Search

Changes in the audit industry after the Sarbanes-Oxley Act, including mandatory audits of internal control over financial reporting and PCAOB oversight and inspection of audit work, have potentially changed the nature and extent of audit sampling in the largest accounting firms. However, little academic evidence exists on these firms' current audit sampling policies (Elder, Akresh, Glover, Higgs, and Liljegren 2013). As such, we administer an extensive, open-ended survey to the national office of the Big 4 and two other international accounting firms regarding their firm's audit sampling policies. We find variation among the largest auditing firms' policies in their use of statistical and nonstatistical sampling methods and in inputs used in the sampling applications that could result in different sample sizes. Sampling experts' internal reviews indicate that projecting and resolving identified misstatements is one of the biggest difficulties that audit engagement teams face when using sampling techniques. Finally, we present evidence that some firms have significantly changed their approach to revenue testing due to PCAOB inspections. This evidence provides important insights into current sampling policies and presents opportunities for future research. [ABSTRACT FROM AUTHOR]

In this study, we examine the impact of conditional conservatism on audit fees and, more importantly, the influence of corporate governance on this relationship. Prior literature presents evidence regarding explanations for the existence and pervasiveness of accounting conservatism such as compensation and debt contracting, shareholder litigation, taxation, and accounting regulation. However, there is very limited evidence or discussion of the potential benefit of accounting conservatism on audit risk and thus audit fees, and how the potential benefit can be attenuated by corporate governance quality. Using a sample of firm-year observations over the period of 2004- 2009, we provide evidence consistent with conditional conservatism and firms' commitment to such conservatism reducing their audit fees. However, our evidence shows that this reduction in audit fees is moderated by higher corporate governance quality. These results have implications for auditors, regulators, standard setters, and firms' managers. In addition, our study extends the literature on the determinants of audit fees. [ABSTRACT FROM AUTHOR]

Recently, the Public Companies Accounting Oversight Board (PCAOB) solicited public comments on its Staff Consultation Paper Auditing Accounting Estimates and Fair Value Measurements. This commentary summarizes the contributors' views on the various questions asked in the PCAOB Staff Consultation Paper. Our comments submitted to the PCAOB appear below. [ABSTRACT FROM AUTHOR]

The growth of managerialism has led to the expansion of technologies of control and monitoring within prisons, including key performance targets and audits. A longer-standing method of prison regulation is provided by HM Inspectorate of Prisons ( HMIP). This article draws upon ethnographic research in order to consider how inspection is located in the context of managerialism. The article explores the structure of inspection and the micro-processes of practice and culture. It is argued that prison inspection provides a distinctive form of monitoring that is concerned with the lived experience of imprisonment rather than management systems and promotes values of humanity as opposed to those of economic rationality propagated by managerial practices. [ABSTRACT FROM AUTHOR]

This study develops a framework for a continuous data level auditing system and uses a large sample of procurement data from a major health care provider to simulate an implementation of this framework. In this framework, the first layer monitors compliance with deterministic business process rules and the second layer consists of analytical monitoring of business processes. A distinction is made between exceptions identified by the first layer and anomalies identified by the second one. The unique capability of continuous auditing to investigate (and possibly remediate) the identified anomalies in ''pseudo-real time'' (e.g., on a daily basis) is simulated and evaluated. Overall, evidence is provided that continuous auditing of complete population data can lead to superior results, but only when audit practices change to reflect the new reality of data availability. [ABSTRACT FROM AUTHOR]

Prior studies document a negative market reaction to going concern opinions. We extend this literature by focusing on the link between the going concern opinion and the cost of equity capital. Using two different samples (one comprising distressed firms and the other matched on propensity score), we document a significant positive association between the issuance of the going concern opinion and the firm's subsequent cost of equity capital. This result is robust to sensitivity tests using various subsamples, time periods, and multiple methods for computing the cost of equity capital. We also examine the association between changes in the audit opinion (going concern to clean opinion and vice versa) and subsequent changes in cost of equity. We find that the cost of equity increases between 3.3 percent and 5.7 percent for firms that receive a first-time going concern opinion. This evidence illuminates the relevance of going concern opinions and the value of the information embedded in them. [ABSTRACT FROM AUTHOR]

