The Effect of Type of Internal Control Report on Users’ Confidence in the Accompanying Financial Statement Audit Report*

2011 ◽  
Vol 29 (1) ◽  
pp. 152-175 ◽  
Author(s):  
STEPHEN KWAKU ASARE ◽  
ARNOLD WRIGHT
Keyword(s):  
Internal Control ◽  
Financial Statement ◽  
Audit Report ◽  
Financial Statement Audit

scholarly journals PEMERINTAH KABUPATEN MUSI RAWAS PROVINSI SUMATERA SELATAN BERDASARKAN HASIL PEMERIKSAAN BPK-RI ATAS LAPORAN KEUANGAN PEMERINTAH DAERAH TAHUN 2015

2016 ◽  
Vol 4 (1) ◽  
pp. 885
Author(s):  
Tevi Leviany
Keyword(s):  
Control System ◽  
Local Government ◽  
Internal Control ◽  
Financial Statement ◽  
Regional Government ◽  
Audit Report ◽  
Financial Reports ◽  
Financial Accountability ◽  
Internal Control System ◽  
Audit Reports

Abstract. The Audit Board of The Republic Indonesia in implementing audit on Local Government Financial Reports  to assess the accountability of regional financial not only gave assessment on the qualification of audit report in forms of auditors’ opinion but also inside the audit of Local Government Financial Reports. The auditors also assess the effectiveness of internal control system which applied in regional government and compliance towards the laws. The problem was the weakness of financial accountability that occurred in government of Kabupaten Musi Rawas Provinsi Sumatera Selatan year 2015 acquired Qualified Opinion. The purpose of this research was to do deeper analysis towards Audit Reports on Regional Government Financial Statement of Kabupaten Musi Rawas by using content analysis to get complete description of Regional Government Financial Statement Accountability condition in Kabupaten Musi Rawas, especially observed from the effectiveness of internal control system. According to the result of analysis, it was concluded that the problem of effectiveness of government internal control of Kabupaten Musi Rawas was most found related with the weakness of Control Environment , Risk Assessment and Monitoring.Keywords: Financial Accountability; Audit Report; Internal Control System Abstrak. BPK – RI dalam pelaksanaan audit atas LKPD (Laporan Keuangan Pemerintah Daerah) untuk menilai akuntabilitas keuangan daerah tidak hanya melalukan penilaian atas kewajaran laporan keuangan dalambentuk pernyataan opini auditor saja, namun  lebih dari itu dalam kerangka audit LKPD tersebut, auditor juga melakukan penilaian atas efektivitas sistem pengendalian intern yang diterapkan pemerintah daerah tersebut serta kepatuhannya terhadap peraturan perundangan yang berlaku. Permasalahan lemahnya akuntabilitas keuangan juga terjadi pada pemerintah kabupaten Musi Rawas Provinsi Sumatera Selatan yang untuk tahun 2015 memperoleh Wajar dengan Pengecualian (Qualified Opinion). Tulisan ini bermaksud melakukan kajian yang lebih mendalam terhadap Laporan Hasil Pemeriksaan (LHP) atas Laporan Keuangan Pemerintahan Daerah  Kabupaten Musi Rawas dengan menggunakan analisis isi untuk memperoleh gambaran yang lebih lengkap mengenai kondisi akuntabilitas keuangan pemerintah Kabupaten Musi Rawas, khususnya dilihat dari sisi efektivitas sistem pengendalian intern. Berdasarkan hasil analisis disimpulkan bahwa permasalahan efektivitas sistem pengendalian intern pemerintah kabupaten Musi Rawas paling banyak dijukmpai terkait kelemahan komponen Lingkungan Pengendalian serta pada komponen Penilaian Resiko dan Pemantauan. Hasil uji F Statistik sebesar 135,06 menunjukan bahwa secara keseluruhan perencanaan pajak berpengaruh terhadap nilai perusahaan, sehingga hipotesis awal Ho penelitian ini.Kata Kunci: Akuntabilitas Keuangan; Hasil Pemeriksaan; Sistem Pengendalian Intern.

scholarly journals Auditors’ Liability for Failure to Detect Fraud: Lessons Learned from Recent American Case Law

2021 ◽  
pp. 19-28
Author(s):  
Stephen Errol Blythe, Ph.D., Ph.D, J.D.
Keyword(s):  
Case Law ◽  
Legal Liability ◽  
Lessons Learned ◽  
Financial Statement ◽  
Audit Report ◽  
Securities Fraud ◽  
Publicly Traded ◽  
Financial Statement Audit ◽  
Client Firm ◽  
American Case

Auditors are occasionally sued for their failure to detect fraud in the client firm during an audit. These lawsuits are typically grounded in professional negligence, negligent misrepresentation, fraud, aiding and abetting fraud, or federal securities fraud. The PCAOB recently promulgated AS 2401, “Consideration of Fraud in a Financial Statement Audit,” which contains fraud-related Generally Accepted Auditing Standards (GAAS) applicable to audits of publicly-traded entities. An auditor’s failure to comply with GAAS may be evidence of professional negligence. U.S. states are divided as to whether an auditor’s averment of compliance with GAAS in an audit report is a statement of opinion or a statement of fact. An auditor’s failure to investigate evidence indicating potential fraud is one factor used to determine an auditor’s legal liability. An auditor may be able to use the doctrine of in pari delicto as a defense if the plaintiff is also a wrongdoer.

