). However, now, due to an ongoing tightening of legal requirements and practices regarding the independence of EAs, this assistance has been restricted. As an alternative, companies are increasingly requesting internal audits to deliver this support. Even though internal audit function (IAF) are an important player in internal control, however, there is little academic knowledge about their impact. Based on a single-case study in a large financial institution, this paper explores to what extent and how IAF affect internal controls. Furthermore, it assesses whether IAF add value to the company. The results suggest that the management letter process, including a step-by-step settlement of interactions, leads to a joint problem solving, an acceptance of all IAF's recommendations and a value-adding outcome improving the level of internal controls.

The Impact of Audit Technology on Audit Task Outcomes: Evidence for Technology‐Based Audit Techniques †

Abstract: As audit technology becomes more widespread, practice and academia are raising concerns about the costs and benefits of these technologies. We examine how internal auditors use technology-based audit techniques (TBATs) and how TBATs impact the efficiency and effectiveness of their audits. We use two surveys and interviews of individual auditors and chief audit executives (CAE) to examine their perceptions of TBATs. Auditors perceive TBATs as beneficial. Specifically, an increase in the use of TBATs is associated with completing more audits, finding more risk factors, providing more recommendations, and decreasing audit days. However, CAEs also perceive TBATs to be costly. An increase in the use of TBATs is associated with an increase in the size of the internal audit function. Finally, interviews with CAEs suggest that TBATs are not used more often because of difficulties in quantifying their benefits, observing their benefits in a timely manner, and hiring auditors with appropriate skills. Overall, TBATs stand to increase the efficiency and effectiveness of audit tasks, but auditors struggle to quantify their net cost-benefit tradeoff. Our findings validate the issues raised by both proponents and opponents of audit technologies and help provide empirical data to inform their decision-making process regarding the future of these tools. Additionally, our study prompts several avenues for future research that can help inform regulators, practitioners, and researchers on how these technologies are impacting the auditing profession. L'impact de la technologie d'audit sur les résultats des tâches d'audit : preuve de l'utilité des techniques de vérification basées sur la technologie Alors que la technologie d'audit se développe, les milieux professionnel et académique soulèvent des inquiétudes quant aux couts et aux avantages de ces technologies. Les auteurs examinent comment les auditeurs internes utilisent les techniques de vérification basées sur la technologie (TVBT) et comment les TVBT ont un impact sur l'efficience et l'efficacité de leurs audits. À l'aide de deux enquêtes et d'entretiens avec des auditeurs individuels et des dirigeants de l'audit interne (DAI), ils examinent leurs perceptions des TVBT. Les auditeurs perçoivent les TVBT comme étant avantageuses. Plus précisément, une utilisation accrue des TVBT est associée à la réalisation d'un plus grand nombre d'audits, à la découverte d'un plus grand nombre de facteurs de risque, à la formulation d'un plus grand nombre de recommandations et à la diminution du nombre de jours d'audit. Cependant, les DAI considèrent également que les TVBT sont couteuses. Une augmentation de l'utilisation des TVBT est associée à une augmentation de la taille de la fonction d'audit interne. Enfin, les entretiens avec les DAI suggèrent que les TVBT ne sont pas utilisées plus souvent en raison des difficultés à quantifier leurs avantages, à les observer en temps opportun et à engager des auditeurs possédant les compétences appropriées. Dans l'ensemble, les TVBT sont susceptibles d'accroitre l'efficience et l'efficacité des tâches d'audit, mais les auditeurs ont du mal à quantifier leur rapport cout-avantage net. Ces résultats permettent de valider les questions soulevées par les partisans et les opposants des technologies d'audit et contribuent à fournir des données empiriques pour éclairer leur processus décisionnel au regard de l'avenir de ces outils. De plus, cette étude propose plusieurs pistes de recherches futures qui peuvent contribuer à informer les autorités de règlementation, les praticiens et les chercheurs sur l'impact de ces technologies sur la profession d'audit. This study examines how the use of technology-based audit techniques (TBATs) influences audit efficiency, effectiveness, and costs.1 Technology is becoming an increasingly important aspect of both internal and external audits as clients become more sophisticated users of technology; auditors face significant pressure to reduce audit fees, and technology is better able to perform audit tasks.2 Although technology is often adopted with the goal of improving efficiency, effectiveness, and costs, studying this phenomenon in audit settings is difficult because of the relative lack of archival data sets. Prior research that attempts to address this issue finds no results or even mixed results (we review this literature in section 2). In line with these mixed findings, researchers find there is less adoption of audit technology at firms than anticipated (Lovata 1990; Janvrin et al. 2008; Vasarhelyi and Romero 2014; Eilifsen et al. 2020). This gap—technology holding significant promise but the lack of evidence of the realization of positive audit outcomes—has led to numerous calls for additional research in this area (Earley 2015; Wang and Cuthbertson 2015; Alles and Gray 2016; Janvrin and Wood 2016; Moffitt et al. 2016; Austin et al. 2021). To our knowledge, our study is among the first to address this issue by examining a proprietary data set of auditors' use and perceptions of TBATs and how TBATs influence actual audit outcomes in the field. Although, at first glance, it would appear relatively obvious that technology should improve audit outcomes, there are reasons why this may not be the case. First, technology may enhance the efficiency of the audit, but rather than redeploying the captured gains into more audit coverage, the organization could reduce audit budgets (for internal audit) or cut audit fees (for external auditors) so that overall audit quality does not improve. Second, to be effective, auditors must not only purchase advanced technology but also have personnel capable of using the technology successfully. The accounting profession currently faces significant challenges in hiring technological expertise, given the high demand and pay for individuals with technology skills in other disciplines (Christ et al. 2021; Maksymov et al. 2021). Third, technology may improve audit outcomes but at a cost that auditors or companies are not willing to pay. For example, Christ et al. (2021) demonstrate that automating inventory counts with drones dramatically improves efficiency and effectiveness; however, there is still relatively little adoption of this technology in the field because “drones are still expensive” (Vien 2018, para. 32). We used three complementary approaches to gather and examine auditors' perceptions of TBATs. First, we conducted a survey of 268 internal auditors, asking their beliefs about how TBATs influence audit efficiency and effectiveness (perception data), the overall use of TBATs in the company's internal audit function (IAF) (overall data), the use of TBATs on the respondents' two most recent audit