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Abstract\nPLAIN LANGUAGE SUMMARYOffices of inspector general (OIGs) have become an important part of the United States government, located in virtually every agency and providing oversight through audits and investigations that examine fraud, waste, abuse, ineffectiveness, and inefficiency. Yet, scholars know little about their activities. Conventional wisdom suggested that investigations would be favored over audits partially because the OIGs would want to bolster their reputation with Congress and the public. This research examines 11 departmental OIGs to explore whether investigations are prioritized over audits, especially in the context of declining budgets. Quantitative workforce data from the U.S. Office of Personnel Management show that contrary to expectation these OIGs largely prioritize auditing through an allocation of more full-time equivalent (FTE) employees. Budget data, adjusted for inflation, show that funding since the 2010s was flat followed by marked increases for some OIGs during the Trump Administration, which doesn’t help explain these priorities; however, a qualitative analysis of statutes shows Congress assigns auditing tasks more often than investigative tasks. Overall, this mixed methods research provides preliminary evidence that OIGs’ desire to maintain or improve their reputation and be responsive to Congress leads them to focus on improving agency performance and helping their agencies fulfill their missions.Since 1978, Congress has been passing laws that create watchdog agencies, known as offices of inspector general (OIGs). Today nearly every federal agency has one. OIGs are charged with two primary tasks: investigating violations of criminal or administrative law and auditing management processes. It was thought that OIGs would make investigations a priority over audits because catching bad guys would provide them with positive reputations among Congress and the public. This research examines data from 11 federal OIGs from the last 12 years to test this hypothesis. We found that 10 of the 11 OIGs had assigned more full-time staff to audits than to investigations, which was contrary to expectations. Budget data from the same time shows that the majority of these OIGs had flat budgets, which didn’t provide definitive evidence of why audits had been prioritized over investigations; however, a review of statutes showed that Congress had assigned auditing tasks more often than investigative tasks. Overall, this research provides preliminary evidence that OIGs pursue positive reputations among Congress and the public by focusing on improving management processes and helping their agencies fulfill their missions. [ABSTRACT FROM AUTHOR]

Automated employment decision tools use machine learning, artificial intelligence, predictive analytics, and other data-driven approaches to enhance candidate experiences and streamline employment related decision-making, allowing human resources to be concentrated where they are needed most. However, the use of these tools without appropriate safeguards has resulted in a number of high-profile scandals in recent years, particularly in regard to bias. Accordingly, lawmakers have started to propose laws that require bias audits of automated employment decision tools to examine their outputs for subgroup differences. The first of its kind was New York City Local Law 144, but other US states have since followed suit. In this paper, we examine the concerns about the effectiveness of this and other similar laws, including the suitability of metrics, the scope of the law, and low levels of compliance. We conclude that despite the law being a good initial first step towards greater transparency around automated employment decision tools and reducing bias, examining outcomes alone is not sufficient to prevent bias elsewhere in the tool. Moreover, effective bias prevention will require a multidisciplinary approach that combines expertise in IO psychology, law, and computer science to develop appropriate metrics and maximize the enforceability of such laws. [ABSTRACT FROM AUTHOR]

The Audit Law emphasizes that at this stage, the development of digital economy technology is changing rapidly, and audit technology must keep pace with the development of digital economy technology in order to better improve the quality of audit work and better serve the overall development of social economy. At present, the development of artificial intelligence audit in China has roughly experienced three stages of computerized audit, computer audit and intelligent audit, of which the intelligent audit stage emphasizes the use of machine learning to obtain human perception ability, with human-like prediction ability, and finally achieve independent access to data, independent analysis of data, independent adaptation to the environment, independent planning tasks, and independent decision-making.Based on the appeal background, this article aims at the hot and difficult problems in the process of audit transformation and upgrading under the background of artificial intelligence, and puts forward the digital process of audit work through the level of "intelligent + audit", in order to help the healthy development of China's audit cause. [ABSTRACT FROM AUTHOR]

