Decision Processes in Audit Evidential Planning: A Multistage Investigation

2000 ◽  
Vol 19 (1) ◽  
pp. 123-143 ◽  
Author(s):  
Arnold M. Wright ◽  
Jean C. Bedard
Keyword(s):  
Risk Factors ◽  
Program Effectiveness ◽  
Planning Process ◽  
Risk Model ◽  
Decision Processes ◽  
Audit Risk ◽  
Planning Stage ◽  
Inherent Risk ◽  
Client Risk ◽  
Audit Program

This paper reports the results of a verbal protocol study designed to assess how variation in inherent-risk factors affects auditors' decision processes throughout audit planning, including the tasks of risk assessment, generation of hypotheses, and development and justification of audit programs. The audit risk model prescribes that audit program plans should be designed to respond to client risk factors. Auditors should be able to identify potential errors that may occur given the risks present and design program plans to test for the presence of these errors. Client inherent-risk factors were varied between subjects to create high- and low-risk conditions and a seeded error enabled assessment of effectiveness in hypothesis generation and audit test planning. We find that client risk factors have pervasive effects throughout planning, affecting the concentration on error hypotheses, audit program effectiveness, and justification for audit tests. However, risk factors were not associated with differences in extent of testing or with justification of extent decisions. Our findings also suggest that recognition of risk factors may provide a stimulus to auditors with less experience to improve performance in the planning process. These results highlight the importance of identifying and communicating client risk factors to all audit team members in the planning stage.

Are Audit Program Plans Risk-Adjusted?

1999 ◽  
Vol 18 (1) ◽  
pp. 55-74 ◽  
Author(s):  
Theodore J. Mock ◽  
Arnold M. Wright
Keyword(s):  
Risk Model ◽  
Experimental Studies ◽  
Strong Relationship ◽  
Audit Risk ◽  
Accounts Receivable ◽  
Inherent Risk ◽  
Audit Risk Model ◽  
Broad Array ◽  
Audit Program ◽  
And Training

Prior archival and experimental studies provide conflicting results regarding the extent to which audit program plans are responsive to client risks, as prescribed by the Audit Risk Model. The purpose of this study is to corroborate and extend archival research on this issue by considering a broader set of client risks and incorporating a number of methodological improvements. Data were gathered on risk assessments and evidential plans in the accounts receivable area from the working papers of 74 randomly selected manufacturing clients (42 general manufacturing and 32 high-technology manufacturing). The results indicate a statistical association between the level of and changes in a limited number of assessed client risks (e.g., management aggressiveness and the inherent risk of an existence misstatement) and evidential plans. In addition, audit programs were found to change little over time with many tests done across a broad array of engagements. Overall, the responsiveness of evidential plans to risks, although limited, was found to be greater in the present study than prior research. These results, which generally replicate prior research, indicate the lack of a strong relationship between client risks and audit programs and thus raise a number of important questions for audit theory, practice and training.

Inherent Risk and Control Risk Assessments: Evidence on the Effect of Pervasive and Specific Risk Factors

2000 ◽  
Vol 19 (2) ◽  
pp. 119-131 ◽  
Author(s):  
William F. Messier ◽  
Lizabeth A. Austen
Keyword(s):  
Risk Factors ◽  
Risk Model ◽  
Positive Association ◽  
Risk Assessments ◽  
Significant Positive Association ◽  
Audit Risk ◽  
Inherent Risk ◽  
Specific Risk ◽  
And Control ◽  
Control Risk

This paper reports on a study that examines the effect of pervasive and specific risk factors on auditors' inherent risk and control risk assessments in an experimental setting. Two hypotheses concerning the significance of inherent and control risk factors on auditors' inherent risk (IR) and control risk (CR) assessments were tested by having 124 senior auditors and managers provide risk assessments on eight cases. The results show that the pervasive and specific risk factors included in the experiment were significant to both the auditors' IR and CR assessments. For the case used in this study, there was a significant positive association between auditors' IR and CR assessments. Taken together, these findings are consistent with Waller's (1993) notion of a knowledge-based dependency between IR and CR assessments. The findings are not consistent with Kinney's (1989) reformulation of the (IR×CR) component of the audit risk model.