engagements (engagement data), and various measures of the efficiency and effectiveness of audit tasks. Second, we conducted another survey of 505 CAEs, asking their beliefs about the costs (in terms of personnel and budget) associated with the companies' IAFs, so we could examine whether the use of TBATs increases or decreases audit costs. Finally, we interviewed 11 CAEs to gain further insight into the decision process to adopt TBATs and how CAEs evaluate TBATs' costs and benefits. Our findings from our first survey show that auditors perceive TBATs make auditors more efficient and effective—and this result is robust across the amount of TBAT usage in the respondents' organization, the rank of the respondent (chief audit executive (CAE) or not), and the size of the IAF of the respondent. The non-perception data we collected in the first survey supports these perception findings. We find that a one standard deviation increase in the usage of TBATs is associated with completing 18.5% more audits, finding 10.8% more risk factors, providing 12.3% more recommendations, and decreasing the days necessary to complete an audit by 13.5%. In other words, higher usage of TBATs is associated with a more efficient and effective audit. When looking at specific phases of the audit, we find that higher usage of TBATs is associated with a reduction in the number of days to prepare an audit and the number of days used in conducting fieldwork, but is not associated with the number of days to prepare audit reports. Although these results show that TBATs can improve the efficiency and effectiveness of the audit, they do not consider the costs necessary to achieve these benefits. Therefore, we analyze the results from our second survey wherein we ask CAEs about the costs associated with TBATs. We find that a one standard deviation increase in TBAT usage is associated with a 15.5% increase in the size of the IAF (i.e., the number of auditors). In open-ended responses about factors CAEs consider to be barriers to TBAT implementation, we find that the top five barriers are high implementation costs, lack of competence of the auditors, data quality issues, high operating costs, and data access issues. When we split the respondents by TBAT usage, we find that IAFs that are low in TBAT usage are much more concerned with financial costs than IAFs that are already using TBATs at a high level. The results of these two surveys provide both positive and negative findings on TBAT usage. Although TBATs are associated with greater audit efficiency and effectiveness (our first survey of auditors), they do come at a higher cost (our second survey from CAEs). Given the data come from different respondents, we are unable to provide an overall net benefit to the usage of TBATs. Therefore, to shed additional light on how auditors decide to invest in and assess the costs and benefits of TBATs, we interviewed 11 CAEs. The interviewees noted that CAEs are largely responsible for deciding whether to use TBATs (i.e., management or the board does not dictate the decision) and that the decision process generally results from an informal cost-benefit analysis. However, this cost-benefit analysis is quite complicated as auditors have a difficult time quantifying all the costs and even more difficulty in assessing the benefits of TBATs. Interviewees noted it can sometimes be difficult to value non-monetary benefits, which are not always recorded by engagement teams; and costs can sometimes be ignored when they are indirectly related to technology acquisition and implementation, such as retraining employees on new technology, operational downtime for technology installation and maintenance, and so on. Furthermore, the interviewees noted that seeing benefits from implementing TBATs can take a long time, partially because it is difficult to find auditors with the skill sets to properly implement and use TBATs. Thus, some IAFs are likely low users of TBATs because of the difficulty in measuring and observing benefits from TBATs and because of the challenge in hiring qualified auditors to realize the benefits of using TBATs. Thus, the interviews suggest that the lack of greater technology adoption is potentially more of a problem of identifying measurable benefits of technology than concerns over the costs of the technology. Our study helps address this issue by providing CAEs with measurable benefits of TBATs on audit engagements. We make several contributions to the literature. First, we contribute to the literature on the costs and benefits of technology in auditing (Lovata 1990; Janvrin et al. 2008; Vasarhelyi and Romero 2014; Eilifsen et al. 2020). We show that auditors should expect to see improvements in efficiency and effectiveness from adopting new technologies; however, these benefits may or may not exceed the costs associated with the technology. Given that large public accounting firms are investing billions in technology (EY 2018; KPMG 2019; PwC 2019a), our results suggest that we should see improvements in audit quality, but we will not necessarily see lower audit fees, especially immediately after introducing new technology. Since many people expect technology to enhance efficiency and thus lower costs, this sets up an interesting line of future research that should investigate how key stakeholders (e.g., managers, auditors, board members, regulators) will respond to the increasing use of technology, especially if that technology does not result in cost savings that many are likely to expect. The audit fee setting process may become increasingly adversarial, and it will be important for future research to gain a better understanding of this dynamic. Second, we identify a reason why technology is not more highly adopted in auditing—identifying costs, but more so identifying quantifiable benefits of technology, is difficult. Thus, one important contribution is that this paper identifies objective, quantifiable benefits to technology adoption in auditing for a large sample of firms. Given accounting is a science of measurement, we encourage future researchers to develop better ways to measure the benefits of technology in audit settings—especially for individual companies. Audit researchers should consider looking to the managerial accounting literature for ways to measure costs and benefits to help enable better decision-making in audit and governance contexts. This will enhance decision quality around when technology should and should not be used. Third, we contribute to the literature by gathering propriety data about specific audit engagements and the amount of technology used on those engagements. We show that the decision to use technology in practice is more complicated than many might expect and that it is not a clear-cut choice to adopt technology. Given the significant exposure and even hype of emerging technologies for solving accounting problems (Austin et al. 2021), this study suggests future research can explore the person, task, and environmental factors that make audit technologies more likely to be used and impactful and how specific audit technologies can impact specific audit outcomes. Finally, we inform the increasing number of researchers examining how internal auditing provides value to the organization (Prawitt et al. 2009, 2012; Ege 2015; Abbott et al. 2016; Bills et al. 2022; Ege et al. 2022; Jaggi 2022). As audit technology implementation continues to mature in organizations, our work can help launch future research into how internal auditing can provide more value to the organizations' operating effectiveness, efficiency, risk management, accounting quality, and other issues. Increasing the amount of technology