Mitigating the Dilution Effect in Auditors' Judgments Using a Frequency Response Mode

2019 ◽  
Vol 31 (2) ◽  
pp. 51-71
Author(s):  
Aasmund Eilifsen ◽  
Natalia Kochetova ◽  
William F. Messier
Keyword(s):  
Frequency Response ◽  
Research Question ◽  
Dilution Effect ◽  
Irrelevant Information ◽  
Response Mode ◽  
Mode Frequency ◽  
Data Availability ◽  
Fraud Risk ◽  
Risk Judgments ◽  
Summary Data

ABSTRACT This paper investigates the potential of using a frequency response mode to reduce the dilution effect of non-diagnostic evidence on auditors' fraud risk judgments. In two experiments, we test one hypothesis and examine a research question related to the dilution effect where response mode (frequency versus probability) and type of non-diagnostic or irrelevant information are manipulated between-participants. Results of the hypothesis tests show that auditors' fraud risk judgments demonstrate a significantly lower dilution effect when they evaluate diagnostic and non-diagnostic or irrelevant evidence using a frequency response mode, as compared to the probability response mode; this effect is most pronounced when auditors are provided with favorable non-diagnostic or irrelevant evidence. JEL Classifications: M4; M40; M420. Data Availability: Summary data are available from the authors upon request.

The Effects of Judgments of New Clients' Integrity upon Risk Judgments, Audit Evidence, and Fees

2001 ◽  
Vol 20 (2) ◽  
pp. 85-99 ◽  
Author(s):  
Philip R. Beaulieu
Keyword(s):  
Source Credibility ◽  
Prospective Audit ◽  
Fraud Risk ◽  
Audit Evidence ◽  
Risk Judgments

Client integrity concerns auditors when they plan new audit engagements because it is related to both fraud risk and the source credibility of clients. Auditors may increase audit work and fees when they judge integrity to be below normal. In an experiment, a sample of 63 Canadian audit partners read information about a prospective audit client, including information about the client's CFO. This information was manipulated to support a judgment of either high or low integrity. As hypothesized, judgments of client integrity were negatively related to risk judgments, audit evidence extent recommendations (indirectly through risk judgments), and fee recommendations (indirectly through risk judgments and extent recommendations).

The Effects of Auditors' Accessibility to “Tone at the Top” Knowledge on Audit Judgments

2014 ◽  
Vol 26 (2) ◽  
pp. 73-96 ◽  
Author(s):  
Regan N. Schmidt
Keyword(s):  
Mental Representation ◽  
Decision Aid ◽  
Audit Quality ◽  
Mental Representations ◽  
Data Availability ◽  
Control Environment ◽  
Audit Process ◽  
Mediation Analyses ◽  
Fraud Risk ◽  
Tone At The Top

ABSTRACT: This study examines how external auditors' accessibility to “tone at the top” knowledge impacts subsequent audit judgments. To examine this relationship, a decision aid is investigated that differentially facilitates the auditors' retrieval of “tone at the top” evidence from memory. Results of an experiment indicate that, holding the client's “tone at the top” constant, the structure of a control environment decision aid influences the auditors' mental representation of the “tone at the top.” Further, favorable “tone at the top” mental representations transfer to induce relatively favorable control environment and fraud risk assessments, and greater reliance on management's explanation for variances detected in analytical procedures. Mediation analyses identify the control environment assessment as a mediator between the influenced mental representation and the subsequent fraud risk and analytical procedure judgments. The results of the paper underscore the importance of how auditors develop their “tone at the top” mental representations, the influence of these mental representations on subsequent audit judgments, and the stage in the audit process where interventions can improve audit quality. Data Availability: Contact the author.

Integration of Fraud Risk in the Risk of Material Misstatement and the Effect on Auditors' Planning Decisions

2018 ◽  
Vol 3 (1) ◽  
pp. A52-A79
Author(s):  
Velina K. Popova
Keyword(s):  
Data Availability ◽  
Risk Environment ◽  
Major Area ◽  
Audit Planning ◽  
Fraud Risk ◽  
Planning Decisions ◽  
Public Company ◽  
Study Participants ◽  
Audit Program ◽  
Planning Judgments

ABSTRACT Prior research finds that although auditors assess fraud risk accurately, they generally fail to adjust audit procedures appropriately. The most recent Public Company Accounting Oversight Board (PCAOB) inspections in 2016 still identify response to risks of material misstatement (RMM) as a major area of inspection focus and cite it as a recurring audit deficiency. In this study, participants assess RMM and make audit-planning judgments in a high/low fraud risk environment using either a traditional source-based representation of RMM (i.e., based on inherent, control, and fraud risk) or a newer type-based representation of RMM (i.e., based on error and fraud risk). The results indicate that while auditors in both groups show similar sensitivity to risk, the type-based group of auditors are better able modify their audit plans by using more procedures that are new to a standard audit program and assigning more experienced staff to address high fraud risk. Data Availability: Contact the author.

