The Effects of the Internal Control Opinion and Use of Audit Data Analytics on Perceptions of Audit Quality, Assurance, and Auditor Negligence

2021 ◽  
Author(s):  
Dereck Barr-Pulliam ◽  
Helen L Brown-Liburd ◽  
Kerri-Ann Sanderson
Keyword(s):  
Quality Assurance ◽  
Internal Control ◽  
Data Analytics ◽  
Audit Quality ◽  
Financial Statements ◽  
Entire Population ◽  
Statistical Sampling ◽  
Testing Methods ◽  
Audit Failure ◽  
Audit Data

Audit data analytics (ADAs) allow auditors to analyze the entire population of transactions which has measurable benefits for audit quality. However, auditors caution that the level of assurance on the financial statements is not incrementally increased. We examine whether the testing methodology and the type of ICFR opinion issued affect jurors' perceptions of auditor negligence. We predict and find that when auditors issue an unqualified ICFR opinion, jurors make higher negligence assessments when auditors employ statistical sampling than when they employ ADAs. Further, when auditors issue an adverse ICFR opinion, jurors attribute less blame to auditors and more blame to the investor for an audit failure. Additionally, jurors perceive the use of ADAs as an indicator of higher audit quality and are less likely to find auditors negligent. However, jurors do not perceive a difference in the level of assurance provided when auditors use ADAs versus sampling testing methods.

Assessment of the quality of the audits of Vietnamese commercial banks financial statements

2021 ◽  
pp. 232-238
Author(s):  
Thi Thu Ha Le ◽  
Thanh Thuy Pham
Keyword(s):  
Quality Control ◽  
Internal Control ◽  
Commercial Banks ◽  
Audit Quality ◽  
Financial Statements ◽  
Base System ◽  
Internal Control System ◽  
Level Of Knowledge ◽  
Audit Reports

The aim of the research is to assess the quality of the audits of Vietnamese commercial banks’ fi nancial statements in recent years. Two audit quality indicators are used in the assessment: fi rstly, the quality of the audit reports and the audited fi nancial statements; and secondly, the quality of the factors aff ecting audit quality. One of the factors aff ecting audit quality the characteristic of audit organizations such as the scale of the organizations, the level of knowledge in the fi eld of banking audit, Qualifi cations and experience of auditors, Independence of the auditor and the audit organization, Cost of the audit, Audit procedures, Audit quality control. Other factors are quality control of audit of fi nancial statement of commercial banks; communication between banking supervisors; legislative base (system of accounting standards, standards on auditing); and the eff ectiveness of the internal control system (ICS) of commercial banks. To study and assess the quality of the audits of commercial banks’ fi nancial statements, the authors conducted questionnaires, interviews on audit and study of audited accounting (fi nancial) statements. The result of the research indicates that the audits of Vietnamese commercial banks’ fi nancial statements have basically met the quality required by the current auditing standards. However, there are still some shortcomings in audit methodology and procedures, audit reports and audited fi nancial statements. The authors also suggest some measures to the audit fi rms and government bodies to improve the audit quality.

On Controlling for Misstatement Risk

2021 ◽  
Author(s):  
James R Moon ◽  
Jonathan E Shipman ◽  
Quinn T Swanquist ◽  
Robert L. Whited
Keyword(s):  
Internal Control ◽  
Audit Quality ◽  
Financial Statements ◽  
Audit Fees ◽  
Future Research ◽  
Coefficient Estimates ◽  
Recent Approach ◽  
Material Weaknesses ◽  
Ex Ante ◽  
Alternative Approaches

Ex ante misstatement risk confounds most settings relying on misstatements as a measure of audit quality, but researchers continue to debate how to effectively control for this construct. In this study, we consider a recent approach that involves controlling for prior period misstatements (“Lagged Misstatements”). Using a controlled simulation and a basic archival analysis, we show that a lagged misstatement control can significantly bias coefficient estimates. We demonstrate this bias using audit fees as a variable of interest but also show the same issue manifests for other measures that respond to the restatement of misstated financial statements (i.e., internal control material weaknesses and auditor changes). We conclude by discussing alternative approaches for controlling for ex ante misstatement risk and providing guidance for future research.

scholarly journals Determinants Of Enforcement Action By The Financial Supervisory Service Of Korea From The Perspective Of Audit Firms

2015 ◽  
Vol 31 (3) ◽  
pp. 821 ◽  
Author(s):  
Min-Jung Kang ◽  
Ho-Young Lee ◽  
Yong-Sang Woo
Keyword(s):  
Audit Quality ◽  
Financial Statements ◽  
Audit Fees ◽  
Firm Characteristics ◽  
Client Characteristics ◽  
Audit Firm ◽  
Audit Failure ◽  
Enforcement Action ◽  
Audit Firms ◽  
Specific Factors