used in audit tasks receives significant attention from professionals (PwC 2018; Hood 2018). However, we know relatively little about the impact these new technologies have on the tangible outcomes of audit tasks' effectiveness and efficiency. Professionals' perceptions of technology are mixed. Some professionals express optimism about technology's impact, believing that it will improve audit task outcomes. For example, Braun et al. (2017, 41) report that auditors “that have successfully implemented sustainable analytics activities have not only been able to clearly visualize and articulate the value analytics can deliver to their functions and the broader business, but also have started to realize that value in enhanced efficiency, effectiveness, and risk awareness.” In contrast, others are less optimistic about the benefits of audit technology for auditors. A Gartner survey (2018) notes that risks surrounding data and audit technological tools are the top concerns for CAEs. Furthermore, Protiviti (2019) finds relatively few organizations indicate that their audit teams understand the importance of technological innovation or that innovation is a core value for the IAF. PwC (2019b, 15) reports that many auditors “struggle to find the right fit” for emerging technologies in their work. As a result, there are repeated calls from both practitioners and academics to research how technology will impact the audit profession (Bierstaker et al. 2001; Ramamoorti 2003; Brown-Liburd et al. 2015; Cao et al. 2015; Earley 2015; Griffin and Wright 2015; Yoon et al. 2015; Alles and Gray 2016; AICPA 2017; Richins et al. 2017; Gepp et al. 2018; Christ et al. 2021). Almost universally, the commentaries call for research to see whether the optimism or pessimism regarding audit technology impacts is warranted.3 Some prior archival research examines how the client's technology investments impact external auditors. The results are mixed, with research finding that more IT investment by the audit client is associated with lower audit report lags (Johnston and Zhang 2018) but higher audit fees, an increased probability of auditors' issuance of going-concern opinions, and a higher likelihood of auditors' Type II errors (Han et al. 2016). Additional evidence by Chen et al. (2014) is similarly mixed and shows that the audit client's IT capability mitigates audit fee increases but has no effect on audit delay. Lim et al. (2021) examine the clients' investment in auditing technology on external auditing outcomes and find that clients' audit data analytics technology is associated with decreased audit fees and decreases in external audit delays. There have been relatively few studies with firm- or engagement-specific data examining the impacts of audit technology. A handful of studies examine the extent of adoption and usage of audit technology at large public accounting firms (Lovata 1990; Janvrin et al. 2008; Dowling 2009; Vasarhelyi and Romero 2014). The most recent of these is Eilifsen et al. (2020), which examines the adoption of data analytics by external auditors and at which points in the audit the technologies are used—but does not examine whether the use of data analytics enhances the efficiency and effectiveness of the audit. Although Li et al. (2018) examine audit technology adoption within the IAF, they examine auditors' perceptions of these tools on performance rather than directly measuring specific, engagement-level audit effectiveness or efficiency outcomes. Our study complements these studies by being the first to provide specific, engagement-level measures of audit task effectiveness and efficiency, not only for the overall usage of audit technologies but also for audit technologies used at different stages of the audit. Extant work suggests a few reasons why technology should improve audit task effectiveness. Technology can allow more direct testing of more transactions, which can improve audit effectiveness (Ballou et al. 2020; Barr-Pulliam et al. 2021; Cardinaels et al. 2021; Emett et al. 2021). In addition, technology allows for gathering and displaying data in unique ways to better interpret audit evidence, and thus enhance audit effectiveness, than audit procedures performed without technology (Dilla et al. 2010; Jans et al. 2014; Rose et al. 2017; Anderson et al. 2020; Pickard et al. 2020; Loraas and Holt 2021; Jans and Eulerich 2022). Finally, technology may increase efficiency (see the second hypothesis), and if any realized time savings are redeployed for additional testing, effectiveness would also be higher (KPMG 2015; CA Worldwide 2017). Although some studies suggest technology would not improve audit effectiveness (Brazel et al. 2004; Commerford et al. 2022; Holmstrom 2021), we believe the literature, on the whole, supports TBATs improving audit effectiveness, which leads to our first hypothesis. Hypothesis 1 (H1).The use of TBATs is positively associated with audit task effectiveness. Technology may also enhance audit efficiency. Technology can increase audit planning efficiency because technology allows auditors to consider various data sources and enable new risk assessment and planning procedures (Lynch et al. 2009; Koreff 2021). Furthermore, technology allows traditional audit procedures to be performed more efficiently (Dowling and Leech 2014; Cooper et al. 2019, 2022; M. Eulerich et al. 2022; Austin et al. 2021; Christ et al. 2021). As specific examples, M. Eulerich et al. (2022) show that robotic process automation adoption in an IAF reduces the time it takes to calculate distances when evaluating compliance tests for mileage reimbursement, the time to validate documents downloaded from enterprise resource planning (ERP) systems, and the time taken to extract information from ERP systems. Practitioners also believe technology increases audit efficiency, suggesting to clients that they can increase the efficiency of their audits by using technology for digital confirmations, using natural language processing systems for legal contract analysis, and using application programming interfaces to speed up data management and extract, transform, and load processes (Davenport and Raphael 2017; AICPA 2019; IDC Research 2022). Although some studies have suggested technology would not improve audit efficiency (Maksymov et al. 2021; Emett et al. 2021; Austin et al. 2021; Negangard et al. 2021), we believe the literature, on the whole, supports TBATs improving audit efficiency, which leads us to our second hypothesis. Hypothesis 2 (H2).The use of TBATs is positively associated with audit task efficiency. It is important to consider the effects of TBATs not only on audit effectiveness and efficiency but also on audit costs. Audit costs might be higher when auditors use TBATs because the technology can be costly, firms might need to upgrade their systems to use the latest auditing tools, training might be needed to educate auditors on how to use the tools and how to apply the tools to specific audits, and additional personnel with specialized technology training might have to be hired in greater numbers or at higher salaries than what would be required for more traditional audits. Alternatively, audit costs could be lower when auditors use TBATs because automation could reduce the number of auditors or audit hours required to perform the audit procedure; audit technology might be able to provide greater insights into risk assessments to allow for a more targeted, smaller audit program; audit technology could entirely remove the need for certain procedures to be performed; or audit technology could provide a higher level of assurance at a similar cost as traditional procedures, thus reducing