Dickinson Technologies, Inc.: Assessing Control Environment and Fraud Risk

2003 ◽  
Vol 18 (1) ◽  
pp. 71-78 ◽  
Author(s):  
Christopher P. Agoglia ◽  
Kevin F. Brown ◽  
Dennis M. Hanno
Keyword(s):  
Risk Assessment ◽  
Internal Control ◽  
Financial Statement ◽  
Risk Assessments ◽  
Background Information ◽  
Control Environment ◽  
Abstract Concepts ◽  
Fraud Risk ◽  
Financial Statement Audit ◽  
Fraud Risk Assessments

This instructional case provides you an opportunity to perform realistic audit tasks using evidence obtained from an actual company. Through the use of engaging materials, the case helps you to develop an understanding of the control environment concepts presented in SAS No. 78 (AICPA 1995), Consideration of Internal Control in a Financial Statement Audit, and fraud risk assessment presented in SAS No. 99 (AICPA 2002), Consideration of Fraud in a Financial Statement Audit. This case involves making a series of fraud risk assessments based on company background information and a detailed and realistic control environment questionnaire, which provide you a context that makes the often abstract concepts relating to control environment and fraud risk assessment more concrete.

SOX 404(b) Audits: Evidence from Auditing the Financial Close Process of the Accounting System

2019 ◽  
Vol 34 (3) ◽  
pp. 77-103
Author(s):  
Diane J. Janvrin ◽  
Maureen Francis Mascha ◽  
Melvin A. Lamboy-Ruiz
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Internal Controls ◽  
Data Availability ◽  
Financial Statement ◽  
Accounting System ◽  
Audit Process ◽  
Financial Statement Audit ◽  
Multiple Method ◽  
Access Controls

ABSTRACT Auditing Standard No. 5 requires that auditors integrate their evaluation of large issuers' internal control over financial reporting (ICFR) into their financial statement audit process, but the PCAOB warns that auditors may not adequately test related manual and systems internal controls. We use a multiple method approach to examine how auditors evaluate one important component of ICFR, the financial close process, and whether they evaluate it differently when conducting a SOX 404(b) integrated versus a financial statement audit. Interviewees relied heavily on walkthroughs, and tended to perform only cursory reviews of entity-level controls related to the financial close process. In addition, they often failed to test the link between the general ledger and supporting systems, including evaluating related access controls. Financial statement-only auditors were more likely to re-perform key controls than rely on cursory walkthroughs. Auditors performing integrated audits appeared to over-rely on ICFR findings when conducting financial statement audits. Data Availability: Interview data are available from the first author. PCAOB inspection reports are publicly available.

The Strategic Effects of Auditing Standard No. 5 in a Multi-Location Setting

2015 ◽  
Vol 35 (1) ◽  
pp. 119-138 ◽  
Author(s):  
Evelyn R. Patterson ◽  
J. Reed Smith
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Private Information ◽  
Financial Statement ◽  
Top Down ◽  
Control Strength ◽  
Financial Statement Audit ◽  
Financial Misstatement ◽  
Strategic Effects

SUMMARY Auditing Standard No. (AS) 5 provides guidance in the required audit of internal control over financial reporting and its integration into the financial statement audit. AS 5 advocates a “top-down” approach, in which control testing helps the auditor assess the risk of financial misstatement across multiple locations. We consider a manager who oversees two locations and who has private information about internal control strength in each location. Only when controls are weak can the manager commit fraud. We show how the manager's opportunity to commit fraud and informational characteristics of internal control tests impact the manager's probability choice of fraud and the auditor's choice of substantive test effort.

Market reactions to the internal control reporting presentation format: combined vs separate audit reports

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hyeesoo (Sally) Chung ◽  
Sudha Krishnan ◽  
John Lauck ◽  
Jinyoung Wynn
Keyword(s):  
Internal Control ◽  
Negative Impact ◽  
Unintended Consequences ◽  
Financial Statement ◽  
Presentation Format ◽  
Market Reactions ◽  
Content Type ◽  
Financial Statement Audit ◽  
Material Weaknesses ◽  
Audit Reports