In the current market conditions with the active development of the regulatory framework of audit in accordance with the requirements and principles of international standards there is an objective need for the development of theoretical positions and practical aspects of the scientific organization of internal audit as a basis for on-farm audit system reform. Place and role of the internal audit system are clarified in the present study as well as its classification, which is given here and in this work is also proposed a sequence of on-farm audit in public institutions in the present study. [ABSTRACT FROM AUTHOR]

Opponents of mandatory rotation argue that a change of partner is bad for audit quality, as it results in a loss of client-specific knowledge. On the other hand, proponents argue that a change of partner is beneficial, as it results in a positive peer review effect and a fresh perspective on the audit. We test the impact of mandatory partner rotation on audit quality using a unique dataset of audit adjustments in China. Our results suggest that mandatory rotation of engagement partners results in higher quality audits in the years immediately surrounding rotation. Specifically, we find a significantly higher frequency of audit adjustments during the departing partner's final year of tenure prior to mandatory rotation and during the incoming partner's first year of tenure following mandatory rotation. [ABSTRACT FROM AUTHOR]

The article discusses how document management corporation Xerox's government and transportation unit Technology Delivery Center (TDC) used the International Organization for Standardization (ISO) 9001:2008 Standard to transform its quality management system (QMS) and grow its business profitability. Topics include the creation of a process on page (POP) for key performance processes, the plan's execution, including adding POPs to the TDC's process asset library (PAL), and audit planning. INSET: RAPPIN' ITS HEAD AROUND QUALITY.

We look at the battle over moves to impose mandatory audit firm rotation in a bid to improve auditor independence and audit quality. And the author asks: Is a game of musical chairs the real answer to the issues relating to auditor independence, objectivity, and professional skepticism? [ABSTRACT FROM AUTHOR]

Investments in sportsmen traditionally were considered as costs, together with transfer fees. From the second half of the twentieth century transfer fees are considered as assets. However, in the late twentieth and early twenty-first centuries the opinion prevailed that requirements for capitalization are met, and that capitalization and disclosure as intangibles are an obligatory procedure in almost all countries with a developed accounting tradition. There is the question of justification of the above procedure, having in mind that the contribution of the contracted fee for transfers cannot be determined related to the financial benefit of clubs, that players are often alienated before the end of the contract, and that the requirements for the control cannot be fully met. [ABSTRACT FROM AUTHOR]

This study investigates whether reading case responses and using graphic organizers can assist students in developing case analysis skills, such as identifying supporting arguments and counterarguments in analyses of financial accounting policy choices. The results of an experiment indicate that students who studied an exemplar case response were better able to identify supporting arguments in a subsequent case analysis. In contrast, students who used a graphic organizer to visualize elements of the exemplar case response were better able to identify the absence of counterarguments, which provide support for alternative accounting choices, in a subsequent case analysis. The effects of these pedagogical tools were apparent not only when students evaluated others' case analyses, but also when they generated their own analyses of a subsequent case. These results are significant because they suggest that short (11-minute) instructional interventions can encourage students to adopt two key aspects of critical thinking: identifying and generating relevant arguments and counterarguments. [ABSTRACT FROM AUTHOR]

The setting-up of national audit authorities in the 2007-2013 programming period has considerably strengthened the control arrangements for cohesion expenditure in Member States. How these bodies are organised differs across the European Union, generally reflecting the administrative structure of each Member State. This article provides information on the 'cost of control' of auditing cohesion expenditure. It is based on data provided by audit authorities in response to a European Court of Auditors' survey in the context of a recent audit published in December 2013 as Special Report No 16/2013 under the title 'Taking stock of 'single audit' and the Commission's reliance on the work of national audit authorities in Cohesion'. [ABSTRACT FROM AUTHOR]

The author discusses three auditing policy-related initiatives where he believes that the U.S. Securities and Exchange Commission (SEC) can provide more support to the Public Company Accounting Oversight Board (PCAOB) and one that it can pursue on its own. These include the standard audit report, engagement partner identification and accounting firm governing or advisory boards. It mentions the rule proposed by the PCAOB requiring auditors to disclose critical audit matters in the audit report.

