Auditors' Assessment and Incorporation of Expectation Precision in Evidential Analytical Procedures

2007 ◽  
Vol 26 (1) ◽  
pp. 1-18 ◽  
Author(s):  
Linda S. McDaniel ◽  
Laura E. Simmons
Keyword(s):  
Level Of Detail ◽  
Professional Standards ◽  
Important Decision ◽  
Analytical Procedures ◽  
Decision Errors ◽  
Do So ◽  
Substantive Analytical Procedures

This paper reports on an experiment that investigates auditors' abilities to assess expectation precision and incorporate their assessments into judgments related to substantive analytical procedures, as required by professional standards. Auditors appear sensitive to both account predictability and level of information detail in assessing expectation precision overall; however, their assessments do not reflect differences in level of detail when the account is less predictable. This finding supports regulators' and prior researchers' calls for additional guidance to assist auditors in forming expectations that consider the nature of the account. We also find that auditors judge the level of assurance from analytical procedures consistent with their precision assessments. However, in contrast to guidance specified in professional standards, we find that auditors do not always incorporate their precision assessments into judgments about the range of possible differences between expected and recorded amounts, nor the likelihood of misstatement causes. Failing to do so may lead auditors to make important decision errors.

scholarly journals Disclosure and Audit Implications of Nonfinancial Measures: A Teaching Case

2018 ◽  
Vol 12 (1) ◽  
pp. I1-I13 ◽  
Author(s):  
Matthew L. Hoag ◽  
Gabriel D. Saucedo
Keyword(s):  
Financial Statements ◽  
Risk Assessments ◽  
Microsoft Excel ◽  
Teaching Case ◽  
Fraud Risk ◽  
Nonfinancial Measures ◽  
Analytical Procedures ◽  
Fraud Risk Assessments ◽  
Substantive Analytical Procedures

SUMMARY This case introduces students to nonfinancial measures (NFMs) and encourages thoughtful consideration and discourse surrounding their reporting and use by managers and auditors. NFMs are commonly reported by companies to provide increased transparency of operations and to more effectively describe performance. External parties such as analysts and auditors make use of NFMs in performing valuation assessments, fraud risk assessments, and substantive analytical procedures. In completing this case, students will be exposed to actual NFMs disclosed in SEC filings and employ Microsoft Excel knowledge to perform foundational analytical procedures. Students will also analyze how these NFMs link to the financial statements, as well as reflect upon the implications of NFMs for both internal and external users.

Whose Post-Truth Era? Confronting the Epistemological Challenges of Teaching Journalism

2019 ◽  
Vol 74 (2) ◽  
pp. 130-142 ◽  
Author(s):  
Jeff Tischauser ◽  
Jesse Benn
Keyword(s):  
Professional Practice ◽  
Liberal Democracy ◽  
Ways Of Knowing ◽  
Professional Standards ◽  
Black Press ◽  
Reporting Practices ◽  
Communities Of Color ◽  
Ethnic Press ◽  
Journalism Students ◽  
Do So

While discussions on validity, professional standards, and routines have become more challenging to many educators of journalism, these challenges are old news to communities of color whose experiences are often discounted or erased by information gathering practices taught in journalism schools. We argue that using the label “post-truth” reinforces the privileged and entitled position of journalism educators, and curtails our responsibility as arbiters of professional practice and routine. In this article, we examine how journalism classrooms can bring in ways of knowing and seeing that can provide a refreshing counter to the staid dis-embedded outsider perspective that views journalism as the protector of one truth, liberal democracy. Borrowing ideas from press theory that places journalism inside community, and counterpublic theory that places agency inside culture, we explore an opportunity for journalists to become mediators and translators between publics as a way to strengthen understanding between communities. To do so, we identify and examine reporting practices used in the Black press to understand how to confront the multiplicity of truth. By unpacking how the ethnic press examines the diverse conditions and experiences that lead to alternative versions of events, we can better gauge what reporting practices are relevant to our students today. Indeed, the so-called post-truth era is part of a larger sociohistoric process of truth-making that reflects the dynamics of power and authority in civil society, which we unpack in this article. In the end, we argue that it is more valuable for journalism students to view their work as mediators and translators of truths between communities.

