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In a prior paper by Bible, Graham, and Rosman (2005), the authors provided a theory to predict that electronic work environments were more cognitively complex than traditional paper environments and found evidence consistent with the theory. Auditors reviewing workpapers in an electronic work environment were less able to identify seeded errors than auditors who were working in a traditional paper environment. This paper uses detailed concurrent verbal protocols for a subset of the participants in the previous paper to extend this line of research. Specifically, it examines how strategies in electronic work environments would differ from those in traditional paper environments to accommodate the greater complexity of electronic work environments. Of particular interest are the strategies that are applied by those who performed well in each environment, because they provide insight into the type of behavior to be modeled. Consistent with the theoretical frameworks of audit task complexity (Bonner [1994]), cognitive load (Sweller, van Merriënboer, & Paas [1998]; Ayres [2001]; Kester, Kirschner, van Merriënboer, & Baumer [2001]), and the adaptive decision maker (Newell & Simon [1972]; Payne, Bettman, & Johnson [1993]), the results show that successful auditors tended to navigate less (e.g., plan and acquire information) and process more (e.g., rehearse, corroborate, and confirm information that was in memory) in the electronic environment. The implication of these findings for practice is that auditors can use strategies that appropriately reflect or adapt to the complexity of the task environment. [ABSTRACT FROM AUTHOR]

This study reports the results of an experiment that examines the impact of electronic work environments on auditor performance. It builds on research that has found that electronic work environments are more cognitively demanding than traditional paper environments and, thus, negatively impact performance. Forty-eight auditors with an average of 78 months of audit experience from one Big Four accounting firm participated. Auditors in the electronic work environment were less able to identify seeded errors and to use them properly in evaluating loan covenants than auditors in the traditional paper environment. Given these findings, suggestions are made as to how to maximize auditor performance in an electronic work environment. [ABSTRACT FROM AUTHOR]

An analytic framework is provided for incorporating different user perspectives on materiality into the audit process. The framework serves as a tool for disaggregating materiality to specific accounts based on materiality criteria for accounts and account combinations. To improve audit efficiency, the planning method incorporates the relative cost of auditing various account balances. It extends existing models of audit risk and materiality by considering explicitly the materiality of account combinations (sums and ratios) to enhance audit effectiveness.

This paper considers the challenges in planning the scope of auditing procedures in a group audit setting for an entity with geographically dispersed components which vary in risk characteristics. Auditing all the components for a complex group entity is often infeasible, hence the auditor faces risk from components not audited, as well as the normal sampling risk resulting from applying audit procedures to certain components. Auditing standards do not explain how to consider the risk factors and consider what portion of a multiple component entity should be selected for audit to be able to issue an unqualified audit opinion on the group. In this paper we describe a step‐by‐step method for determining a minimum number of component audits needed to support an aggregate low level of audit risk of material misstatement. The paper responds to calls from academics, practitioners, and standards‐setters for theoretically valid and practically feasible solutions to the group audit problem, using a method that combines professional judgment and experience with basic statistical principles in an ensemble approach. [ABSTRACT FROM AUTHOR]

We synthesize the literature on auditors' evaluation of, and reporting on, internal control over financial reporting (ICOFR), as required by the Sarbanes-Oxley Act. The purpose of the synthesis is (1) to provide information on how and how well auditors perform the task, which serves as feedback to the Public Company Accounting Oversight Board on implementation issues and problems related to auditors' application of the professional standards on ICOFR; and (2) to identify gaps in the current literature and fruitful areas of future research. Consistent with Auditing Standard No. 5, we delineate five phases of the ICOFR audit: (1) planning; (2) scoping; (3) testing; (4) evaluation; and (5) reporting. We structure our synthesis using a framework that classifies the determinants of performance in each phase into five broad areas: (a) the auditor's attributes, (b) the client's attributes, (c) the interaction between the auditor and the client, (d) task attributes, and (e) environmental attributes. Key contributions include providing an ICOFR tasks taxonomy, proposing a model of the determinants of performance for each task, evaluating auditors' performance of the tasks in our taxonomy, highlighting findings and gaps of importance to regulators, and providing a road map for future research. [ABSTRACT FROM AUTHOR]