Copyright of Accounting Perspectives is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

There has been an increasing international focus on "conflict minerals," which are sourced from mines in Central Africa and believed to benefit armed groups that engage in serious human rights abuses. In August 2012, the U.S. Securities and Exchange Commission (SEC 2012) issued a final rule (Release No. 34-67716) related to implementing new disclosures required by the Dodd-Frank Act that are aimed at dissuading publicly-traded companies from engaging in trade that supports conflict minerals. Beginning in 2014, many publicly traded companies will be required to issue Conflict Minerals Reports, and have the reports independently assured. For the first time, there is an SEC audit requirement for corporate social responsibility information. Significant uncertainty surrounds the nature of the requisite audit procedures and the form and content of the audit reports themselves. For example, issuers have the option of engaging auditors for either an attestation engagement or a performance audit. We summarize the SEC's final rule, with particular focus on the audit requirement, and discuss some challenges that audit firms face. [ABSTRACT FROM AUTHOR]

On May 7, 2013, the Public Companies Accounting Oversight Board (PCAOB) solicited public comments on its reproposed exposure draft of the Auditing Standard on Related Parties (Docket 038: Proposed Auditing Standard on Related Parties and Related Amendments to PCAOB Auditing Standards). The two-month comment period ended on July 8, 2013. This commentary summarizes the contributors' views on this exposure draft. [ABSTRACT FROM AUTHOR]

In today's legal environment, auditors who fail to detect fraud face potentially extreme liabilities because of the possibility of biased juries and other factors that can result in extreme legal liabilities for auditors. This paper summarizes a recent study ("The Impact of Audit Penalty Distributions on the Detection and Frequency of Fraudulent Reporting"; Burton et al. [2011]), which used an experimental economics research method to investigate how the legal liability for failing to detect fraud influences auditors' efforts to detect financial reporting fraud and auditees' commission of such fraud. The experiments show that a penalty system that is not subject to extreme legal liabilities for the auditor, but has the same expected value (i.e., average penalties) as a system that is subject to extreme liabilities, increases auditors' effort to detect fraud and decreases fraudulent reporting by auditees. [ABSTRACT FROM AUTHOR]

The reality for auditors is that, during the audit process, they will experience emotional reactions, such as liking or disliking toward client personnel, or anxiety about components of tasks. Auditors also may experience different moods while conducting audits. Research reveals that an important consequence of auditors experiencing emotions and moods is that these reactions can influence their decision making. We provide a summary of the results and practice implications associated with several studies in a stream of research that has examined the impact of auditors' emotions and moods on audit judgments. [ABSTRACT FROM AUTHOR]

On January 15, 2013, the International Auditing and Assurance Standards Board (IAASB) solicited public comments on the exposure draft of its consultation paper entitled A Framework for Audit Quality (the Framework). The four-month comment period ended on May 15, 2013. This commentary summarizes the contributors' views on this exposure draft (the exposure draft and related information are available at: http://www. ifac.org/publications-resources/framework-audit-quality). This consultation paper makes great strides toward meeting the IAASB's strategy of "enhancing the quality of assurance" and "supporting global financial stability." The threeby- three design (attributes of audit quality coupled with engagement, firm, and national levels; see page 24 of the Framework) and detailed outline of inputs, outputs, context, and interactions provides practitioners, regulators, and other stakeholders with a common audit-quality roadmap for implementation, communication, and research agendas. As financial systems continue to become more integrated, the Framework supports the global financial system and economic stability by providing worldwide coordination of the expectations of auditors, regulators, investors, and other stakeholders. We also believe that the Framework should be of great use to auditing academics and doctoral students, both as a teaching and research tool. Summarized below are our specific comments on specific issues raised in the consultation paper. [ABSTRACT FROM AUTHOR]