Between a Rock and a Hard Place: A Path Forward for Using Substantive Analytical Procedures in Auditing Large P&L Accounts: Commentary and Analysis

2014 ◽  
Vol 34 (3) ◽  
pp. 161-179 ◽  
Author(s):  
Steven M. Glover ◽  
Douglas F. Prawitt ◽  
Michael S. Drake
Keyword(s):  
Audit Quality ◽  
Financial Statements ◽  
Difference Threshold ◽  
Income Statement ◽  
Public Company ◽  
Significant Difference ◽  
Low Levels ◽  
Analytical Procedures ◽  
Hard Place ◽  
Substantive Analytical Procedures

SUMMARY Substantive analytical procedures can be an important and effective audit tool to gather evidence and highlight areas of potential misstatement, and for decades have been one of the common substantive procedures applied to income statement accounts. Recently, however, there is a growing trend for public company auditors to forego substantive analytical procedures on large income statement accounts, such as revenue, due to criticisms from regulatory inspectors that such procedures are not capable of providing useful substantive evidence. In this commentary, we address the concern that discouraging the application of appropriately rigorous substantive analytical procedures may diminish overall audit quality. We consider whether rigorous substantive analytical procedures can be designed to provide useful evidence at moderate and low levels of assurance for large income statement accounts, such as revenue, even when the significant-difference threshold exceeds overall materiality. Such procedures can provide strong evidence that financial statements are free of massive fraud or unintentional misstatement. Further, the moderate or low assurance obtained by such substantive analytical procedures can be combined with assurance provided by other audit procedures to yield high overall assurance. We illustrate one potential approach that may be useful in designing substantive analytical procedures to achieve moderate or low assurance and we explain how our approach is consistent with auditing theory and auditing standards.

Can Substantive Analytical Procedures with Data and Data Analytics Replace Sampling as Tests of Details?

2020 ◽  
Author(s):  
Kyunghee Yoon ◽  
Timothy Pearce
Keyword(s):  
Data Analytics ◽  
Careful Consideration ◽  
Analytical Models ◽  
Risks And Benefits ◽  
Audit Firms ◽  
Income Statement ◽  
Analytical Procedures ◽  
High Level ◽  
Audit Sampling ◽  
Substantive Analytical Procedures

To avoid problems caused by moderate or weak substantive analytical procedures (SAPs), audit firms tend to focus more on tests of details than SAPs, especially for large income statement accounts such as revenues. Based on findings from previous studies, this commentary study attempts to: 1) summarize the outcomes of SAPs developed by advanced analytics models (e.g., regression and time series models), and 2) respond to the question of SAP use by evaluating the limitations and benefits if one test replaces the other. The outcomes of prior studies generally show that SAPs developed by advanced analytical models do not provide a high level of assurance for revenue. Since SAPs and audit sampling present different risks and unique benefits, they are often complementary. Without the careful consideration of conditions related to the risks and benefits of each test, simply avoiding SAPs could reduce the effectiveness of substantive tests.

scholarly journals Sampling and tracking a changing environment: persistence and reward in the foraging decisions of bumblebees

2017 ◽  
Vol 7 (3) ◽  
pp. 20160149 ◽  
Author(s):  
Aimee S. Dunlap ◽  
Daniel R. Papaj ◽  
Anna Dornhaus
Keyword(s):  
Environmental Persistence ◽  
New Information ◽  
High Reward ◽  
Foraging Decisions ◽  
Two Factors ◽  
Empirical Tests ◽  
Different Levels ◽  
Decision Errors ◽  
Do So

The question of when to collect new information and how to apply that information is central to much of behaviour. Theory suggests that the value of collecting information, or sampling, depends on environmental persistence and on the relative costs of making wrong decisions. However, empirical tests of how these variables interact are lacking. We tested whether bumblebee foraging decisions are indeed influenced by these two factors. We gave bees repeated choices between a resource providing a steady, mediocre reward and a resource fluctuating between a low reward and a high reward. In this paradigm, we manipulated environmental persistence by changing how long the quality of a fluctuating resource remained stable at one reward level. We manipulated the costs of decision errors by changing the relative values of the available rewards. Bees sampled the fluctuating resource more frequently when it changed quality more frequently, indicating that they measured environmental persistence and reacted to it as predicted by theory. Bees showed surprisingly suboptimal tracking, not reliably choosing the currently best resource except when the fluctuating resource was very persistent and the potential rewards high. While bees modify their choices in response to different levels of change and potential rewards, they do not always do so according to optimality predictions.