the need for additional evidence to be gathered. Thus, adopting technology could be associated with higher or lower audit costs. Given this dynamic, we explore the following non-directional hypothesis. Hypothesis 3 (H3).The use of TBATs is associated with audit costs. To create our first data set, we surveyed 268 auditors.4 We developed the survey by consulting the academic and practitioner literature, receiving feedback from two internal auditors, and working with the German chapter of the Institute of Internal Auditors (IIA). The final survey version consisted of open- and closed-response questions about the respondent's overall usage of TBATs in the IAF and specific data about the two most recent audit engagements.5 Questions about the two most recent audit engagements cover details about the type and nature of the audit engagement, measures of effectiveness and efficiency of the audit engagement, and usage of TBATs across various stages of the audit engagement. We provided respondents with the definition of TBATs so that participants conceptualized TBATs consistently and uniformly. Survey responses were collected at two large annual conferences of a national IIA chapter. One of the authors distributed paper copies of the survey directly to the auditors at each of these events. Approximately 1,100 people were at the conferences, and we achieved approximately a 24% participation rate. From the 268 respondents, we obtained 205 observations with complete data to run the analysis examining the number of audits performed (column (3) of Table 3). As mentioned, we asked the 268 respondents to provide information about their two most recent engagements, yielding a possible 536 observations (if provided with complete data) at the individual engagement level. As described in more detail later, we examine three audit effectiveness/efficiency outcomes at the engagement level: (i) significant risk factors found, (ii) recommendations provided, and (iii) total auditing days—we also break out total auditing days into various parts of the audit. For the model analyzing risk factors (recommendations) (total auditing days), there are 300 (340) (361) observations with complete data included in the regression model. To examine audit costs, we use a different data set collected from a survey of CAEs.6 This data set was also developed as a collaboration between academics and three different IIA organizations and was extensively pilot tested before collecting responses from CAEs in companies headquartered in Germany, Austria, and Switzerland. The CAEs that were contacted received an electronic invitation to participate with a hyperlink to the survey. All participants who took part in the study completed the survey anonymously. A total of 4,009 invitations were sent out to CAEs. We received responses from 505 participants, which is a response rate of 12.6%. Respondents include CAEs from a broad range of industries and different-sized companies. However, not all participants answered the survey in full. From the sample of CAE responses, there are 349 observations that provided data about TBAT usage in their organization. As described in more detail later, we examine two audit cost outcomes: (i) the budget of the IAF and (ii) IAF size as proxied by the number of IAF employees. For the model examining the IAF budget (IAF size), 309 (320) observations with complete data are included in the regression model. We reached out to personal contacts and interviewed 11 CAEs about their usage and perceptions of the costs and benefits of TBATs. We specifically selected participants to ensure a wide representation based on their level of TBAT usage. On average, interviewees had more than 20 years of experience, and the interviews lasted, on average, 27 minutes. We used a semi-structured interview approach (see Appendix 2 for the interview script). We summarize the key things we learned from the interview process later in the paper. Although various studies suggest ways to measure audit effectiveness, there is no generally accepted measure (Arena and Azzone 2009; A. Eulerich and M. Eulerich 2020). Conceptually, audit effectiveness deals with the degree to which the audit “performs in such a way so as to accomplish the task described by the audit objective” (Dittenhofer 2001, 447). We examine audit effectiveness in several ways. First, we examine the number of audit engagements the audit department can complete. In other words, we examine the audit's coverage or scope. When auditors conduct more engagements, they can examine more issues, identify more areas for improvement, and address more matters of concern for the organization. For the main independent variables of interest, we measure the audit teams' overall usage of TBATs during the engagement. We asked respondents to rate their usage of TBATs across six stages of the audit process, including planning the audit schedule, planning the audit process, gathering evidence, performing analyses, reporting the audit findings, and following up on the audit findings. More specifically, we asked respondents the following question for each of the six stages of the audit engagement: “How would you rate your usage of technology-based audit techniques for the following stage of the audit?”7 The respondents would then answer based on a seven-point Likert scale (1 = very low to 7 = very high). The responses to the six audit stages are averaged together to create Engagement TBAT Level, our overall TBAT usage measure for the audit engagement.8 For both equations (2) and (3), Controls is a vector of control variables (see Appendix 1 for a full description of each variable). We control for the number of days the audit team worked on the engagement (Auditing Days). We use indicator variables to capture information about the entity being audited (i.e., Subsidiary, Plant, Project, and Process). To control for the audit's focus, we included the following indicator variables: Financial Focus, Operational Focus, Compliance Focus, Managerial Focus, and IT Focus.9 Assurance is an indicator variable that controls whether the audit engagement relates to assurance work and not a consulting project. We control for the number of auditors working on the engagement (Team Size) and the audit's size and scope (Audit Size). We also control for the audit object's risk and performance before the audit by including the risk level assessment (Risk before) and performance level (Performance before) of the audit object before the audit engagement. Also, we control for the size of the audit department (IAF Employees), whether the head of internal audit reports functionally to the supervisory board or audit committee (Report to Board/AC), IAF's level of assurance activities (Assurance PCT), IAF's outsourcing level (Outsourcing PCT), and the average number of training days for auditors (Training Days). We include the same company characteristics as control variables as used in equation (1). We use Survey 1 data about specific audit engagements to run equations (2) and (3). Before we discuss the empirical results from the models above, we depict how the audit respondents perceive the value of TBATs. The following analyses are based on responses collected from Survey 1. Although not objective dependent variables, like those in our primary analyses, this analysis provides useful insights into how auditors view the potential benefits of TBATs.11 We asked auditors their opinion about whether TBATs help improve the effectiveness and efficiency of audit tasks. The respondents answered each question based on a scale ranging from one (very little) to five (very much). In Table 1, panel A presents the results for effective