On March 26, 2013, the Public Company Accounting Oversight Board (PCAOB) solicited public comments on its exposure draft of the Proposed Framework for Reorganization of PCAOB Auditing Standards and Related Amendments to PCAOB Auditing Standards and Rules. The comment period ended on May 28, 2013. This commentary summarizes the contributors' views on this exposure draft (the exposure draft and other related information are available at: http://pcaobus.org/Rules/Rulemaking/ Pages/Docket040.aspx). [ABSTRACT FROM AUTHOR]

Properly understanding the economic role of auditing standards is an important step toward improving both audit effectiveness and efficiency. In this essay, I observe that auditing standards are most important when an auditor may have an incentive to under-audit. While this conclusion may not come as a surprise, the conditions under which standards may, or may not, have a desirable effect on audit quality are less obvious. More specifically, I present a number of observations about what standards can do: Standards can (1) compensate for the lack of observability of the audit outcome by focusing on the audit process; (2) partially mitigate the information advantage possessed by the auditor as a professional expert that might motivate the auditor to under-audit; (3) counterbalance the diversity of demand across multiple stakeholders that might drive the audit to the lowest common denominator and create a market based on adverse selection; and (4) provide a benchmark that facilitates the calibration of an auditor's legal liability in the event of a substandard audit. However, I also present a number of observations about what standards should not try to do: Standards should not (1) discourage the use of judgment by auditors; (2) limit the potential demand for economically valuable alternative levels of assurance; (3) lead to excessive procedural routine or standardization in the conduct of the audit; and (4) be set based on an enforcement agenda. In the end, standards overreach may undermine the economic value of the audit to many stakeholders and lead to fee pressure for audit firms. Hopefully, these insights can inform future debates about the level and types of standards that are appropriate for the auditing profession. [ABSTRACT FROM AUTHOR]

Designed to be used in an undergraduate or Master's auditing course, this Case asks students to evaluate work performed on the financial statement audit of a private wholesale merchandiser. Through this evaluation, students can uncover issues relating to gaining knowledge of a client and its environment, risk assessment, materiality, audit strategy, and specific audit procedures for the revenue/receivables/ receipts accounting cycle. The Teaching Notes provide support both for instructors who ask students to prepare the Case in advance of class and for instructors who instead assign the Case for analysis in real-time during class, whereby the Case is read aloud paragraph-by-paragraph and issues are discussed as they are detected. [ABSTRACT FROM AUTHOR]

Copyright of Zeszyty Teoretyczne Rachunkowości is the property of Stowarzyszenie Ksiegowych w Polsce Rada Naukowa and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper addresses the paucity of research surrounding the mandatory auditing of for-profit private and not-for-profit companies in Australia. We document the various mandatory auditing provisions under the Corporations Act and identify over 22 000 companies that lodge audited accounts with the regulator under federal law. In 2011, 6339 large proprietary companies, 186 small proprietary companies, 2797 foreign-owned companies, 3985 unlisted public companies and 8404 public companies limited by guarantee had an obligation under the Corporations Act to lodge audited accounts. While large proprietary and foreign-owned companies have an option to apply to the Australian Securities and Investment Commission for audit relief, we estimate that less than 10% are granted audit exemption. We document that since 1995 an additional 1500 large proprietary companies that should have lodged under the size provisions of the Corporations Act have been granted exemption from doing so (i.e., grandfathered), although these firms appear to be subject to an annual audit even though they do not lodge accounts. We estimate the costs and discuss the potential public interest and firm-level benefits associated with the mandatory auditing of for-profit private and not-for-profit companies in Australia. [ABSTRACT FROM AUTHOR]