The effect of alternative fraud model use on auditors’ fraud risk judgments

2015 ◽  
Vol 34 (6) ◽  
pp. 578-596 ◽  
Author(s):  
Douglas M. Boyle ◽  
F. Todd DeZoort ◽  
Dana R. Hermanson
Keyword(s):  
Fraud Risk ◽  
Risk Judgments

Financial Statement Fraud Detection: An Analysis of Statistical and Machine Learning Algorithms

2011 ◽  
Vol 30 (2) ◽  
pp. 19-50 ◽  
Author(s):  
Johan Perols
Keyword(s):  
Machine Learning ◽  
Analyst Forecasts ◽  
Machine Learning Algorithms ◽  
Data Availability ◽  
Financial Statement ◽  
Support Vector ◽  
Classification Algorithms ◽  
Employee Productivity ◽  
Financial Statement Fraud ◽  
Fraud Risk

SUMMARY This study compares the performance of six popular statistical and machine learning models in detecting financial statement fraud under different assumptions of misclassification costs and ratios of fraud firms to nonfraud firms. The results show, somewhat surprisingly, that logistic regression and support vector machines perform well relative to an artificial neural network, bagging, C4.5, and stacking. The results also reveal some diversity in predictors used across the classification algorithms. Out of 42 predictors examined, only six are consistently selected and used by different classification algorithms: auditor turnover, total discretionary accruals, Big 4 auditor, accounts receivable, meeting or beating analyst forecasts, and unexpected employee productivity. These findings extend financial statement fraud research and can be used by practitioners and regulators to improve fraud risk models. Data Availability: A list of fraud companies used in this study is available from the author upon request. All other data sources are described in the text.

scholarly journals THE USING OF WHATSAPP IN TEACHING PRONUNCIATION PRACTICE TO THE THIRD SEMESTER STUDENTS OF TADRIS ENGLISH STUDY PROGRAM IN IAIN PALU

2021 ◽  
Vol 1 (2) ◽  
pp. 25-33
Author(s):  
Afifah Afifah
Keyword(s):  
Research Question ◽  
Data Availability ◽  
State Institute ◽  
Study Program ◽  
The Third ◽  
Internet Server ◽  
Data Collections ◽  
Teaching Pronunciation ◽  
The Voice ◽  
Voice Recording

This research focuses on the using of WhatsApp in teaching pronunciation practice to the third semester students of Tadris English Study Program in IAIN Palu. The research question is “How is the using of WhatsApp in teaching Pronunciation Practice to the third semester students of Tadris English Study Program in IAIN Palu?” This is a qualitative research by using two instruments of data collections namely questionnaire and interview. The participants consisted of 19 third semester students of Tadris English Study Program of State Institute for Islamic Studies (IAIN) Palu. The researcher conducted five meetings of Pronunciation Practice class to the participants via WhatsApp before distributing the questionnaire and interview sheet. The questionnaire consisted of five questions by applying Likert Scale, while the interview consisted of ten questions. From the questionnaire and interview, the researcher concludes that the using of WhatsApp in teaching Pronunciation Practice to the third semester students of Tadris English Study Program in IAIN Palu is practical. The students could understand the material shared via WhatsApp in the form of documents shared, videos shared, as well as voice recording shared. They could use the features in WhatsApp well such as sharing documents, voice notes, sharing videos, video call and so on in learning pronunciation practice. The students like Pronunciation Practice Class and enjoy studying it via WhatsApp. Learning Pronunciation Practice via WhatsApp has some advantages such as time flexibility as well as structured and easily accessed materials. However, it also has some limitations such as internet data availability and video call limitation. Besides, the participants faced several obstacles in learning Pronunication Practice via WhatsApp, such as the limitation of smartphone memory to save files, down internet server, and unavailability of internet data. Nevertheless, they could passed those obstacles well by deleting some unused files to give more space to the memory and finding out wifi connection to stay connected to WhatsApp when the server was down or they ran out of internet data. They could understand the teaching of Pronunciation Practice via WhatsApp by downloading and reading the documents shared, the videos shared, and the voice recording shared by the lecturer. When they found a difficulty, they asked their friends or the lecturer via WhatsApp group.