Drawing on an analysis of 208 articles, this paper argues that while the fraud literature varies on the diagnosis of fraud, it is rooted in a common narrative as to its nature and causes. Specifically, this paper adopts an investigative approach to understand how fraud is often researched and shapes audit policies and practices. The findings reveal that fraud is generally looked at as an individual and/or organizational phenomenon, thereby allowing the meso-level of analysis to escape scrutiny. A gap, therefore, exists in being able to detect fraud at the meso-level, such as in financial services (i.e., LIBOR rigging). A meso-level analysis of fraud will allow researchers to highlight problems across the general field like the banks rigging the LIBOR or distorting the currency market as in the forex scandal. A meso-level analysis of fraud is important because it highlights the contagious behavior across the field and offers insights for fraud prevention and detection. Recognizing this unique epistemology will allow researchers to uncover new knowledge and not remain wedded to a reified understanding of fraud and fraud risks. Policymakers can derive insights and draft policies that reflect practitioners' needs. [ABSTRACT FROM AUTHOR]

The construction of a scientific and usable audit evaluation indicator system is a major issue to be addressed in the theoretical research and practical development of auditing of natural resource assets. Existing research can be summarized into three perspectives: the reference perspective of sustainable development evaluation model, the selection perspective of assessment indicators in natural resource and environmental management authorities, and the perspective of audit content analysis. However, the established evaluation indicator system ignores the function of audit findings in audit evaluation and has further encountered application bottlenecks, then hinder the advancement of this reform task for promoting ecological civilization. Thus, based on government audit laws and practices, this study proposes a perspective of integrating audit and evaluation, which maintains that the audit evaluation indicator should be constructed based on audit findings, and carries out the audit evaluation by way of a mark-deducting logic according to actual audit findings in each audit program. This new perspective promotes the organic unity of audit evaluation and audit findings in the dimensions of evaluation logic and evaluation basis. And from this perspective, the study proposes a concrete scheme for the construction of the evaluation indicator system in the auditing of natural resource assets, which includes establishing first-level indicators focusing on responsibility, establishing secondary indicators focusing on audit findings, setting weight according to the characteristics of authority and responsibility, determining mark-deducting standards according to audit practice, implementing evaluation according to the attribution relationship, calculating scores by deduction and bonus points, and determining constraint issues in evaluation. Furthermore, using the provincial-level leading officials' outgoing audit evaluation as an example, this study constructs the specific evaluation indicator system based on 35 audit programs implemented by the National Audit Office. The indicator system includes 6 first-level evaluation indicators, 26 second-level evaluation indicators, and 72 third-level evaluation indicators. The perspective of integrating audit and evaluation reflects the thought that audit evaluation comes from audit practice and could be used in audit practice, opens up a new horizon for theoretical research on outgoing audit evaluation, and further promotes this ecological civilization system to improve supervision efficiency in practice. [ABSTRACT FROM AUTHOR]

Copyright of FinanzRundschau is the property of De Gruyter 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.)

We study the real effects of certification to demonstrate the value of mandatory certification over and above mandatory disclosure in enhancing investment efficiency. In our model, a firm's manager selects a project to maximize the firm's short‐term stock price, which is a function of her certification and disclosure decisions about the outcome of the project. Although the manager might be either forthcoming or strategic with regard to the disclosure of her private information, she can strategically choose whether to incur a cost or not to certify her disclosure, unless mandated. The manager always selects the first‐best project when both certification and disclosure are mandatory. However, when certification is voluntary, project selection is inefficient. In addition, mandating disclosure without mandating certification can lead to lower investment efficiency than mandating neither. In justifying why mandatory certification is beneficial for public firms, our results offer a note of caution regarding the contemplated regulatory moves for increased disclosures by public firms without corresponding certification requirements, for example, the recent SEC proposal requiring extensive climate‐related disclosure. [ABSTRACT FROM AUTHOR]

Copyright of Business Consultant / Poslovni Konsultant is the property of FINconsult Ltd. 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.)

Copyright of Collected Papers of the Law Faculty of the University of Rijeka / Zbornik Pravnog Fakulteta Sveučilišta u Rijeci is the property of Pravni fakultet Sveucilista u Rijeci 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.)