This article is one in a series of two publications concerning companies' detection of accounting engineering operations in use. Its conclusions and methods may be applied to external auditing procedures. The aim of the present duo-article is to define a method of statistical analysis that could identify procedures falling within the scope of a framework herein defined as accounting engineering. This model for analysis is meant to be employed in these aspects of initial financial and accounting audit in a business enterprise that have to do with isolating the influence of variant accounting solutions, which are a consequence of the settlement method chosen by the enterprise. Materials for statistical analysis were divided into groups according to the field in which a given company operated. In this article, we accept and elaborate on the premise that significant differences in financial results may be solely a result of either expansive policy on new markets or the acquisition of cheaper sources for operating activities. In the remaining cases, the choice of valuation and settlement methods becomes crucial; the greater the deviations, the more essential this choice becomes. Even though the research materials we analyze are regionally-conditioned, the model may find its application in other accounting systems in the country, provided that it has been appropriately implemented. Furthermore, the article defines an innovative concept of variant accounting. [ABSTRACT FROM AUTHOR]

Corporate scandals and the global financial crisis have cast doubt over auditors' integrity and credibility. At the heart of this doubt lies increasing concerns over the issue of auditor independence. New Zealand like the rest of the developed world, in an attempt to restore faith in its financial markets, has embarked on a number of reforms. Audit independence issues are increasingly fuelled by concerns raised over the significant amounts of revenue being collected by external auditors for nonaudit services.Questioning audit independence is not new and has been the subject of extensive research. The research found that respondents were aware of the importance of independence to the profession and largely agreed with the changes that were being made to the Code of Ethics. Given the importance placed by the share market and other stakeholders, on the independence of the auditor, this study will be of significance to those who have an interest in the work performed by auditors. [ABSTRACT FROM AUTHOR]

This paper investigates the successful resolution of audit challenges faced by auditing professionals. We use an experiential questionnaire (EQ) (Gibbins and Qu 2005) to elicit practicing auditors' experiences with resolving challenges personally encountered on an audit engagement. One hundred ninety-seven auditing professionals from all levels (staff to partners) and firm types (local to Big 4) responded to our EQ, and 130 provided complete information about a self-identified challenge they had encountered. Over 70 percent of these challenges were successfully resolved wherein communication with other auditors on the engagement, along with communication with the client, aided most in the resolution process. These results provide evidence confirming theory-based research indicating the importance of knowledge sharing for CPAs (Vera-Muñoz et al. 2006). Our findings also extend prior research on the components of professional judgment (Gibbins and Emby 1985; Emby and Gibbins 1988; Gibbins and Mason 1988) by providing insight into the potentially troublesome area of challenges that are often encountered during an audit, and how effective communication can lead to successful resolution of such challenges. [ABSTRACT FROM AUTHOR]

This study investigates whether workload pressures, as proxied by the audit busy season (i.e., December fiscal year-end date) and auditor workload compression (i.e., relative concentration of companies with the same fiscal year-end date in an auditor's client portfolio), affect audit quality. Using a sample of 8,384 firm-year observations during the period 2006-2009, we find that busy season companies exhibit greater magnitudes of abnormal accruals and are more likely to meet or beat certain earnings benchmarks. Additional tests show that these associations are enhanced by the degree of auditor workload compression. Prior experimental and survey research indicates that workload pressures lead to dysfunctional behaviors and lower audit quality among individual auditors. Our archival findings suggest that these pressures can transcend the quality control mechanisms of a firm, affecting quality at the audit engagement level. [ABSTRACT FROM AUTHOR]

This research finds that local government-controlled companies are able to obtain more favorable audit opinions from local auditors when they face the need for new equity financing or the threat of exchange delisting. We capture this ability by comparing the observed opinions that companies receive from local auditors with those that we predict they would receive if they used a Big 4 auditor. Our empirical results highlight the importance of understanding political and economic institutions when analyzing the reporting behavior of managers and auditors in a transition economy, and suggest that regulators should be aware of the unintended consequences of basing capital market resource allocation decisions on reported accounting earnings, which can be subject to significant managerial discretion. [ABSTRACT FROM AUTHOR]