<p>In this study, we examine the determinants of enforcement action by the Financial Supervisory Service of Korea from the perspective of audit firms. Enforcement action is an indication of audit failure. Both client- and audit firm-specific factors are involved in its occurrence. Most published studies of enforcement after audit failure focus on client characteristics because details about audit firms from financial statements and information about organizational structure are not publicly available. However, examining the issues surrounding enforcement from the perspective of audit firms may also be valuable in elucidating the potential determinants of audit failure resulting in enforcement action. Utilizing publicly available data from audit firms in South Korea, we identify several audit firm characteristics as determinants of enforcement action. The results of our empirical analysis reveal that the likelihood of audit failure is positively associated with the ratio of accounts receivable to total assets, the ratio of audit fees to total revenue, the ratio of partners to the total number of CPAs, CEO ownership, and age of audit firms. In addition, the likelihood of audit failure is negatively associated with ownership concentration and profitability. These associations are more pronounced in non-affiliated audit firms than affiliated audit firms. Several useful implications for regulators are described for improving audit quality by means of enforcement action.</p>

scholarly journals Analisis Penerapan Corporate Governance, Kualitas Audit dan Pengungkapan CSR Serta Ukuran Perusahaan terhadap Integritas Laporan Keuangan

Syntax Idea ◽  
2021 ◽  
Vol 3 (9) ◽  
pp. 2179
Author(s):  
Ranti Nugraheni
Keyword(s):  
Internal Control ◽  
Audit Committee ◽  
Audit Quality ◽  
Stock Exchange ◽  
Manufacturing Sector ◽  
Secondary Data ◽  
Institutional Ownership ◽  
Financial Statements ◽  
Csr Disclosure ◽  
Corporate Social

The information presented in the financial statements (LK) is expected to have a high integrity value. To present financial statements with integrity, it is influenced by many factors, both external and internal to the company. The purpose of this study was to determine the effect of internal control (audit committee) and external supervision (institutional ownership and external audit quality), disclosure of corporate social responsibility (CRS), firm size on the integrity of financial statements. The sample of this research is companies listed on the Stock Exchange for the manufacturing sector for 3 years from 2016 to 2018 with a purpose-based sampling method in data collection. This type of research is quantitative using secondary data and data analysis is carried out by multiple regression with SPSS 25 in data processing. The results of this study provide empirical evidence that institutional ownership, audit quality, and CSR disclosure have a positive and significant effect on the integrity of financial statements. While the size of the company and the audit committee have no significant effect on the integrity of the financial statements.

scholarly journals A Comprehensive Analysis of Findings from Single Audits: The Implications of Auditee Type and Auditor Expertise

2018 ◽  
Vol 7 (1) ◽  
pp. 55-77 ◽  
Author(s):  
Tammy R. Waymire ◽  
Thomas Z. Webb ◽  
Timothy D. West
Keyword(s):  
Local Government ◽  
Internal Control ◽  
Audit Quality ◽  
Financial Statements ◽  
Comprehensive Analysis ◽  
Financial Statement ◽  
Federal Grant ◽  
Program Compliance ◽  
Single Audit ◽  
Internal Control Deficiencies

ABSTRACT Single audits provide critical accountability for federal grant awards. Our study comprehensively examines differences in single audit findings (related to both financial statements and major program compliance) by auditee type (state/local government and nonprofit) and across varying levels of auditor expertise. In a sample of 24,144 audit engagements over the period 2004 through 2010, nonprofit auditees report fewer internal control deficiencies than government auditees, but more instances of questioned costs related to major programs. Audits conducted by firms with lower single audit expertise are associated with fewer financial statement and major program compliance findings. The results by auditee type and auditor expertise are important to discussions of single audit quality.

Multidimensional Audit Data Selection (MADS): A Framework for Using Data Analytics in the Audit Data Selection Process

2019 ◽  
Vol 33 (3) ◽  
pp. 127-140 ◽  
Author(s):  
Won Gyun No ◽  
Kyungha (Kari) Lee ◽  
Feiqi Huang ◽  
Qiao Li
Keyword(s):  
Data Analytics ◽  
Systematic Approach ◽  
Selection Process ◽  
Entire Population ◽  
Data Selection ◽  
Transaction Data ◽  
Audit Data ◽  
Using Data