Institutional Aspect of Disclosing Key Audit Matters in the Auditor’s Report

Abstract: Th e article considers the application of ISA 701 “Informing about key audit issues in the auditor’s report”, taking into account industry risks and the signifi cance of audited organizations, including as participants in public procurement. An analysis was made of the selection of key audit issues as areas of increased audit risk, their use to increase the information content of stakeholders about the quality of audit procedures, an approach was formulated to typology of information disclosed in the audit process, taking into account the institutional specifi cs of the audited organizations.

Going Big, Going Small: A Perspective on Strategies for Researching Audit Quality

Abstract: This paper updates how archival audit research has evolved since the summary in Francis (2004) of what we knew then about audit quality. The paper describes an evolution from “going big” and asking basic questions about the audit market, institutions, and audit quality, to “going small” with a focus on smaller units of analysis (offices, partners, and engagement teams) as the key to understanding audit quality. I used to believe that audit firm differences, and differences across offices within firms, were the most important audit-related sources of variation in quality, and that differences in people and audit teams were relatively unimportant. However, the evidence in Cameran, Campa, and Francis (2022) using UK partner data convinced me otherwise. I now believe the behaviors of partner-led engagement teams are just as important (and maybe more important) than audit firms and offices in understanding audit quality. However, to learn more about partner-led teams means going inside the black box of audit firms, which requires proprietary data from audit firms and research access to their professional staff. I conclude with an example of collaborative research with audit firms.

The impact of audit committee effectiveness on firms’ outcomes in China: a systematic review

Abstract: Purpose This paper aims to discuss the academic literature on the impact of audit committee effectiveness on different outcomes (accounting, auditing, governance and economics) in China. Design/methodology/approach The authors have conducted a systematic review using the PRISMA guidelines. Findings The key finding is that the regulatory organisations in China, such as the China Securities Regulatory Commission (CSRC) and the State-Owned Assets Supervision and Administration Commission (SASAC), need to play the active role that is expected of them to enhance the transparency and independence of an audit committee. Also, Chinese listed companies are facing institutional barriers (CEO power, concentrated ownership and government influence) to effectively implement the imported concept within China. Research relating to the audit committee's effectiveness has focused mainly on agency and resource dependence perspectives. Research limitations/implications China’s regulatory bodies (CSRC and SASAC) should make necessary reforms to enhance the audit committee’s effectiveness. This study also provides implications for the other settings that have imported the audit committee concept from the Anglo-American countries. Originality/value This study contributes to the literature by synthesising the prior mixed findings on audit committee literature in China and providing suggestions to the regulators and future research.