The Sarbanes-Oxley Act of 2002 (SOX) effectively bars an auditor from providing nonaudit services to an audit client based on the belief that the resulting economic bonding undermines the auditor's independence and quality of the audit (U.S. House of Representatives 2002). The accounting profession has strongly debated this view and counter-argues that auditor-provided nonaudit services benefit the client. We contribute to this debate by examining the effect of auditor-provided nonaudit services on the effectiveness and efficiency of the audit. We find that higher nonaudit service fees are associated with shorter audit report lags-a potential indicator of audit efficiency- prior to the passage of SOX, but such effects dissipate after SOX. We find that discretionary accruals and financial restatements-potential indicators of audit effectiveness- do not increase when shorter audit lags occur in conjunction with high nonaudit service fees. We also find that the firms with the highest levels of nonaudit service fees prior to SOX have the largest increase in audit lags after SOX. These results suggest that there is some merit to the profession's argument that auditor-provided nonaudit services benefit clients without leading to a loss of audit effectiveness. [ABSTRACT FROM AUTHOR]

In cases of alleged audit failure, auditors can make general statements regarding the quality of their work, or other statements intended to decrease juror assessments of auditor negligence. In this study, we examine how the perceived credibility of these remedial defense tactics moderates their effect on juror assessments of auditor negligence in cases of undetected fraud. We predict and find experimental evidence that remedial tactics result in lower negligence assessments when such tactics are perceived to be credible, but "backfire" (i.e., result in higher negligence assessments) when perceived as not credible. We also predict and find that credibility is compromised either when client importance is high, or when a remedial tactic is implemented by an audit firm's local (as opposed to national) office. As such, we find that remedial tactics result in lower negligence assessments when client importance is low and the tactics are implemented by a firm's national office, but result in higher negligence assessments when client importance is high, irrespective of the tactic's source (local versus national). [ABSTRACT FROM AUTHOR]

This study examines investors' response to the disclosure of prior-period waived misstatements under Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in the Current Year. Misstatement correction decisions typically are not observable, and financial statement users have little insight into the disposition of identified misstatements, a dimension of audit and financial statement quality. We find that investors respond negatively to the disclosure of SAB No. 108 misstatements, and this response is associated with the current-period auditor initially waiving the misstatement and client importance. Although SAB No. 108 misstatements were waived under prevailing materiality guidance, our findings suggest that investors interpret SAB No. 108 misstatements as indicating lower perceived audit quality. [ABSTRACT FROM AUTHOR]

As a result of legal and regulatory requirements, audit firms in certain jurisdictions have recently started issuing transparency reports containing information on audit firm governance. In this study we investigate whether audit firm governance disclosure is associated with actual audit quality. Based on a sample of transparency reports of 103 audit firms in a number of EU countries, we find that there is variation in the extent and type of governance disclosures across audit firms. We, however, do not find an association with actual audit quality, apart from a weak association with an audit firm's statement on the effectiveness of its internal quality control system. [ABSTRACT FROM AUTHOR]

The article focuses on the fundamental auditing principles that will be developed by the International Organization of Supreme Audit Institutions (INTOSAI). Members of INTOSAI are being called to use the International Standards of Supreme Audit Institutions (ISSAIs) as reference for public sector auditing and implement them according to national legislation. The promotion of professionalism, credibility and quality in auditing is said to be the purpose of INTOSAI's standard.

The accounting policies and changes in accounting policies are primarily oriented towards the objectives of different interest groups inside the company (management and shareholders). The way to calculate and determine the costs of supplies in MRS 2, it can be shown that with the same operating conditions different financial results may be achived depending on the selected method, or the selected accounting procedure. The aim of this paper is to show that managment of the company by using changes in accounting policies can have short term impact on the financial results and in this way satisfy their own interests. [ABSTRACT FROM AUTHOR]

