The Auditor's Reporting Model: A Literature Overview and Research Synthesis

2008 ◽  
Vol 22 (1) ◽  
pp. 69-90 ◽  
Author(s):  
Bryan K. Church ◽  
Shawn M. Davis ◽  
Susan A. McCracken
Keyword(s):  
Future Study ◽  
Historical Development ◽  
Academic Research ◽  
Research Synthesis ◽  
Advisory Group ◽  
Relevant Research ◽  
The Public ◽  
Literature Overview ◽  
Public Company ◽  
Key Questions

This article examines academic research to contribute to the Public Company Accounting Oversight Board's (PCAOB) project on the auditor's reporting model. We develop a framework to organize our discussion of the literature in light of key questions raised at two Standing Advisory Group (SAG) meetings. We trace the historical development of the auditor's report and then delve into relevant research that focuses on the auditor's reporting decision and the content of the auditor's report. Throughout the article, we offer recommendations for future study. Last, we provide a brief recap and summarize the key findings.

scholarly journals Auditing Subsequent Events: Perspectives from the Field

2014 ◽  
Vol 8 (2) ◽  
pp. A10-A24 ◽  
Author(s):  
David N. Herda ◽  
James J. Lavelle
Keyword(s):  
Academic Research ◽  
Research Synthesis ◽  
Securities And Exchange Commission ◽  
The Public ◽  
Public Company ◽  
Research Questions

SUMMARY: A research synthesis team formed by the Auditing Section of the American Accounting Association recently authored a paper (Chung et al. 2013) addressing the audit of subsequent events (SEs). The audit of SEs is a difficult audit area, as approximately one-third of the Public Company Accounting Oversight Board's inspection reports and numerous Securities and Exchange Commission enforcement releases identify deficiencies in this area (Chung et al. 2013). Chung et al. (2013) developed a model and proposed a series of research questions encouraging future academic research in this area. In this paper, we address several of these questions by surveying 76 practicing auditors. We summarize the auditors' responses and present recommendations that may be useful in improving audits of SEs.

Does Recent Academic Research Support Changes to Audit Reporting Standards?

2016 ◽  
Vol 30 (2) ◽  
pp. 255-275 ◽  
Author(s):  
Jean Bédard ◽  
Paul Coram ◽  
Reza Espahbodi ◽  
Theodore J. Mock
Keyword(s):  
Financial Reporting ◽  
Academic Research ◽  
Financial Statements ◽  
Future Research ◽  
Research Support ◽  
The Public ◽  
Market Participants ◽  
Information Gap ◽  
Public Company ◽  
Reporting Process

SYNOPSIS The Public Company Accounting Oversight Board (PCAOB), the International Auditing and Assurance Standards Board (IAASB), and the U.K. Financial Reporting Council (FRC) have proposed or approved standards that significantly change the independent auditor's report. These initiatives require the auditor to make additional disclosures intended to close the information gap; that is, the gap between the information users desire and the information available through the audited financial statements, other corporate disclosures, and the auditor's report. They are also intended to improve the relevancy of the auditor's report. We augment prior academic research by providing standard setters with an updated synthesis of relevant research. More importantly, we provide an assessment of whether the changes are likely to close the information gap, which is important to financial market participants and other stakeholders in the audit reporting process. Also, we identify areas where there seems to be a lack of sufficient research. These results are of interest to all stakeholders in the audit reporting process, as the changes to the auditor's report are fundamental. Additionally, our summaries of research on the auditor's report highlight where there is limited research or inconsistent results, which will help academics identify important opportunities for future research.

Do Strategic Reasoning and Brainstorming Help Auditors Change Their Standard Audit Procedures in Response to Fraud Risk?

2009 ◽  
Vol 84 (3) ◽  
pp. 811-837 ◽  
Author(s):  
Vicky B. Hoffman ◽  
Mark F. Zimbelman
Keyword(s):  
Academic Research ◽  
Strategic Reasoning ◽  
The Public ◽  
Fraud Risk ◽  
Planning Decisions ◽  
Public Company

ABSTRACT: The Public Company Accounting Oversight Board recently reported that its inspections show that auditors fail to effectively modify their standard audit procedures in response to fraud risk. Prior academic research is consistent with this finding. Our study examines the effects of two interventions on auditors' planning decisions in a high-fraud-risk setting: strategic reasoning and brainstorming in groups. Both interventions are predicted to lead auditors to more effectively modify their planned audit procedures. We use a panel of fraud experts to identify effective modifications to the audit plan of a specific fraud case. The experts' recommendations are then used to evaluate the effectiveness of practicing auditors' audit plans with and without the two interventions. We predict and find that each intervention leads to more effective modifications to the standard audit procedures and that the combination of the interventions is not significantly more effective than either intervention used alone.