Audit Tenure, Audit Firm Reputation and Audit Quality Study on Indonesian Manufacture Companies

Abstract: The debate on audit quality still continues due to different results and arguments on audit tenure, audit firm reputation and audit quality. This study provides empirical evidence on the differentiation of audit quality by considering the audit tenure and audit firm reputation. Using the data from IDX of manufacturing companies in 2019 and 2020, the researcher examines the difference in audit quality, measured by discretionary accruals, in terms of audit tenure and audit firm reputation. This study also examines 247 companies that are analyzed using Mann-Whitney test. Findings from this study reveal that there is no significant difference between the audit quality of companies that have repeated and non-repeated audits. However, this study indicates that there is a significant difference in the audit quality of a company that is audited by the big 4 and non-big 4 audit firms. Based on the result, it can be suggested that auditor rotation is not necessary to enhance the audit quality since independent auditors tend to sustain their reputation and maintain their service qualifications.

Auditor independence, auditor ethics, auditor experience, and due professional care on audit quality

Abstract: Public accountants are exceptionally important to give certainty to clients that the financial statements introduced by the organization can be trusted, but the risk of misstatement will in any case exist despite the fact that it has been evaluated by a Public Accounting Firm. This study expects to analyze the components that influence audit quality that can lessen the risk of misstatement in the presentation of financial statements, specifically auditor independence, auditor ethics, auditor experience, and due professional care. The subject in this study were employees who worked as auditors at the Tangerang’s Public Accounting Firms. This type of research is a causal study with a convenience sampling method. The research period was completed during the Coronavirus pandemic from March to June 2020. The hypothesis test method used in this research is multiple regression analysis. The results of this study are auditor independence does not affect audit quality, auditor ethics does not affect audit quality, auditor experience has positive effect on audit quality, and due professional care has positive effect on audit quality. This research is expected to be a reference in making decisions by auditors based on audit considerations possessed by an auditor to improve audit quality, especially from the experience and due professional care of the auditor.

Big Data Analytics and Audit Quality: Evidence from Canada

Abstract: AbstractThis paper aims to understand better how Big Data and Big Data Analytics (BDA) affect professional judgement, audit performance and perceived audit quality in Canadian audit firms. Our findings are based on semi-structured interviews conducted with audit professionals firms. This research evidence suggests that auditors’ skills and competence to perform engagement activities are assertively affected by BDA in audit methodology. Auditors benefit from being able to visualise audit evidence so they can use it to guide their professional judgement and decision making. We found evidence that the early stages of adopting data analytics and implementing are inefficient, but they save auditors’ time as the tools get more familiarised. Finally, we documented that auditing professionals can use analytics to gain more insight into clients’ business and offer them insights, which leads to confidence in clients.KeywordsBig DataBig Data AnalyticsAuditCanadian audit

State Audit's Supervision, Guidance and Utilization of Internal Audit in China

Abstract: In the relevant regulations and practices of the use of internal audit by state audits, there are problems that the functional boundaries of audit institutions' supervision and guidance of internal audit are ambiguous, and the methods and degrees of internal audit use lack legal constraints. These problems will undermine the independence and objectivity of internal audit and affect the quality and authority of state audit. This article focuses on considerations for determining this boundary.

Regulatory intervention and audit quality: new evidence from audit firm suspension

Abstract: Purpose This paper aims to examine how auditors respond through audit fees and audit quality following disciplinary actions imposed by audit regulators in an emerging market setting. Design/methodology/approach This paper uses the disciplinary actions in 2017 against two major audit firms in China as an exogenous shock to examine the effect of tougher enforcement actions on auditor behavior as reflected in their emended audit fees and audit quality. This paper sampled from publicly listed firms in China with requisite data for the period 2015 through 2018. Using a difference-in-differences model, this paper examines whether the enforcement action (i.e. the suspension of audit firms) significantly impacted the audit fees and audit quality for clients of the disciplined audit firms (hereafter, suspended audit firms) in the two-year period postsuspension relative to audit firms that were not disciplined (hereafter, nonsuspended audit firms). Findings This paper finds evidence of increased audit fees and improved audit quality by the suspended audit firms relative to the nonsuspended audit firms in the two-year period postsuspension. These findings suggest that in contrast to symbolic disciplinary actions such as public censures documented in prior literature (Boone et al.,2015), tougher punitive disciplinary actions are followed by an increase in audit fees and an improvement in audit quality by the suspended audit firms. This paper also finds that the deterrent effect from the audit firm suspension is exclusive to the penalized audit firms and had no positive spillover effects on their peers. Research limitations/implications A limitation of this study is the focus on the effect of audit firm suspension against two large local audit firms in China. Given the unique characteristics of the Chinese audit market and the Chinese regulatory environment, our findings may not be generalizable to audit firms in other countries and jurisdictions, especially where the audit market is dominated by the international Big 4 auditors that possess greater brand name capital than second-tier local audit firms. Originality/value This paper provides novel evidence on the impact of strengthened enforcement on auditor behavior in an emerging market setting. This paper contributes to the existing literature examining the impact of regulatory interventions on financial reporting outcomes and audit quality. While there is evidence on how regulations affect financial statement preparers’ demand for high audit quality, there is limited research on how regulatory interventions affect auditor’s incentive to supply higher audit quality. This paper also contributes to the scant existing evidence on the effect of disciplinary actions against audit firms in emerging economies.