This paper provides the first evidence that state-level liability standards affect auditor behavior. We hypothesize that auditors demand more conservative reporting when their insurance clients are domiciled in states with more stringent standards for third-party claims against the auditor for negligence. To test this hypothesis, we analyze a sample of 3,107 loss reserve observations from 1993 through 2004. Our sample is restricted to private insurers that operate in a single state to control for auditor liability under statutory law and to reduce the possibility of forum shopping by plaintiffs. Consistent with Petroni (1992), we find that financially struggling insurers tend to under-reserve. This behavior is attenuated when the insurer is domiciled in a state that uses either the Restatement of Torts or the reasonable foreseeability standard to determine the auditor's liability to third parties. Compared to the case where the auditor's liability is defined by the legal concept of privity, these standards impose greater legal costs on auditors for ordinary negligence. [ABSTRACT FROM AUTHOR]

I model unilateral auditor liability under the assumption that the auditor has an aversion to uncertainty about probability (ambiguity aversion). A vaguely defined negligence standard implies an ambiguity situation. There are two characteristics of ambiguity aversion: pessimism and likelihood insensitivity. The former improves the auditor's overall incentives to avoid the worst outcome possible (certainty effect). The latter impairs the auditor's marginal incentives because taking additional care is perceived to be partly futile (futility effect). The futility effect prevails with low damage payments; the certainty effect is dominant with high damage payments. Even with low incentives to sue, an ambiguity-averse auditor exerts excessive care when damage payments are sufficiently large. With strict liability, there is no ambiguity situation and, hence, there are no distortions from ambiguity aversion. Ambiguity aversion affects auditor care in a different way to loss aversion or risk aversion because there is no futility effect with the latter. [ABSTRACT FROM AUTHOR]

Causal inference—that is, determining the "root cause(s)" of an observed anomaly—is one of the most fundamental audit tasks. This study develops an analytical framework to formally model conditions present in many audit settings, and provides illustrations related to performing substantive analytical procedures. We examine four conditions not fully considered in prior research: multiple hypotheses about what may cause an anomaly, multiple items of evidence with varying diagnosticity, observed effects that may not be certain, and hypotheses sets that may not be exhaustive. The results reveal when the following phenomena should occur: (1) discounting or inflating of posterior probabilities, (2) superadditive probabilities of various causes, and (3) unchanged probability of a potential cause given evidence in support of a different cause. The analytical findings have implications for the design and interpretation of experimental auditing research, for educating novice auditors, and for potentially improving audit practice. [ABSTRACT FROM AUTHOR]

At the beginning of this study I have determined the way in which have been taken the European Directive2006/43/CE concerning the International Standards of Audit in the national legislation in Romania and Spain. Then i have realised a comparative analyses International Standards of Audit which refer to the audit Report, applicable in Romania and the Technical audit norm applicable in Spain, analyses where i have identified a series of differences. At the end of research we found out that the identified differences are not significant and therefore it has been demonstrated the research hypothesis, according to which in Romania and Spain have been made important steps in harmonising the financial audit process, so that the juridical and professional frame in the two countries presents several similitude. [ABSTRACT FROM AUTHOR]

As financial statements continue to contain more estimates and audit programs rely more on enquiry-based evidence, there is an increasing need to understand whether the process of enquiry can provide more reliable evidence. Prior research in other disciplines indicates enquiry process improvement is a first step in the direction of improving the quality of evidence obtained from management enquiry. This study explores which type of decision aid—a simple cognitive planning theory-adapted instruction or a detailed checklist developed from auditing field research—is more likely to improve junior auditors' planning for collecting enquiry-based evidence about a specific accounting issue. An experiment was conducted using 154 participants with an average of 12 months of auditing experience. The results show participants receiving the theory-based instruction, in contrast to those receiving no decision aids, planned to pose a greater number of questions and inquire of a larger and more diverse set of client personnel in areas relevant to the accounting issue. Further, these participants planned to corroborate evidence obtained from management enquiry with an increased number of audit procedures other than enquiry. The practice-based checklist resulted in similar overall effects, albeit at the "cost" of having to deal with a more complex aid and with less focus on corroboration by means other than enquiry. This study suggests that both decision aids can lead junior auditors to improve their planned approach to enquiry, and if these plans are executed appropriately, they could lead to more reliable audit evidence generated from enquiry of management. [ABSTRACT FROM AUTHOR]

