The Role of Problem Representation Shifts in Auditor Decision Processes in Analytical Procedures

1999 ◽  
Vol 18 (1) ◽  
pp. 18-36 ◽  
Author(s):  
James L. Bierstaker ◽  
Jean C. Bedard ◽  
Stanley F. Biggs
Keyword(s):  
Mental Image ◽  
Decision Processes ◽  
Problem Representation ◽  
Financial Statement ◽  
Verbal Protocols ◽  
Effective Decision ◽  
Correct Representation ◽  
Analytical Procedures ◽  
Problem Representations

In audit analytical procedures, research has shown that auditors have difficulty proposing possible explanations for financial statement discrepancies (Bedard and Biggs 1991a). One source of this difficulty is that auditors may represent analytical procedures problems incorrectly; that is, their mental image of the problem does not contain the underlying cause of the discrepancies. Because shifting initial representations of problems is difficult, auditor decision processes are affected. The purpose of this study is to investigate how problem representation shifts can lead auditors to better insight into possible explanations of discrepancies, and thus improve auditor decision processes in analytical procedures. To accomplish this purpose, verbal protocol data from Bedard and Biggs (1991a) were used to develop a series of problem representations and prompts for the analytical procedures task used in that study. The prompts were given to activate relevant knowledge structures in memory and encourage successive shifts toward the correct representation. Think-aloud verbal protocols were collected from 12 senior auditors with three to five years' experience to provide evidence of problem representation shifts and decision processes. The results indicate that: (1) all subjects initially formulated an unproductive problem representation; (2) only one subject shifted to a productive problem representation and solved the case without prompts; and (3) even with prompts two subjects were unable to solve the case. These findings suggest that shifting to a productive problem representation was critical in achieving effective decision processes and identifying the seeded error in this analytical procedures task. Auditors who developed a thorough understanding of the financial relationships in the case prior to proposing potential solutions were better able to shift problem representations and solve the case. In addition, two processes related to an explanation inherited from client management, “wheel spinning” and truncated hypothesis generation, inhibited problem representation shifts.

Comprehensive Income: which potential effects on firms' performance evaluation and users' decision process?

2016 ◽  
pp. 55-94
Author(s):  
Pier Luigi Marchini ◽  
Carlotta D'Este
Keyword(s):  
Performance Evaluation ◽  
Decision Process ◽  
Financial Analysts ◽  
Listed Companies ◽  
Financial Statement ◽  
Comprehensive Income ◽  
Other Comprehensive Income ◽  
Gains And Losses ◽  
The Impact

The reporting of comprehensive income is becoming increasingly important. After the introduction of Other Comprehensive Income (OCI) reporting, as required by the 2007 IAS 1-revised, the IASB is currently seeking inputs from investors on the usefulness of unrealized gains and losses and on the role of comprehensive income. This circumstance is of particular relevance in code law countries, as local pre-IFRS accounting models influence financial statement preparers and users. This study aims at investigating the role played by unrealized gains and losses reporting on users' decision process, by examining the impact of OCI on the Italian listed companies RoE ratio and by surveying a sample of financial analysts, also content analysing their formal reports. The results show that the reporting of comprehensive income does not affect the financial statement users' decision process, although it statistically affects Italian listed entities' performance.

When Do Auditors Use Specialists' Work to Improve Problem Representations of and Judgments about Complex Estimates?

2017 ◽  
Vol 93 (4) ◽  
pp. 177-202 ◽  
Author(s):  
Emily E. Griffith
Keyword(s):  
Pattern Recognition ◽  
Situational Factors ◽  
Situational Factor ◽  
High Quality ◽  
Quality Audit ◽  
Domain Specific ◽  
Epistemic Motivation ◽  
Specific Expertise ◽  
Problem Representations

ABSTRACT Auditors are more likely to identify misstatements in complex estimates if they recognize problematic patterns among an estimate's underlying assumptions. Rich problem representations aid pattern recognition, but auditors likely have difficulty developing them given auditors' limited domain-specific expertise in this area. In two experiments, I predict and find that a relational cue in a specialist's work highlighting aggressive assumptions improves auditors' problem representations and subsequent judgments about estimates. However, this improvement only occurs when a situational factor (e.g., risk) increases auditors' epistemic motivation to incorporate the cue into their problem representations. These results suggest that auditors do not always respond to cues in specialists' work. More generally, this study highlights the role of situational factors in increasing auditors' epistemic motivation to develop rich problem representations, which contribute to high-quality audit judgments in this and other domains where pattern recognition is important.

Parliamentarism and the Legislative Branch

2017 ◽  
Author(s):  
András Sajó ◽  
Renáta Uitz
Keyword(s):  
Decision Making ◽  
Political Parties ◽  
Legislative Branch ◽  
Effective Decision ◽  
The Law ◽  
Internal Operations ◽  
Effective Decision Making ◽  
The Relationship ◽  
Law Making

This chapter examines the relationship between parliamentarism and the legislative branch. It explores the evolution of the legislative branch, leading to disillusionment with the rationalized law-making factory, a venture run by political parties beyond the reach of constitutional rules. The rise of democratically bred party rule is positioned between the forces favouring free debate versus effective decision-making in the legislature. The chapter analyses the institutional make-up and internal operations of the legislature, the role of the opposition in the legislative assembly, and explores the benefits of bicameralism for boosting the powers of the legislative branch. Finally, it looks at the law-making process and its outsourcing via delegating legislative powers to the executive.