Do Investors Perceive Low Risk When Earnings are Smooth Relative to the Volatility of Operating Cash Flows? Discerning Opportunity and Incentive to Report Smooth Earnings

2016 ◽  
Vol 92 (3) ◽  
pp. 137-154 ◽  
Author(s):  
Devon Erickson ◽  
Max Hewitt ◽  
Laureen A. Maines
Keyword(s):  
Earnings Management ◽  
Cash Flows ◽  
Low Risk ◽  
Data Availability ◽  
Additional Information ◽  
Operating Cash Flows ◽  
Risk Judgments

ABSTRACT A fundamental accounting question is whether investors perceive low risk when earnings are smooth relative to the volatility of operating cash flows. We conduct two experiments to examine this question. Absent additional information concerning the likelihood of earnings management, our first experiment finds that investors give managers the benefit of the doubt and perceive low risk when earnings are relatively smooth. Given this finding, our second experiment examines whether additional information that supports investors' suspicions of earnings management affects investors' risk judgments when earnings are relatively smooth. We find that investors no longer give managers the benefit of the doubt when additional information suggests that managers have either the opportunity or the incentive to report smooth earnings. Our study provides important insights to the literature concerning both “whether” and “when” relatively smooth earnings affect investors' risk judgments. Data Availability: Contact the authors.

THE USING OF WHATSAPP IN TEACHING PRONUNCIATION PRACTICE TO THE THIRD SEMESTER STUDENTS OF TADRIS ENGLISH STUDY PROGRAM IN IAIN PALU

2021 ◽  
Vol 1 (2) ◽  
pp. 29-36
Author(s):  
Afifah Afifah
Keyword(s):  
Research Question ◽  
Data Availability ◽  
State Institute ◽  
Study Program ◽  
The Third ◽  
Internet Server ◽  
Data Collections ◽  
Teaching Pronunciation ◽  
The Voice ◽  
Voice Recording

This research focuses on the using of WhatsApp in teaching pronunciation practice to the third semester students of Tadris English Study Program in IAIN Palu. The research question is “How is the using of WhatsApp in teaching Pronunciation Practice to the third semester students of Tadris English Study Program in IAIN Palu?” This is a qualitative research by using two instruments of data collections namely questionnaire and interview. The participants consisted of 19 third semester students of Tadris English Study Program of State Institute for Islamic Studies (IAIN) Palu. The researcher conducted five meetings of Pronunciation Practice class to the participants via WhatsApp before distributing the questionnaire and interview sheet. The questionnaire consisted of five questions by applying Likert Scale, while the interview consisted of ten questions. From the questionnaire and interview, the researcher concludes that the using of WhatsApp in teaching Pronunciation Practice to the third semester students of Tadris English Study Program in IAIN Palu is practical. The students could understand the material shared via WhatsApp in the form of documents shared, videos shared, as well as voice recording shared. They could use the features in WhatsApp well such as sharing documents, voice notes, sharing videos, video call and so on in learning pronunciation practice. The students like Pronunciation Practice Class and enjoy studying it via WhatsApp. Learning Pronunciation Practice via WhatsApp has some advantages such as time flexibility as well as structured and easily accessed materials. However, it also has some limitations such as internet data availability and video call limitation. Besides, the participants faced several obstacles in learning Pronunication Practice via WhatsApp, such as the limitation of smartphone memory to save files, down internet server, and unavailability of internet data. Nevertheless, they could passed those obstacles well by deleting some unused files to give more space to the memory and finding out wifi connection to stay connected to WhatsApp when the server was down or they ran out of internet data. They could understand the teaching of Pronunciation Practice via WhatsApp by downloading and reading the documents shared, the videos shared, and the voice recording shared by the lecturer. When they found a difficulty, they asked their friends or the lecturer via WhatsApp group.

Are Fraud Specialists Relatively More Effective than Auditors at Modifying Audit Programs in the Presence of Fraud Risk?

2014 ◽  
Vol 90 (3) ◽  
pp. 881-915 ◽  
Author(s):  
J. Efrim Boritz ◽  
Natalia Kochetova-Kozloski ◽  
Linda Robinson
Keyword(s):  
Risk Factors ◽  
Time Budget ◽  
Data Availability ◽  
Fraud Risk ◽  
Standard Procedures ◽  
Revenue Cycle ◽  
Audit Program ◽  
Budget Increase

ABSTRACT Previous studies indicate that auditors are able to identify fraud risk factors, but may not be able to translate this knowledge into an audit plan that effectively takes these factors into account to increase the likelihood of detecting fraud. Fraud specialists may be able to compensate for such limitations. This study investigates the relative merits of involving fraud specialists in assisting auditors by developing an audit plan that would effectively address fraud risk in a revenue cycle. Results show that fraud specialists did not differ from auditors in the number of procedures selected from a standard audit program; nor were these procedures cumulatively more effective than those selected by auditors. Fraud specialists generated a greater number of non-standard additional audit procedures, and those procedures were marginally more effective, but less efficient, than those of auditors, except for certain groups of procedures. Finally, although the fraud specialists proposed significantly more additional (non-standard) procedures than auditors, their proposed budget increase for this category of procedures was significantly smaller than the budget increase proposed by auditors. Adjustments to the overall time budget did not differ between fraud specialists and auditors. Data Availability: Data are available from the authors upon request.

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