scholarly journals Exploring the application of analytical procedures by Jordanian external auditors

2021 ◽  
Vol 10 (3) ◽  
pp. 44-53
Author(s):  
Modar Abdullatif ◽  
Aya Banna ◽  
Duha El-Sahsah ◽  
Taher Wafa
Keyword(s):  
Internal Controls ◽  
Structured Interviews ◽  
Quality Of Data ◽  
High Quality ◽  
External Audit ◽  
External Auditors ◽  
Analytical Procedures ◽  
Limited Demand ◽  
Do So

This study aims to explore the application of analytical procedures (AP) as a major external auditing procedure in the developing country context of Jordan, a context characterised by the prevalence of closely held businesses, and limited demand for an external audit of high quality (Abdullatif, 2016; Almarayeh, Aibar-Guzman, & Abdullatif, 2020). To do so, the researchers conducted semi-structured interviews with twelve experienced Jordanian external auditors. The main issues covered are the detailed use of AP as an audit procedure and the most significant issues that may limit the effectiveness and reliability of this procedure in the Jordanian context. The main findings of the study include that AP are generally used and favoured by Jordanian auditors, despite their recognition of several problems facing the application of AP, and potentially limiting its reliability and effectiveness. These problems include weak internal controls of some clients, low quality of data provided by some clients, a lack of availability of specialised audit software for many auditors, and a lack of local Jordanian industry benchmarks that can be used to develop expectations necessary for the proper application of AP. The study recommends the establishment of such industry benchmarks, along with better monitoring by the regulatory authorities of the quality of company data, and increasing the efforts of these authorities on promoting the auditors’ use of specialised audit software in performing AP

The “Advocacy” Function of the Rehabilitation Counselor in Effecting Social Change

1973 ◽  
Vol 3 (4) ◽  
pp. 254-262
Author(s):  
R. Dean Taylor
Keyword(s):  
Social Change ◽  
Attitude Change ◽  
Change Agent ◽  
Professional Standards ◽  
Rehabilitation Counselor ◽  
Architectural Barriers ◽  
Client Needs ◽  
The Coordinator ◽  
Do So

The concept of “social change agent” will serve only to further confuse the role of rehabilitation counselor, both for the counselor and to others who work with the counselor. Not that the counselor should not act to bring about change, but that he do so under the concept of “advocate.” The counselor should be guided by professional standards and by client needs. These aspects of attitude change, removal of architectural barriers and acting as a link to the larger society, the counselor could best meet the client's needs. As the concept of advocacy becomes classified and delineated the rehabilitation counselor will recognize the delimiting role of the therapist model or the coordinator model and will focus on client needs. The final goal of rehabilitation efforts is for the client to become an advocate for himself.

The Reel Wheel: Using Analytical Procedures as Substantive Tests of Account Balances

2019 ◽  
Vol 35 (1) ◽  
pp. 13-24
Author(s):  
Jason L. Smith ◽  
Nathaniel M. Stephens
Keyword(s):  
Real World ◽  
Data Aggregation ◽  
Class Discussion ◽  
Factors Affecting ◽  
Auditing Standards ◽  
Analytical Procedures ◽  
Class Assignment ◽  
Substantive Analytical Procedures

ABSTRACT This case provides students an introductory experience to substantive analytical procedures in a realistic audit setting. Students are presented with a scenario, adapted from a real-world example, requiring them to (1) research relevant auditing standards, (2) develop an independent expectation for a client's revenue account, and (3) consider the precision of the estimate, additional audit procedures, and the reliability of the underlying data and evidence obtained. In completing the case, students will learn to: (1) explain the benefits and challenges of using substantive analytical procedures, (2) research relevant auditing standards, (3) create and analyze relevant substantive analytics, (4) evaluate the appropriateness of data aggregation in substantive analytical procedures, and (5) discuss factors affecting the reliability of data used by the auditor. The case is typically assigned as an out-of-class assignment, combined with a subsequent in-class discussion. It can be used in either undergraduate or graduate auditing courses.

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