Response of a Subgroup of the PCAOB's Investor Advisory Group to the PCAOB's Concept Release Concerning Reports on Audited Financial Statements and Related Amendments to PCAOB Standards

2011 ◽  
Vol 5 (2) ◽  
pp. C21-C50 ◽  
Author(s):  
Kelvin Blake ◽  
Joseph V. Carcello ◽  
Norman J. Harrison ◽  
Michael J. Head ◽  
Barbara E. Roper ◽  
...  
Keyword(s):  
Financial Statements ◽  
Capital Allocation ◽  
Financial Statement ◽  
Advisory Group ◽  
Audit Report ◽  
Audit Risk ◽  
The Public ◽  
Public Company ◽  
Risk Areas

SUMMARY Recently, the Public Company Accounting Oversight Board (PCAOB) released a concept release concerning possible revisions to PCAOB standards related to reports on audited financial statements and related amendments to PCAOB standards. The comment letter below, written by a subgroup of the PCAOB's Investor Advisory Group, was recently submitted to the PCAOB in response to the Board's concept release. The subgroup believes that the four most important changes to the audit report would require the auditor to: (1) discuss the auditor's assessment of the estimates and judgments made by management in preparing the financial statements and how the auditor arrived at that assessment, (2) disclose areas of high financial statement and audit risk and how the auditor addressed these risk areas, (3) discuss unusual transactions, restatements, and other significant changes in the financial statements (including the notes), and (4) discuss the quality, not just the acceptability, of the issuer's accounting practices and policies. They further assert that the disclosure of this information will improve investors' ability to make informed buy/sell decisions, which should result in higher returns to investors and improved capital allocation within society.

scholarly journals Audit Quality: Insights from the Academic Literature

2012 ◽  
Vol 32 (Supplement 1) ◽  
pp. 385-421 ◽  
Author(s):  
W. Robert Knechel ◽  
Gopal V. Krishnan ◽  
Mikhail Pevzner ◽  
Lori B. Shefchik ◽  
Uma K. Velury
Keyword(s):  
Audit Quality ◽  
Academic Research ◽  
Future Research ◽  
The Public ◽  
Academic Literature ◽  
Public Company

SUMMARY This study presents a review of academic research on audit quality. We begin with a review of existing definitions of audit quality and describe general frameworks for establishing audit quality. Next, we summarize research on indicators of audit quality such as inputs, process, and outcomes. Finally, we offer some suggestions for future research. The study should be useful to academics interested in audit quality as well as to the Public Company Accounting Oversight Board (PCAOB) and other regulators.

scholarly journals Profiling Membership in the PCAOB's Standing Advisory Group

2019 ◽  
Vol 13 (1) ◽  
pp. A30-A41
Author(s):  
Kelsey Brasel ◽  
L. Tyler Williams
Keyword(s):  
Advisory Committee ◽  
Standard Setting ◽  
Descriptive Study ◽  
Data Availability ◽  
Professional Experience ◽  
Advisory Group ◽  
The Public ◽  
Advisory Boards ◽  
Public Company ◽  
Group Members

SUMMARY The Public Company Accounting Oversight Board (PCAOB) appoints an advisory group known as the Standing Advisory Group (SAG) to provide input on the relevance and appropriateness of its standard-setting agenda. Throughout the year, the PCAOB convenes meetings where the SAG opines on the direction of authoritative guidance on behalf of constituent groups. Our descriptive study provides an overview of the SAG's composition and role in standard-setting and succinctly describes the group members' professional experience since its inception in 2004. Specifically, we examine to what extent the PCAOB assembles the advisory group in consideration of the requirements of the Federal Advisory Committee Act of 1972 (FACA), which mandates appropriate constituent representation on governmental advisory boards. We find that although the PCAOB is not required to meet the requirements of the FACA, the SAG appears to represent an appropriate level and variety of professional experience consistent with other governmental advisory boards. Data Availability: Publicly available.

A Summary of Research and Enforcement Release Evidence on Confirmation Use and Effectiveness

2008 ◽  
Vol 27 (2) ◽  
pp. 253-279 ◽  
Author(s):  
Paul Caster ◽  
Randal J. Elder ◽  
Diane J. Janvrin
Keyword(s):  
Specific Problem ◽  
Academic Research ◽  
Response Rates ◽  
Future Research ◽  
Directional Bias ◽  
The Public ◽  
Public Company ◽  
Audit Evidence ◽  
Research Questions

SUMMARY: Confirmations are extensively used and are often perceived by practitioners to be one of the most persuasive forms of audit evidence. Yet academic research has found limitations that restrict confirmation effectiveness for many management assertions. In addition, a number of problems with false and forged confirmations are identified in Accounting and Auditing Enforcement Releases (AAERs). The Public Company Accounting Oversight Board (PCAOB) and the International Auditing and Assurance Standards Board (IAASB) have put confirmation evidence on their respective agendas. Academic research indicates that receivable confirmations can be effective evidence for the existence assertion. Low response rates, as well as respondent errors and directional bias in detecting errors, are key barriers to confirmation effectiveness. Our review of AAERs identified failure to authenticate responses, collusion between auditee management and customers, and concealed side agreements and special terms as specific problem areas. We also identify a number of research questions for future research.