Based on a quadratic form of audit tenure in explaining audit quality, we estimate a reference point that is potentially optimal for audit firm rotation for 22 countries across legal regimes with high versus low levels of investor protection. We find that our estimate for the high investor protection regime is longer than that for the low investor protection regime (24 years vs. 14 years for our main measure). However, very few firms from our sample would have been affected if there were a requirement of a mandatory rotation term, suggesting that mandatory audit firm rotation may not be necessary. In additional analyses, we not only evaluate the empirical validity of the quadratic form but also use various measures of our key variables, to conduct several other robustness tests. We continue to find a longer optimal point for countries with stronger investor protection in these robustness tests. Our findings imply that stronger country-level investor protection is a substitute for a shorter term of mandatory audit firm rotation. [ABSTRACT FROM AUTHOR]

Biased evaluation of evidence exists when an auditor either over-emphasizes evidence that supports management assertions or over-emphasizes evidence against management assertions. This study examines if an auditor’s advocacy attitudes lead to bias in information search for audit evidence. We measure the range of advocacy attitudes of individual auditors and hypothesize that auditors at either end of the advocacy spectrum may impede the objectivity of evidence gathered. Results from 60 Big 4 auditors indicate that advocacy attitudes affect both initial judgments and consequent search strategies of auditors. When initial judgments are client-favorable, all auditors exhibit search strategies focused on finding evidence to take a more conservative position; however, when initial judgments represent an unfavorable client position, auditors with lower advocacy attitudes exhibit a stronger tendency to search for additional evidence against a client-favorable position, consistent with a confirmation bias. Conversely, auditors with more neutral attitudes plan a more objective search effectively mitigating the bias. Aggregate findings establish an important link between bias and information search that may manifest itself in auditor training procedures and be of interest to auditing regulators. [ABSTRACT FROM AUTHOR]

As the universe of potential response options to address mental health-related calls for service continues to grow, it becomes increasingly important to understand how police make decisions during interactions with mental health involvement. This study evaluates the levels of variability in the preferred course of action police select to address these encounters. We employ vignette-based surveys in two police agencies to evaluate the level of disagreement in the preferred categorical outcomes of calls involving people with mental illness. To understand factors that contribute to levels of variation in responses, we randomly assigned participants to one of two variations each vignette, which modifies a single element of the scenario. We find extensive evidence of 'pattern noise', or variability in the preferred course of action when dealing with mental health calls for service. This disagreement is observed across jurisdictions, among both patrol and command staff, and in varied situational contexts. The application of noise audits in law enforcement agencies can help to quantify the level of alignment in how decisions are made among both patrol officers and by leadership. This process can facilitate efforts to align organizational decision-making. • The application of noise audits in policing can help quantify the level of alignment in decision-making among patrol officers and leadership. • Noise audits are a novel evaluation method that policing can use to identify the magnitude of variation in decision-making. • Context influences officer decision-making in mental health calls for service, but not always. • Different variables affect the level of agreement across officers when making outcome decisions about mental health calls for service. • Command staff and line levels officers don't always agree on how to handle calls for service involving persons with mental illness. [ABSTRACT FROM AUTHOR]

Copyright of Business Consultant / Poslovni Konsultant is the property of FINconsult Ltd. 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.)

The theory of convenience suggests that financial threats and possibilities, organizational opportunities to commit and conceal wrongdoing, as well as personal willingness for deviant behavior determine the likelihood of white-collar crime. When there is suspicion of white-collar crime, public and private organizations tend to hire fraud examiners from audit firms and law firms to reconstruct past events and sequences of events. This article links findings in fraud examination reports regarding crime convenience to the extent of corruption in the respective countries. Research results suggest that white-collar crime convenience increases as the extent of crime in a nation increases. The empirical research presented in this article is exploratory with a number of shortcomings that need to be addressed in future studies. [ABSTRACT FROM AUTHOR]