The need to compile and approve the accounting policies in applying the accounting regulations is provided by the Order no. 3055/2009 for the approval of the accounting regulations consistent with European directives and applicable from January 1st, 2010. These policies should be developed considering the nature of the activity and should be developed by specialists from the economic and technical field who are familiar with the activity carried out and the strategy adopted by the entity and approved by the administrators of the economic entity. When choosing the accounting policies, one must consider the objective of the financial situations, namely to present the precise image of the financial position of the outcome as well as the modification of an entity's financial position. Fiscal rules should not have any role in decisions on accounting policies adopted by the economic entity. Unfortunately, the accounting specialists still remain victims of the habit of thinking the economic transactions in terms of fiscality. There is an artificial dependence of fiscal accounting, maintained by the practice [ABSTRACT FROM AUTHOR]

Copyright of Science & Studies of Accounting & Finance: Problems & Perspectives / Apskaitos ir Finansu Mokslas ir Studijos: Problemos ir Perspectyvos is the property of Vytautas Magnus University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper examines whether local block holdings are associated with audit policy and outcomes. For local investors are long-term investors and they tend to invest a larger portion of their total investment in local companies, I posit that local block holders will be dedicated investors and have strong incentives to monitor management. Consistently I find that companies with local block holders are less likely to have unclean/going-concern opinions, and more likely to have long-term relationships with auditors. In addition, although I find weak evidence that the existence of local block investors affects audit fees, I do not observe any significant difference of audit fees between firms with local block holdings and firms with nonlocal block holdings. Overall, this paper shows that information advantage of local investors can have real effects on audit process through monitoring activities. [ABSTRACT FROM AUTHOR]

The Personal Financial Reporting Project is designed to help students better understand the basics of financial reporting by applying class concepts to their own financial situations. Through a series of monthly assignments, completed over a two- or three-month period, students identify their personal assets and liabilities, determine which of these are included within a balance sheet, develop an accounting system to track changes to their assets and liabilities and recognize revenue and expenses, prepare financial statements, and develop significant accounting policies. After the second assignment, each subsequent assignment builds on the prior part. As such, students must correct errors in the earlier parts to accurately finish the next assignment. The complete project is made up of five parts; however, during some semesters, the project was condensed to include only Parts 2 through 4. The latter approach may be very appropriate for programs on the quarter system. Students report the project enhances their understanding of accounting concepts, improves their ability to prepare accounting reports, helps them understand the articulation concept, and provides them with additional insight into their personal financial situation. The project motivates both top-tier students and those who do not perform as well on exams and quizzes. [ABSTRACT FROM AUTHOR]

With the European Commission making global leadership claims in the field of audit regulation, the content of its 2010 Green Paper on ‘Audit Policy: Lessons from the Crisis’ warrants careful scrutiny. Important issues raised in the Green Paper include regulatory oversight, competition in the audit market, the dangers of having very few firms with the capacity to audit global transnational corporations, professional judgement, innovative audit practices and, last but not least, social responsibility. This article analyses the principal perspectives and assumptions underpinning the construction of the Green Paper. The aims are threefold: to enhance understanding of the contemporary regulatory mindset of the European Commission, contribute to policy debate and inspire future research. [ABSTRACT FROM AUTHOR]

This qualitative study explores whether the impact of the introduction of the legally enforceable Australian Auditing Standards (ASAs) differs between audit firms based on their size. It complements and extends the Australian Government's pre-implementation April 2006 Regulation Impact Statement ( ) and study exploring the perceptions of key stakeholders. The results of the current study, based on data from extensive interviews with auditors from small, medium and large audit firms, suggest that compliance with the legally enforceable ASAs does not appear to increase perceived audit quality or public confidence. The study also finds that the costs/benefits to small audit firms and their clients differ to those of medium and large firms, raising questions about the viability of smaller firms remaining in the audit market. [ABSTRACT FROM AUTHOR]