Auditing Related Party Transactions: A Literature Overview and Research Synthesis

2007 ◽  
Vol 21 (1) ◽  
pp. 81-102 ◽  
Author(s):  
Elizabeth A. Gordon ◽  
Elaine Henry ◽  
Timothy J. Louwers ◽  
Brad J. Reed
Keyword(s):  
Risk Assessment ◽  
Corporate Governance ◽  
Research Evidence ◽  
Relevant Literature ◽  
Academic Research ◽  
Fraud Detection ◽  
Research Synthesis ◽  
Policy Makers ◽  
Related Party Transactions ◽  
Literature Overview

We examine research relevant to auditing related party transactions to contribute to the PCAOB project on this topic and to provide other policy makers, auditors, and academics with an overview of relevant literature. Specifically, we report on the challenges associated with the identification, examination, and disclosure of related party transactions. Additionally, we address issues and research evidence related to nondisclosure and reliance on management assertions, risk assessment, materiality, fraud detection, the effect of related party transactions on corporate governance, and international auditing issues. Overall, we believe that the findings in academic research and the significance of related party transactions in recent prominent fraud cases are consistent with the PCAOB's reconsideration of auditing of related party transactions. We conclude with implications for further research.

Economic Analysis of Proposed PCAOB Standards: Finding a Path Forward

2018 ◽  
Vol 32 (2) ◽  
pp. 183-200 ◽  
Author(s):  
Christine Nolder ◽  
Zoe-Vonna Palmrose
Keyword(s):  
Economic Analysis ◽  
Audit Quality ◽  
Standard Setting ◽  
Current Approach ◽  
Relevant Research ◽  
The Public ◽  
Setting Process ◽  
Public Company ◽  
Tailored Approach ◽  
The U.S

SYNOPSIS The pace of standard-setting by the Public Company Accounting Oversight Board (PCAOB) has been glacial, which increases the risk that U.S. auditing standards are not keeping up with the global audit environment. Legislation enacted in 2012 that created the need to conduct economic analysis of proposed PCAOB standards added important considerations. If appropriately integrated into the process, these considerations can improve PCAOB standard-setting. We describe the PCAOB's current approach to economic analysis and offer recommendations to improve the coherence, usefulness, and relevance of the evidence sought to justify the need for standard-setting. Our recommendations involve a tailored approach that (1) differentiates among types of PCAOB standards based on considering their overarching purpose and target audience; (2) recognizes appropriate theories that are unique to each type of standard—whether economic or other theories; and (3) develops audit-centric core principles focused on audit quality on which to ground the discussion of each proposed standard. We hope our commentary shifts thinking about the approach to economic analysis to improve PCAOB standard-setting, stimulates academic discussion of these and other important issues facing the standard-setting process in the U.S., and inspires relevant research that informs PCAOB standard-setting.

PCAOB Inspections of Smaller CPA Firms: The Perspective of Inspected Firms

2010 ◽  
Vol 24 (2) ◽  
pp. 189-219 ◽  
Author(s):  
Brian Daugherty ◽  
Wayne Tervo
Keyword(s):  
Negative Impact ◽  
Academic Research ◽  
Unintended Consequences ◽  
Publicly Traded ◽  
Investor Confidence ◽  
The Public ◽  
Market Participants ◽  
Sarbanes Oxley ◽  
Public Company ◽  
Inspection Process

SYNOPSIS: We solicit perceptions of the Public Company Accounting Oversight Board’s (PCAOB) inspection process from the leadership of triennial firms (100 or fewer publicly traded audit clients, inspected triennially) receiving their initial inspection. Our research is motivated by a growing stream of academic research related to triennial firms. Practitioners have called for research to determine whether the performance of audits in the Sarbanes-Oxley era may fail to attain the stated objective of enhancing investor confidence in the capital markets. Academics note further PCAOB inspection research can provide important insights into the consequences of PCAOB inspection for auditors and other market participants. In general, smaller respondents reported initial PCAOB inspections resulted in a negative impact on many aspects of their audit practices, while medium and larger firms reported more favorable consequences. Collectively, responding firms evaluated their initial inspection team’s performance favorably, but were more critical of other aspects of the inspection process. Levels of satisfaction with nearly all aspects of PCAOB inspections appear to increase with firm size and the passage of time. We interpret our findings as suggesting the efficacy of PCAOB inspections may be enhanced by focusing on potential unintended consequences and inspection process modifications rather than on inspectors’ qualifications and actions.

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