SYNOPSIS: The Big 4 accounting firms have expanded their legal service arms to historic proportions over the last decade, employing thousands of lawyers around the world. Although most of the Big 4's revenue from legal services is presently generated outside the U.S., they are now making inroads into the U.S. legal market, and rule changes are being considered that would further allow the Big 4 to offer legal services in the U.S. This essay summarizes the current status of Big 4 firms as legal service providers, discusses potential implications of legal offerings for their U.S. audit practices, and suggests directions for future research. Our proposed research questions are informed by several literatures, interviews with former Big 4 partners and practicing attorneys, and a survey of the general public. They center on the fundamental difference between audit and law practices, brand equity considerations, and culture changes within the Big 4. [ABSTRACT FROM AUTHOR]

A smart contract is a digital protocol (software code) that enables automated monitoring and executing contract's provisions without the need for intermediaries. Blockchain technology allows implementing smart contracts through a distributed ledger, but has no reliable way of enforcing legal rules. For example, in networks such as Bitcoin, it is possible to engage in illegal activities such as money laundering and dealing in weapons. In addition, it is impossible to enforce and audit legal costs such as taxes and duties. This research has devised a plan that allows official institutions to enforce the rules and audits efficiently during automatic execution process of smart contracts. This article discusses five important challenges in applying legal rules to Blockchain: the accreditation to the contracting parties' and the goods' nature, collecting legal costs, enforcing territorial laws and auditing. We present "Hyper Smart Contract", a method for regulating Blockchain-based smart contracts and assess the limitations of the current generation of smart contracts on Ethereum to ensure a proper implementation of this plan. The performance of proposed method evaluated on a motivation application. [ABSTRACT FROM AUTHOR]

This study investigates auditors’ reactions to a new audit support system that was designed by a Big 4 firm as a response to a stricter regulatory regime. The system’s features guide audit teams to comply with the firm’s methodology and auditing standards. Understanding auditors’ reactions is important because they influence the effectiveness of the system as a control. Our analysis of internal documents from the firm and interviews we conducted with auditors identifies that, although many of the system’s features could have been used as a coercive control, this was not the case. The auditors viewed the system positively and reported that it enables the effective delivery of audit engagements. Two primary factors explain their reaction: (1) management’s interventions during system deployment, and (2) how the system’s design ensures compliance by providing audit teams with constrained choices in applying the system’s recommendations. These factors developed an auditor’s sense of empowerment by leveraging their skills and knowledge. Empowerment became stronger following management interventions that encouraged audit teams to challenge the system’s recommendations. We compare how auditors reacted to the new system with prior research, and document how this system’s features are changing auditor behavior and increasing the frequency and timeliness of audit team interaction. This analysis demonstrates that, when used as a process control, an audit support system can have unintended consequences for auditor behavior and interaction. More generally, this study highlights that to understand how technology impacts auditor behavior, it is important to examine the technology’s design and deployment. [ABSTRACT FROM AUTHOR]

The importance of fostering more accurate audits has been heightened by a series of high-profile accounting scandals at the beginning of the millennium. These scandals prompted more stringent regulations over corporate governance and financial reporting and the creation of audit oversight bodies as the Public Company Accounting Oversight Board (PCAOB) in the United States and the Public Oversight Board (POB) in the United Kingdom. In parallel, the growing globalization of business has brought forth calls for adherence to a common set of International Financial Reporting Standards (IFRS). Even if a common standard is promulgated, it will not lead to similar results if implementation differs across countries. Therefore, it is important to investigate the auditing regulatory regimes in different nations and the status of cross-border audit inspections. Accordingly, we begin by describing the cross-national institutions (e.g., the International Federation of Accountants [IFAC]) that impact national regulatory choices. Then we survey the audit regulatory practices of public company auditors of a select group of major economic powers and based on this analysis, we discuss the challenges and obstacles to engaging in intra-national audit, cross-national audit/inspections, and the challenges posed by differences in auditing standards used in various linked (e.g., by joint ventures, etc.) nations. We include in this discussion the effects of national culture, investor legal protection, economic development, and differing financial standard sources. [ABSTRACT FROM PUBLISHER]

The Audit Board of Indonesia (BPK), as an independent audit institution, was mandated by the 1945 Constitution to perform investigative audits to declare state losses. In the process of exercising its authority, BPK encounters issues related to its own organizational reputation. The objective of this research is to identify and examine how the auditor’s independence affects the quality of an investigative audit and its effect on the credibility of the BPK. The main finding of the study is that the auditor’s independence as a value has a positive impact on the BPK’s reputation, which is represented by the quality of investigative audits. [ABSTRACT FROM AUTHOR]