The Influence of Potentially Fraudulent Reports on Audit Risk Assessment and Planning

2001 ◽  
Vol 76 (1) ◽  
pp. 59-80 ◽  
Author(s):  
D. Paul Newman ◽  
Evelyn Patterson ◽  
Reed Smith
Keyword(s):  
Financial Reporting ◽  
Planning Process ◽  
Dynamic Interaction ◽  
Fraudulent Financial Reporting ◽  
Expected Payoff ◽  
Audit Risk ◽  
Audit Planning ◽  
Inherent Risk ◽  
Risk Detection ◽  
Reported Earnings

We consider how auditors assess the risk of fraudulent financial reporting and plan their audit where a possibly fraudulent auditee anticipates the assessment and planning process. The auditor uses the auditee's (possibly fraudulent) earnings report to revise his beliefs about the likelihood of fraud when formulating an audit plan. We find that as underlying earnings increase, a fraudulent auditee increases reported earnings. In turn, as the auditee's reported earnings increase, the auditor increases audit effort. We also find that the auditee (who knows the auditor will use the report for audit planning) selects reports that increase his own expected payoff, relative to reports he would select if the auditor did not observe the report before finalizing the audit plan. By contrast, the auditor is no better off using the auditee's report for audit planning. Inherent risk, detection risk, and overall audit risk can increase when the auditor uses the auditee's report. Thus, because of the dynamic interaction between the auditor and auditee, procedures that aid in assessing audit risk may not reduce that risk or result in more efficient audits.

Misstatements in Financial Statements: The Relationship between Inherent and Control Risk Factors and Audit Adjustments

2014 ◽  
Vol 33 (4) ◽  
pp. 247-269 ◽  
Author(s):  
Klaus Ruhnke ◽  
Martin Schmidt
Keyword(s):  
Risk Factors ◽  
Internal Control ◽  
Risk Model ◽  
Relative Magnitude ◽  
Level Control ◽  
Audit Risk ◽  
Big 4 ◽  
Audit Risk Model ◽  
And Control ◽  
Control Risk

SUMMARY: This paper analyzes whether audit adjustments vary systematically with inherent and control risk factors. The analysis is based on proprietary data from a large recent sample of audit adjustments detected in the financial statement audits conducted by a Big 4 audit firm in Germany. We extend the scope of prior studies by incorporating client-specific planning materiality in our design, enabling us to analyze the relative magnitude of adjustments. Our findings show that audit adjustments vary systematically, as proposed by the audit risk model. Specifically, the integrity and competence of the client's management, economic position, entity-level control strength, and internal control system are associated with the number and relative magnitude of audit adjustments. The results also suggest that inherent and control risk factors are particularly strongly associated with income-affecting adjustments. JEL Classifications: M40, M41, M42.

Audit Risk Assessment and Influence on the Auditor`s Opinion

2021 ◽  
Vol 19 (163) ◽  
pp. 528-543
Author(s):  
Maria GROSU ◽  
◽  
Camelia Catalina MIHALCIUC ◽  
◽  
Keyword(s):  
Risk Factors ◽  
Stock Exchange ◽  
Risk Control ◽  
Financial Statements ◽  
Accurate Identification ◽  
Cross Sectional ◽  
Audit Risk ◽  
Inherent Risk ◽  
Three Components ◽  
Control Risk

Risk is one of the most controversial elements that auditors face in audit missions. This refers to the probability that significant misstatements will exist in the financial statements of companies, and the auditor will issue an unqualified opinion, therefore an erroneous opinion. For the auditor, the audit risk can be considered an economic risk, which requires the professional accountant to try to minimize this risk. Accurate identification and evaluation of the risk factors that characterize the three components of the Audit Risk - Inherent Risk, Control Risk and Detection Risk - contribute to a rigorous planning of the audit approach. In other words, the identified risks will be the basis for orienting the auditor's efforts towards those areas where distortions can lead to the alteration of the true image reported by the users' financial statements. In this study are identified and prioritized, based on financial reports in general, and of the audit, in particular the risk factors that characterize Audit Risk on three components: Inherent Risk, Control Risk and Detection Risk. The sample studied is represented by companies listed on the Bucharest Stock Exchange on the regulated market, and the cause-effect analysis, but also cross-sectional analysis takes into account the period 2019-2020, before the crisis caused by Covid-19 and year of installation of the crisis. By testing and validating research hypotheses using regression methods and multivariate data analysis, it is highlighted that a ranking of audit risk components can be made, the inherent risk having a greater influence on audit planning than control risks and detection risks. Also, at the level of the analyzed sample, a company profile is identified, depending on the object of activity, auditor, the size of the audit risk and the opinion formulated in the audit report for the financial year closed at the end of 2020.