Executives’ Decision Processes at the Front End of Major Projects: The Role of Context and Experience in Value Creation

2020 ◽  
pp. 875697282097722
Author(s):  
Denise Chenger ◽  
Jaana Woiceshyn
Keyword(s):  
Value Creation ◽  
Oil And Gas ◽  
Decision Processes ◽  
Strategic Decision ◽  
Decision Context ◽  
Front End ◽  
Risk Approach ◽  
Multiple Case

The front end of projects is strategically important; yet, how project concepts are identified, evaluated, and selected at the pre-project stage is poorly understood. This article reports on an inductive multiple-case study of how executives made such decisions in major upstream oil and gas projects. The findings show that in such a high-risk context, often an experienced executive makes these decisions alone and he creates value by facilitating growth. We identified three value-creating decision processes that varied by the executives’ risk approach and decision context. These processes depart from the formal project management prescriptions and the strategic decision-making literature.

scholarly journals Are Environmentally Innovative Companies Inclined towards Integrated Environmental Disclosure Policies?

2021 ◽  
Vol 11 (1) ◽  
pp. 29
Author(s):  
Isabel-María García-Sánchez ◽  
Nicola Raimo ◽  
Filippo Vitolla
Keyword(s):  
Environmental Performance ◽  
Voluntary Disclosure ◽  
Environmental Innovation ◽  
Environmental Disclosure ◽  
Academic Field ◽  
Environmental Actions ◽  
Correct Representation ◽  
Mediating Factor ◽  
The Impact

In recent years, the correct representation of environmental performance has become increasingly important. In light of this, in the academic field, numerous researchers have examined the level and quality of environmental disclosure. However, in the context of studies relating to the determinants of environmental disclosure, little attention has been paid to the role of environmental innovation. This study, in the context of voluntary disclosure theory, aims to fill this important gap through the analysis of the impact of environmental innovation on the level of integrated environmental information disclosed by companies and the analysis of environmental performance as a mediating factor in this relationship. The results show a positive relationship between environmental innovation and integrated environmental disclosure. In addition, they show that environmental performance represents a mediating factor in this relationship. However, complementary analyses show that responsible firms adopt silent strategies in their environmental integrated disclosure policies in order to limit the knowledge by external users of the different environmental actions implemented.

scholarly journals The use of analytical procedures by Yemeni auditors

2015 ◽  
Vol 12 (2) ◽  
pp. 17-25
Author(s):  
Shamharir Abidin ◽  
Mohammed Abobaker Baabbad
Keyword(s):  
Financial Statements ◽  
Audit Firms ◽  
Analytical Review ◽  
Analytical Procedures

This study sets out to investigate the extent to which Yemeni auditors use analytical review procedures during the audit of client’s financial statements. It also examines the stage of auditing procedure in which Yemeni auditors implement analytical review procedures. Moreover, the study determines the relationships between the importance’s factors and the use of analytical review procedures. The findings of the study have indicated that the Analytical Procedures were utilized on high percentage by audits in larger and high experienced audit firms compared to small and low experienced audit firms where the results have shown low percentage. Nevertheless, the role of auditors’ perception towards Analytical Procedures has proved to have a significant effect of usage of Analytical Procedures

Financial Reporting and Entrepreneurial Finance: Evidence from Equity Crowdfunding

2021 ◽  
Author(s):  
John Donovan
Keyword(s):  
Financial Reporting ◽  
Positive Association ◽  
Financial Statement ◽  
Entrepreneurial Finance ◽  
Ongoing Debate ◽  
Equity Crowdfunding ◽  
Macroeconomic Uncertainty ◽  
Ex Post ◽  
Insight Into

I study the role of accounting and financial reporting in entrepreneurial finance by examining whether financial statement disclosure increases capital raised through equity crowdfunding. On average, I find a positive association between financial reporting and capital raised, suggesting that accounting reduces information asymmetry with potential investors. Additionally, the importance of financial reporting in equity crowdfunding varies predictably in the cross-section. Specifically, financial reporting is associated with greater capital raised when the firm has longer historical operations, during periods of higher macroeconomic uncertainty, and when complemented by detailed shareholder agreements. Finally, using a mediation analysis, I find evidence that financial reporting is indirectly associated with better ex post performance by increasing the likelihood of raising capital. These results provide insight into the role of financial reporting in entrepreneurial finance and inform the ongoing debate over regulation and disclosure in the equity crowdfunding market. This paper was accepted by Brian Bushee, accounting.

Interstate Business College: A Case Study in Fraud Examination

2004 ◽  
Vol 19 (4) ◽  
pp. 505-527 ◽  
Author(s):  
Bonita K. Peterson ◽  
Thomas A. Buckhoff
Keyword(s):  
Career Path ◽  
Financial Statement ◽  
Accounting Students ◽  
Top Management ◽  
Financial Statement Analysis ◽  
Public Records ◽  
Management Fraud ◽  
Business College

This case is based on an actual fraud that occurred and provides you with an opportunity to develop fraud examination skills, which include document examination, searching public records, financial statement analysis, and communicating the results of your work. Such skills benefit all accounting students regardless of the career path they may choose (e.g., a fraud investigator, an auditor, a consultant, a tax accountant). This case also: (1) exemplifies the complexity often found in fraud cases, and (2) illustrates how fraud examinations differ from financial statement audits. While some of the names of the parties involved have been changed, no facts in the case have been altered. Interstate Business College (IBC), founded in 1912, collapsed in the wake of allegations of top management fraud. The allegations became public when 23 former students filed a lawsuit against the director and owner of IBC, alleging misappropriation of student funds. You will assume the role of the fraud investigator hired by their attorney to determine if there is evidence to support their claim. Upon completion of the case, you will have a sense of the amount of documents, detail, and work involved when resolving fraud allegations.

Sign in / Sign up

Export Citation Format

Share Document