The framers of the Sarbanes–Oxley Act (SOX) presume that nonaudit services (NASs) lower the quality of financial statements, so they have prohibited auditors from offering most NASs. In addition, regulators believe that NASs may cause the auditor to be perceived as “dependent” in appearance, thus increasing information risk, even if they have no impact on the quality of financial statements. The authors investigate two hypotheses using pre-SOX data. First, they ask whether the proportion of NASs fees to total fees has a positive or negative association with the ability of financial statements to predict a firm’s future cash flows, which can be considered a measure of the quality of the statements. Second, they ask whether the proportion has a negative or positive association with the cost of capital (COC) and the bid/ask spread, controlling for the predictability. The COC and the bid/ask spread serve as proxies for information risk. Contrary to the proponents of prohibiting NAS, the authors find that the proportion of NASs fees to total fees has a positive association with predictability. Controlling for the quality of financial statements, NASs still have a negative association with the COC and the bid/ask spread as proxies for information risk. These findings suggest that NASs improve the quality of financial statements and reduce information risk. [ABSTRACT FROM PUBLISHER]

The article focuses on the effect that mandatory audit partner rotation has on the quality and perceptions of quality for audits in Taiwan. It states that absolute and signed abnormal accruals were used as proxies to determine audit quality. It comments that the audits weren't significantly different in quality compared to companies that did not rotate auditors in that year. It examines the earnings response coefficient of companies subject to mandatory audit partner rotation to determine perceptions of audit quality and found it was not significantly different than companies not subject to the audit rotation. It mentions that the U.S. has had mandatory audit partner rotation since the 1970s, and that the rules were strengthened with the Sarbanes-Oxley Act of 2002.

The Sarbanes-Oxley Act of 2002 requires the lead audit or coordinating partner and the reviewing partner to rotate off the audit every five years so the engagement can be viewed ''with fresh and skeptical eyes.'' Using data obtained from actual audits by multiple U.S. offices of three large international audit firms, we examine whether there is a relationship between evidence of reduced audit quality, measured by estimated discretionary accruals, and audit partner tenure with a specific client. We find that estimated discretionary accruals are significantly and negatively associated with the lead audit partner's tenure with a specific client. Thus, audit quality appears to increase with increased partner tenure. After controlling for client size and engagement risk, we find audit partner tenure significantly and negatively associated with estimated discretionary accruals only for small clients with partner tenure of greater than seven years, regardless of risk level. We also find that tenure is not significantly associated with estimated discretionary accruals for large clients. This suggests that as partner tenure increases, auditors of small client firms become less willing to accept more aggressive financial statement assertions by managers, and that partner tenure does not affect audit quality for large clients or for shorter-tenure smaller clients. Our results relating to audit partner tenure are consistent with the conclusions about audit firm tenure by Geiger and Raghunandan (2002); Johnson, Khurana, and Reynolds (2002);Myers, Myers, and Omer (2003); and Nagy (2005) and extend their findings by focusing on individual audit partners rather than on audit firms. [ABSTRACT FROM AUTHOR]

In the aftermath of one of the worst financial and accounting scandals, the SEC and other regulatory bodies have initiated a flurry of reforms designed to improve corporate governance and to hopefully deter future abuses. The Sarbanes-Oxley Act of 2002 (SOA) has imposed harsher penalties on errant directors and officers and significantly enhanced the role and responsibility of audit committees and independent directors. But the suggested reforms so far have failed to address the major problem that still besets corporate America today. Namely, the agency costs of managing corporations: CEOs, CFOs, and other directors and officers serve their entrenched-insular interest to the detriment of shareholders. In this article, we intend to survey the landscape of the recent suggested reforms, especially as they relate to accounting and audit failures, and evaluate their effectiveness in terms of their ability to alleviate the agency cost of conducting business. We will also offer a proposed reform which we believe can be an effective deterrent to financial and auditing failures. [ABSTRACT FROM AUTHOR]