scholarly journals Multilocation Audit Risks

2011 ◽  
Vol 14 (4) ◽  
pp. 1 ◽  
Author(s):  
Robert D. Allen ◽  
James K. Loebbecke
Keyword(s):  
Risk Factors ◽  
Risk Model ◽  
Future Research ◽  
Audit Risk ◽  
Accounting Firms ◽  
External Auditors ◽  
Audit Planning ◽  
Large Size ◽  
Single Location ◽  
Risk Framework

<span>Multilocation audits (MLAs) pose unusual risks for external auditors. Recent lawsuits against auditors manifest these risks. Despite the complexity and risk, there is little existing research and/or professional guidance that address MLA issues. This sparsity is especially surprising given that most companies of medium and large size conduct business activities in multiple locations. The purpose of this paper is to identify risks that exist in a MLA environment that do not necessarily exist in a single-location audit. The MLA risk framework was developed by 1) identifying risk factors specific to MLAs that we believe are important in audit planning, 2) evaluating the risk factors through interviews with MLA experts, 3) examining the policy and procedure manuals of public accounting firms, and 4) relating the risk factors to the audit risk model. The paper is intended to provide a framework for future research related to MLAs.</span>

IMPLEMENTASI MANAJEMEN KURIKULUM MADRASAH MUROTTILIL QUR’AN AL-RIFA’IE 2 MALANG

2019 ◽  
Vol 1 (1) ◽  
pp. 70
Author(s):  
Akhmad Ulul Albab
Keyword(s):  
Planning Process ◽  
Case Study Research ◽  
Field Research ◽  
Evaluation Process ◽  
Observation Time ◽  
Curriculum Planning ◽  
Research Approach ◽  
Learning Program ◽  
Planning Stage ◽  
Academic Calendar

This thesis aims to examine the management process applied in the Madrasah Murottilil Qur'an Al-Rifa'ie 2 Malang. Beginning with the curriculum planning process, implementing the curriculum, and how to evaluate the curriculum of the Madrasah Murottilil Qur'an Al-Rifa'ie 2 Malang. This research aims to find out and describe the managerial process of the curriculum, and the inhibiting factors in the implementation of efforts to achieve the vision, mission that has been set.This thesis is a report on the results of field research using a qualitative descriptive method with a case study research approach that takes place at the Al-Rifa'ie 2 Malang Boarding School.Data collection is done by interview, observation, and documentation. Data analysis is done by reducing data, then presenting data, and finally from the compiled data conclusions are drawn. Checking the validity of the data is done with credibility which includes Triangulation, peer checking, extension of observation time, increasing perseverance.The results of the analysis show that the curriculum management implemented by p Madrasah Murottilil Qur'an Al-Rifa'ie 2 At the planning stage, the process carried out was planning the implementation time, the learning program, making the academic calendar, and how the evaluation was held. At the implementation stage, it starts with a new santri test, conducts learning and conducts an ascension test. The evaluation process is carried out at least 2x in one month, and 1 and after one semester.

Dysfunctional Behavior in Organizations: Insights from the Management Control Literature

2017 ◽  
Vol 37 (4) ◽  
pp. 117-141 ◽  
Author(s):  
Krista Fiolleau ◽  
Theresa Libby ◽  
Linda Thorne
Keyword(s):  
Risk Factors ◽  
Internal Control ◽  
Management Control ◽  
Future Research ◽  
Fraud Triangle ◽  
Audit Risk ◽  
Research Opportunities ◽  
Dysfunctional Behavior ◽  
Research Questions ◽  
Published Research

SUMMARY As the scope of the audit continues to broaden (Cohen, Krishnamoorthy, and Wright 2017), research questions in management control and internal control are beginning to overlap. Even so, there is little overlap between these fields in terms of published research to date. The purpose of this paper is to take a step in bridging the gap between the management control and the internal control literatures. We survey relevant findings from the extant management control literature published between 2003 and 2016 on dysfunctional behavior and the ways in which it might be mitigated. We then use the fraud triangle as an organizing framework to consider how the management control literature might help to address audit risk factors identified in SAS 99/AU SEC 316 (AICPA 2002). The outcome of our analysis is meant to identify and classify the extant management control literature of relevance to research on internal control in a manner that researchers new to the management control literature will find accessible. We conclude with a set of future research opportunities that can help to broaden the scope of current research in internal control.