Auditors' Incentives and Audit Quality: Non-Audit Services versus Contingent Audit Fees

Abstract: I develop a model that provides new insights into the consequences of the provision of non-audit services (NAS) by audit firms to audit clients. I also investigate the joint implications of NAS and contingent audit fees (CAF) for audit quality. In the model, litigation and reputation costs do not provide sufficient incentives to auditors to exert audit effort. Investors of client firms may therefore let auditors provide NAS because of an incentive effect. Indeed, the possibility of providing NAS contingent on detecting financial misstatements increases auditors' incentives to exert audit effort. However, the provision of NAS also reduces auditor independence, which may decrease audit quality and in turn render the provision of NAS by auditors undesirable. Thus my analysis uncovers an interesting tradeoff for regulators between the positive incentive effect and the decrease in auditor independence. Removing the current restrictions on CAF may offset the ex post decrease in audit quality while preserving the ex ante incentives. My analysis also generates a number of testable empirical predictions.

Are joint audits associated with higher audit quality?

Abstract: This paper investigates and assesses whether a joint audit engagement results in higher audit quality compared to a single audit given audit firms’ characteristics and complexity of their clients’ activities. The research adopts a survey-based questionnaire sent to external auditors of five audit firms with international affiliation including two Big 4 firms to assess their perceptions about whether joint audit improves audit quality compared to a single audit. Also, interviews with audit partners and professors of auditing were made to check the reliability of the survey. Descriptive and inferential statistics are used to test the research hypotheses. The results reveal that joint audit enhances the quality of the audit as auditors in joint audits deliver high audit quality and ensure continuity with the client. The results also confirm the importance to perform joint audit engagements involving one of the Big 4 with one audit partner possessing industry specialization related to the audit engagement. However, no variation was found in audit quality in a joint audit compared to a single audit for listed companies compared to non listed companies even when there are discrepancies in the joint audit partners’ level of competence and experience. The study is among the first to survey the impact of joint audits compared to single audits on audit quality in an emerging economy. The study identifies valuable insights and provides recommendations to audit firms, professional and oversight bodies, and government to encourage the use of joint audits versus single audits to improve audit quality

Audit committee members’ proximity to corporate headquarters and audit fees

Abstract: Purpose This study aims to investigate how audit committee members’ geographical location relative to corporate headquarters affects audit fees. The motivation for the paper rests on the observation that regulatory and market trends have significantly affected the composition of boards of directors and audit committees. To ensure that audit committees play their monitoring role, regulations now require directors’ independence and some level of financial expertise. The need to find directors who meet these requirements, as well as the advent of globalization and technological improvements lead firms to expand their reach when looking for directors. Design/methodology/approach The authors use a sample of 1,517 firm-year observations of Canadian firms from 2008 to 2017. The study relies on multivariate analyses. Findings The results show that, among nonlocal audit committee members, the presence of foreign directors is associated with higher audit fees. In contrast, other nonlocal audit committee members do not have a differential impact on audit fees. This effect is more prevalent in large firms. Moreover, having a foreign chair of the audit committee as well as foreign audit committee members who are not accounting experts appear to accentuate the increase in audit fees. A possible explanation for the finding is that, from the supply side, auditors assign a higher risk to firms with a higher percentage of foreign audit committee members. Alternatively, from the demand side, firms with foreign audit committee members may ask for more audit effort. Further analysis indicates that having a higher percentage of foreign audit committee members is associated with a higher likelihood of restatements, an indication of low audit quality. Originality/value To the best of the authors’ knowledge, this study is the first to document that auditors price the location of audit committee members and consider it when planning for their audit.

New development: Marketization versus politicization in a perpetual strive for public audit independence

Abstract: IMPACT This article contributes to the debate about audit independence by providing insight into the different phases of the audit process and how and why audit activities are subject to influence from different interests. This insight can be used by regulators who are interested in developing policies to improve audit quality.

The Effect of Auditor Independence and Complexity on Audit Quality and Its Impact on the Reputation of the Auditor Institution – Survey of the Supreme Audit Agency (BPK) Representative of South Sumatra