PurposeThis paper aims to investigate whether the stock market reacts to presentation options available to auditors under AS 2 (providing separate financial statement audit and internal control over financial reporting [ICOFR] audit reports, or presenting a combined report with both audit opinions). Design/methodology/approachDrawing on psychology theory, the authors hypothesize that presenting material weaknesses in ICOFR with an unqualified financial statement audit in a combined report effectively dilutes the weight placed on the material weaknesses perceived by investors. The authors further hypothesize the presentation format effect to vary by type of material weaknesses since some material weaknesses are considered more serious than others. The authors examine ICOFR and audit reporting and cumulative abnormal return data from 2007 to 2017 using two-stage least squares regression analysis. FindingsThe results show that a combined report of ineffective ICOFR and unqualified financial statement audit reduces the negative impact of material weakness disclosures on stock price reactions, but only when the weaknesses involve more serious entity-wide controls, as opposed to controls over specific accounts. Practical implicationsThe findings help inform preparers, auditors, regulators and investors about the potentially unintended consequences of reporting format choice. Originality/valueThe findings contribute to the literature on internal control disclosures by demonstrating that market reactions to these disclosures depend not only on the types of material weaknesses disclosed but also on their presentation format.

scholarly journals ANALISIS OPINI AUDIT TERHADAP KINERJA ORGANISASI

2018 ◽  
Vol 9 (1) ◽  
pp. 104-115
Author(s):  
Sunarmin Sunarmin
Keyword(s):  
Significant Influence ◽  
Financial Statements ◽  
Financial Statement ◽  
Audit Report ◽  
Non Profit ◽  
Audit Opinion ◽  
Community Institution ◽  
Financial Statement Audit ◽  
Public Company ◽  
Government Institution

Financial Statement Audit is an audit conducted by an independent auditor of the financial statements presented by his client to express an opinion on the fairness of the financial statements. The audit report is a formal medium used by the auditor to communicate to interested parties about the conclusions of the audited financial statements. In issuing the audit report, the auditor must comply with the 4 reporting standards set forth in the generally accepted auditing standards.This analysis is a review of several sources, including from manuals, published studies, legislation published by state organizers as well as some information from media news. This analysis is much related to the phenomenon that has become a source of news in June 2017 and related to the role, function and benefits of the opinion audit conducted by external audit of the organization, both non-profit objectives and expanded to profit organizations. This analysis aims to be more convincing whether there is a significant influence on audit opinion on organizational performance.The result of this analysis can be concluded that, the existence of audit opinion from result of examination conducted by independent accountant, apparently have a very significant influence to the good performance for non-profit organization (government institution, community institution), or profit organization (public company).

Accelerated Filing Deadlines, Internal Controls, and Financial Statement Quality: The Case of Originating Misstatements

2015 ◽  
Vol 29 (3) ◽  
pp. 551-575 ◽  
Author(s):  
Colleen M. Boland ◽  
Scott N. Bronson ◽  
Chris E. Hogan
Keyword(s):  
Internal Control ◽  
Internal Controls ◽  
Data Availability ◽  
Financial Statement ◽  
Similar Increase ◽  
Section 404 ◽  
Regulatory Changes ◽  
Rule Change ◽  
Initial Decrease

SYNOPSIS We examine whether regulations requiring accelerated filing deadlines and internal control reporting and testing affect financial statement reliability. Unlike prior research, we examine whether these regulatory changes are associated with an increase in the likelihood that misstatements originate in the period following the respective change. If the implementation of these rules causes a misstatement, then the misstatement would most likely occur in the period immediately following the rule change. We provide evidence that accelerated filers (AFs) experience an increase in the likelihood of an originating misstatement following the acceleration of filing deadlines from 90 to 75 days. Large accelerated filers (LAFs), however, do not experience a similar increase following this acceleration or the subsequent acceleration from 75 to 60 days. After the implementation of the SOX Section 404 internal control requirements, we find that the likelihood of an originating misstatement declined for AFs but not for LAFs. Taken together, the findings suggest that, although AFs experienced an initial decrease in financial statement reliability, this decrease was temporary. Data Availability: Data are publicly available from the sources identified in the text.

An Analysis of the Demand for Reporting on Internal Control

2000 ◽  
Vol 14 (3) ◽  
pp. 325-341 ◽  
Author(s):  
Heather M. Hermanson
Keyword(s):  
Decision Making ◽  
Financial Reporting ◽  
Internal Control ◽  
Operational Definition ◽  
Financial Statement ◽  
Individual Investors ◽  
Internal Auditors ◽  
Additional Information ◽  
User Groups ◽  
Definition Of

The purpose of this study is to analyze the demand for reporting on internal control. Nine financial statement user groups were identified and surveyed to determine whether they agree that: (1) management reports on internal control (MRIC) are useful, (2) MRICs influence decisions, and (3) financial reporting is improved by adding MRICs. In addition, the paper examined whether responses varied based on: (1) the definition of internal control used (manipulated as broad, operational definition vs. narrow, financial-reporting definition) and (2) user group. The results indicate that financial statement users agree that internal controls are important. Respondents agreed that voluntary MRICs improved controls and provided additional information for decision making. Respondents also agreed that mandatory MRICs improved controls, but did not agree about their value for decision making. Using a broad definition of controls, respondents strongly agreed that MRICs improved controls and provided a better indicator of a company's long-term viability. Executive respondents were less likely to agree about the value of MRICs than individual investors and internal auditors.

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