scholarly journals A novel simple risk model to predict the prognosis of patients with paraquat poisoning

2021 ◽  
Vol 11 (1) ◽  
Author(s):  
Yanxia Gao ◽  
Liwen Liu ◽  
Tiegang Li ◽  
Ding Yuan ◽  
Yibo Wang ◽  
...  
Keyword(s):  
Risk Factors ◽  
Latent Class ◽  
Risk Model ◽  
Risk Groups ◽  
Training Sample ◽  
Risk Indicators ◽  
Hospital Death ◽  
Gamma Glutamyl Transferase ◽  
Creatine Kinase Mb ◽  
Glutamyl Transferase

AbstractTo identify risk factors and develop a simple model to predict early prognosis of acute paraquat (PQ) poisoning patients, we performed a retrospective cohort study of acute PQ poisoning patients (n = 1199). Patients (n = 913) with PQ poisoning from 2011 to 2018 were randomly divided into training (n = 609) and test (n = 304) samples. Another two independent cohorts were used as validation samples for a different time (n = 207) and site (n = 79). Risk factors were identified using a logistic model with Markov Chain Monte Carlo (MCMC) simulation and further evaluated using a latent class analysis. The prediction score was developed based on the training sample and was evaluated using the testing and validation samples. Eight factors, including age, ingestion volume, creatine kinase-MB [CK-MB], platelet [PLT], white blood cell [WBC], neutrophil counts [N], gamma-glutamyl transferase [GGT], and serum creatinine [Cr] were identified as independent risk indicators of in-hospital death events. The risk model had C statistics of 0.895 (95% CI 0.855–0.928), 0.891 (95% CI 0.848–0.932), and 0.829 (95% CI 0.455–1.000), and predictive ranges of 4.6–98.2%, 2.3–94.9%, and 0–12.5% for the test, validation_time, and validation_site samples, respectively. In the training sample, the risk model classified 18.4%, 59.9%, and 21.7% of patients into the high-, average-, and low-risk groups, with corresponding probabilities of 0.985, 0.365, and 0.03 for in-hospital death events. We developed and evaluated a simple risk model to predict the prognosis of patients with acute PQ poisoning. This risk scoring system could be helpful for identifying high-risk patients and reducing mortality due to PQ poisoning.

Patterns and predictors of serious surf-related injuries in Hawaii

Trauma ◽  
2021 ◽  
pp. 146040862098362
Author(s):  
Ashley Marumoto ◽  
Adam Guzman ◽  
William B. Harris ◽  
John Vossler ◽  
Sidney Johnson
Keyword(s):  
Risk Factors ◽  
Public Awareness ◽  
Leisure Activity ◽  
Severe Injury ◽  
Spine Injury ◽  
Inherent Risk ◽  
Risk Of Injury ◽  
Safety Interventions ◽  
Associated Risk Factors ◽  
Irreversible Injury

Introduction Surfing is a popular leisure activity with inherent risk of injury that many participants fail to mitigate. There is a paucity of literature reporting severe surf-related trauma and associated risk factors. Methods A retrospective observational study of registry data from Honolulu’s main trauma center assessing surf-related injuries and risk factors for severe injury was performed between January 1, 2014 and December 31, 2018. Results Spine (35.1%), face (17.5%), and head (12.3%) injuries were the most common injuries identified in this cohort. A number of predictors for severe injury as well as serious spine injury were identified. Major risk factors for severe injury and serious spine injury included location of injury on Maui (Severe injury: OR 6.79, 95%CI 1.43–40.35, p = 0.0217; serious spine injury: OR 7.27, 95%CI 1.39–58.24, p = 0.0308) and being from one of the 48 contiguous states (severe injury: OR 3.33, 95%CI 1.10–10.98, p = 0.0388; serious spine injury: OR 2.95, 95%CI 1.08–8.46, p = 0.0379). Conclusion Understanding the nature of surf-related injuries and who is at risk can help to inform safety interventions that may prevent severe, sometimes irreversible injury. Efforts should be made to increase public awareness to the potential risk of surf-related activities.

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