Abstract: Purpose: (i) Analyze and test the effect of auditor independence and complexity on audit quality; (ii) Analyze and test the effect of auditor reputation in mediating independence and audit quality. Methodology: This study uses descriptive analysis, a type of quantitative research, which, when viewed from the data analysis method used, uses a Likert scale measurement. This study uses primary data sources. The survey method is distributing questionnaires to auditors who work at BPK RI Representatives of South Sumatra. Findings: Audit independence has a positive and significant effect on audit quality. the increasing independence of auditors will improve audit quality, audit independence has a positive and significant effect on the reputation of the institution. This is with increasing auditor independence will improve the reputation of the institution, the complexity of the audit has a positive and significant effect on audit quality means that every increase in audit complexity will improve audit quality, audit complexity has a positive and significant impact on the reputation of the institution. This condition means that every increase in audit complexity will increase the reputation of the institution. , Audit quality has a positive and significant effect on the reputation of the institution. The condition means that every increase in audit quality will improve the reputation of the institution Originality/Value: This study is to improve the quality of the financial auditing agency in the South Sumatra region in terms of contributions regarding the independence and complexity of auditors on audit quality and their impact on the reputation of the auditor institution where it is necessary to increase audit complexity in connection with improving audit quality in addition to audit complexity. in accordance with the hypothesis, therefore the formulation of further research for. The recommendations are expected to be why audit complexity is proven to provide an increase in audit quality and not the other way around. As for the variables of independence and audit quality, it is proven to have a positive effect on the reputation of the institution, thus recommendations to the agency to improve the reputation of the institution in terms of independence and audit quality.

The effectiveness of internal auditing in the public sector in zambia

Abstract: Purpose: This paper aims at examining factors that have an impact on internal audit effectiveness in the public sector. The objective of this study was to device a model that can be used in the public sector to enhance a sound internal auditing system that will boost financial accountability and quality audit work. The study focused on three independent variables such as management support for internal audit activity, organizational independence on the internal audit work, and the adequate of competent internal audit staff. Methodology: In order to achieve this, a quantitative survey research design was chosen as the research paradigm underpinning the study using structured questionnaires as data collection tool to a sample of 172 respondents comprising of internal auditors and users of internal audit services who were systematically randomly sampled. Results: The study findings revealed that both management support and organizational independence were low and that internal audit office of the sampled ministries and parastatals had low technical staff proficiency which limited its capacity to provide effective service. In line with the findings, the study recommended that: (i) the management should appreciate the role of IA by providing the necessary resources and trainings. (ii) Government should ensure that the independence of IA is guaranteed for them to work without fear or interference. (iii) Government should recruit and retain Internal Audit candidates based on their qualifications, experience, training attained and certification by the IIA. The research is limited with the issue of generalizability on other settings; therefore, a similar study can be conducted in the private sector using a mixed method approach.

Audit features of the first ifrs financial statements

Abstract: Abstract. This article focuses on the financial audit of the first financial statements prepared in accordance with International Financial Reporting Standards (IFRS). Also, the article examines the requirements for the training, maintenance and design of workers in accordance with International Standards on Auditing (ISA) 230 «Audit documentation». The article identifies the main objectives, relevance and need for an audit of the first IFRS financial statements. The main sources of information for such an audit have been formed. The article analyzes the requirements for the first IFRS financial statements. Based on these requirements, the criteria are formed according to which the auditor will check the correctness of the transition of the company from national to international standards. Also, the main audit procedures that will be applied by the auditor in performing such an audit are identified. The research identified the importance of an audit of IFRS accounting policies. The criteria by which the auditor will verify the compliance of the applied accounting policy with the requirements of international standards are defined. The article identifies and analyzes the role of proper use of reasonable cost in the transition to international standards. There are requirements for such application, which will be important when auditing the correctness of the first IFRS financial statements. The article provides an overview of the transformation file of the transition to IFRS as one of the important sources of information for the audit. The procedure of transition from national to international standards with the help of a transformation file is analyzed. The importance of the auditor’s use of such a transformation file is determined. The research of the audit of the first financial statements in accordance with IFRS, allowed to form the requirements for audit documentation in accordance with the requirements of ISA. The main composition of the audit documentation that the auditor should have upon completion of the audit of the first IFRS financial statements is indicated. Keywords: audit, auditor’s report, IFRS, ISA, IFRS financial statements. JEL Classification M41 Formulas: 0; fig.: 2; tabl.: 1; bibl.: 13.

Professional Considerations for Audit Risk in Creating Smart Governance in Indonesia

Abstract: This study aims to determine how different audit considerations determine risk between certified auditors and non-certified auditors. This study uses an empirical study approach using an experimental method. Experiments without control (natural) are carried out through audit cases encountered in the field during the audit process. This study's participants were 52 auditors with two categories, namely 26 participants with certified auditors and 26 participants for non-certified auditors. Data collection using the deployment of instruments after the field audit process is carried out. Based on the one-way analysis of the Annova test data, it shows that there are significant differences in audit considerations in determining risk between certified auditors and non-certified auditors. Certified auditors have more professional competence in providing audit considerations in determining risk. The problem of work culture for uncertified auditors is a residual risk that is difficult to detect and can lead to audit failure. Professional certified auditors' competence in providing risk considerations will encourage the formation of smart governance, given that auditors are a synergistic catalyst in organizational processes. Practical recommendations to the leadership of a government institution, especially state universities in Indonesia, that the internal auditors in a university, together with the leadership and the authorized departments, need to establish a risk map in a university leadership provision auditors. To always improve competence in the form of expertise certification training in the audit field. Professional judgment in determining audit risk by looking deeper into the theory of judgment decision making (Connolly, Arkes, and Hammond, 2000). The research approach used a study conducted by Fukukawa and Mock (2011). This study uses internal auditors at state universities in Indonesia, where an experiment is designed to determine internal audit risk. The determination of audit risk will ensure that the audit is right on target, effective, and efficient.