SYNOPSIS Advances in data analytics techniques allow auditors to process the entire population of transaction data to identify outliers (i.e., unusual/suspicious transactions) that are more likely to be subject to misstatement. However, these techniques often generate a large number of outliers, making it impractical for auditors to investigate them in their entirety when performing substantive tests. This study proposes a Multidimensional Audit Data Selection (MADS) framework that provides a systematic approach for auditors to use data analytics in the audit data selection process. The framework also addresses a common obstacle of applying data analytics to the entire population of data—dealing with a potentially large number of outliers. By identifying problematic items from the entire population using data analytics and then applying prioritization methodologies to the resulting items, this framework allows auditors to focus on items with a higher risk of material misstatement and ultimately enhance the effectiveness of the audit.

scholarly journals PENGARUH TIME BUDGET PRESSURE DAN RISIKO AUDIT TERHADAP KUALITAS AUDIT (SURVEY PADA AUDITOR DI KANTOR AKUNTAN PUBLIK DI BANDUNG)

2017 ◽  
Vol 5 (1) ◽  
Author(s):  
Medianto Suryo
Keyword(s):  
Audit Quality ◽  
Time Budget ◽  
Financial Statements ◽  
Public Accounting ◽  
Audit Risk ◽  
Audit Failure ◽  
Independent Variables ◽  
Independent Variable ◽  
Time Budget Pressure

Empirically the application of principles of corporate governance can improve the quality of financial statements. However, in the implementation of Good Corporate Government and the quality of financial statements has not been done perfectly. Based on the results of research indicates that the failure of GCG implementation in Indonesia can be seen from various cases of audit failure. Based on the above, it shows that GCG mechanism is not working properly, where the stakeholders can not use the financial statements because of the low quality of financial statements or irrelevant and unreliable. This study will provide an overview of the influence of time budget pressure and audit risk on audit quality at public accounting offices in Bandung. This research uses path analysis with Time Budget Pressure variables, Audit Risk, and Audit Quality. The result of the research shows that both independent variable (Time Budget Pressure and Audit Risk) give contribution (influence) to the Quality of Audit equal to 34,20%. While the rest of 65.80% influenced by other factors outside the two independent variables.

The effect of academic education on employers’ satisfaction and audit quality in Iran

2016 ◽  
Vol 48 (5) ◽  
pp. 249-256
Author(s):  
Mahdi Salehi ◽  
Mostafa Bahrami ◽  
Fatemeh Alizadeh
Keyword(s):  
Internal Control ◽  
Design Methodology ◽  
Audit Quality ◽  
Accounting Standards ◽  
Financial Statements ◽  
Academic Education ◽  
Content Type ◽  
Audit Firm ◽  
Audit Reports

Purpose – The purpose of this paper is to examine the effect of academic education of auditors on the satisfaction of employees and the quality of audit reports. Design/methodology/approach – In order to collecting data a questionnaire designed and developed among the auditors, managers, and professors in Iran during November 20, 2014. Findings – The results of the study reveal that the inability to fully understand the audit report is one of the major problems of customers. For the audit firm, issues such as observation of accounting standards in financial statements, preparation of sufficient documents for the auditor, strong internal control, and understanding the limitations and problems of auditors were considered important. Originality/value – To the best of the authors’ knowledge the current paper is the first study which deals with the topic of the study in developing countries, especially Iran.

What Went Wrong in the Audit of Tri-Pack Films Limited?

2020 ◽  
Vol 17 (1) ◽  
pp. 36-51
Author(s):  
Omair Haroon ◽  
Waqar Ali ◽  
Atifa A. Dar
Keyword(s):  
Audit Quality ◽  
Listed Company ◽  
Financial Statements ◽  
Securities And Exchange Commission ◽  
Audit Firm ◽  
Audit Failure ◽  
Chartered Accountants ◽  
Year 2013

This case looks into an instance of an audit failure in the context of a Pakistani listed company, Tri-Pack, whose financial statements for the year 2014 showed a material misstatement (which reduced 2013 profits after tax by around 88%). This led to an investigation by the regulator (Securities and Exchange Commission of Pakistan) into the audits across 2012–2013, culminating into a stern warning being issued to the engagement leader (partner) for having failed to exercise an attitude of professional scepticism, failed to perform the audit to obtain reasonable assurance around Tri-Pack’s financial statements being free from material misstatement either due to errors or fraud and failed to bring out material facts about the affairs of the company and make a report to the shareholders thereof1. The case hones in on the audit dynamics and defence presented by the audit firm (A.F. Ferguson & Co. Chartered Accountants) for the year 2013, to assess the shortcomings in the conduct of the audit of Tri-Pack’s financial statements for that year’s end. It stimulates the work of an audit quality head who reviewed Tri-Pack’s audit file in order to ascertain whether the objectives of the audit were met and what lessons can be drawn to leverage towards future audit engagements.

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