scholarly journals Comments on Discussion Paper: Fraud and Going Concern in an Audit of Financial Statements: Exploring the Differences Between Public Perceptions About the Role of the Auditor and the Auditor’s Responsibilities in a Financial Statement Audit

2021 ◽  
Author(s):  
Tammie J Schaefer ◽  
Veena L Brown ◽  
Matthew S. Ege ◽  
Noel Harding ◽  
Dana R. Hermanson ◽  
...  
Keyword(s):  
Financial Statements ◽  
Public Perceptions ◽  
Research Literature ◽  
Financial Statement ◽  
Sufficient Time ◽  
Discussion Paper ◽  
Going Concern ◽  
Financial Statement Audit ◽  
External Reporting

We commend the International Auditing and Assurance Standards Board (the Board) on its efforts to determine “whether the auditing standards related to fraud and going concern need to be updated to reflect the rapidly evolving external reporting landscape.” We especially commend the Board on the timeliness of the call for input into these issues in that there is sufficient time to conduct research to further inform questions raised in the Discussion Paper and the questions that will inevitably arise as deliberations continue and progress is made on the project. We note below insights from the extant research literature as they relate to the questions posed in the Discussion Paper, but there remain many unanswered questions. We believe that many members of the Auditing Section of the American Accounting Association stand ready to work with the Board and other stakeholders to inform deliberations in this area.

Fintech in financial reporting and audit for fraud prevention and safeguarding equity investments

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Paulina Roszkowska
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Fraud ◽  
Financial Statement Fraud ◽  
Content Type ◽  
Financial Scandals ◽  
External Auditor ◽  
Equity Investments

Purpose The purpose of this paper is to explore the audit-related causes of financial scandals and advice on how emerging technologies can provide solutions thereto. Specifically, this study seeks to look at the facilitators of financial statement fraud and explain specific fintech advancements that contribute to financial information reliability for equity investments. Design/methodology/approach The study uses the case studies of Enron and Arthur Andersen to document the evidence of audit-related issues in historical financial scandals. Then, a comprehensive and interdisciplinary literature review at the intersection of business, accounting and engineering, provides a foundation to propose technology advancements that can solve identified problems in accounting and auditing. Findings The findings show that blockchain, internet of things, smart contracts and artificial intelligence solutions have different functionality and can effectively solve various financial reporting and audit-related problems. Jointly, they have a strong potential to enhance the reliability of the information in financial statements and generally change how companies operate. Practical implications The proposed and explained technology advancements should be of interest to all publicly listed companies and investors, as they can help safeguard equity investments, thus build investors’ trust towards the company. Social implications Aside from implications for capital markets participants, the study findings can materially benefit various stakeholder groups, the broader company environment and the economy. Originality/value This is the first paper that seeks solutions to financial fraud and audit-related financial scandals in technology and not in implementing yet another regulation. Given the recent technology advancements, the study findings provide insights into how the role of an external auditor might evolve in the future.

Bank officers’ perceptions and uses of qualified audit reports

2014 ◽  
Vol 11 (3) ◽  
pp. 215-237 ◽  
Author(s):  
Nina Sormunen
Keyword(s):  
Financial Statements ◽  
Structured Interviews ◽  
Content Type ◽  
Factors Affecting ◽  
Going Concern ◽  
Other Information ◽  
Audit Reports ◽  
Going Concern Reports ◽  
Practical Implications

Purpose – The purpose of this study is to provide insights into the perceptions and uses of qualified audit reports in financial statements of small- and medium-sized enterprises (SMEs). As there is a long-standing debate on the usefulness of auditor’s going-concern reports, this study aims to provide insights into the factors that affect how banks perceive and use going-concern reports. Design/methodology/approach – Semi-structured interviews with bank officers were conducted. Findings – The study findings demonstrated that bank officers considered that the going-concern report provided information, although they did not regard the information as being particularly useful. The main factors affecting the usefulness of information are use of other information sources and bank officers’ perceptions of auditing. Other factors are also presented and discussed in the current research paper. Practical implications – Regulators have taken the action to improve the auditor’s reporting model, and the findings provided by this study are important because they provide a deeper understanding of the perceptions and uses of audit reports from smaller companies. The study also contributes knowledge about the role of audit reports in the context of SMEs finance. Originality/value – This is one of the first studies to use a qualitative approach to examine factors that affect the use of going-concern reports.

Role of Financial Statement in Investment Decision Making Process

2020 ◽  
Vol 9 (1) ◽  
pp. 105-108
Author(s):  
Suraj Bhujel
Keyword(s):  
Decision Making ◽  
Investment Decision ◽  
Financial Statements ◽  
Vital Role ◽  
Financial Statement ◽  
Quality Information ◽  
Decision Making Process ◽  
Investment Decision Making

It is believed that financial statements are the key documents for any organizations for the investment decision making. Investment decision making depends upon the quality information obtained by the various sources and it is concluded in this research which is based on the findings that financial statement plays a vital role in investment decision making and recommends that no investment decision should be taken without the consideration of a company’s financial statements.

Can Auditors Mitigate Information Asymmetry in M&As? An Empirical Analysis of the Method of Payment in Belgian Transactions

2013 ◽  
Vol 33 (1) ◽  
pp. 57-91 ◽  
Author(s):  
Mathieu Luypaert ◽  
Tom Van Caneghem
Keyword(s):  
Information Asymmetry ◽  
Private Information ◽  
Regression Models ◽  
Financial Statements ◽  
Financial Statement ◽  
Firm Characteristics ◽  
Target Level ◽  
Financial Statement Audit ◽  
Method Of Payment ◽  
The Relationship

SUMMARY In this paper, we empirically examine the relationship between the external financial statement audit and the method of payment across a sample of Belgian mergers and acquisitions between listed and private firms over the period 1997–2009. We investigate whether a Big N audit (at the target level) reduces the need for a contingent payment resulting from information asymmetry about the target's value. In addition, we analyze whether a Big N audit (at the bidder level) limits incentives for bidders to exploit private information about their own value. Using multivariate ordered probit and binary regression models, we determine that contingent payments are less common when the target is audited by a Big N auditor after controlling for several other deal and firm characteristics. Furthermore, we find that the incentive to use stock payments in periods of stock market overvaluation is lower for acquirers with a Big N auditor. Finally, target shareholders are more likely to accept a contingent offer if the acquirer's financial statements are certified by a Big N auditor. JEL Classifications: G34; M4.

scholarly journals FAKTOR-FAKTOR YANG MEMPENGARUHI KUALITAS LAPORAN KEUANGAN PEMERINTAH DAERAH KOTA SEMARANG

KINERJA ◽  
2016 ◽  
Vol 20 (2) ◽  
pp. 179
Author(s):  
Lilis Setyowati ◽  
Wikan Isthika ◽  
Ririh Dian Pratiwi
Keyword(s):  
Human Resources ◽  
Internal Audit ◽  
Financial Statements ◽  
Financial Statement ◽  
Primary Data ◽  
Significant Positive Effect ◽  
Role Of It ◽  
Positive Effect

AbstractThe purpose of this study is analyze the factors influence the quality of financial statement .This study uses primary data obtained from questionnaires to accounting of SKPD Semarang. The method used in this research is multiple regression analysis. The results of this study indicate that (1) the variable role of information technology did not significantly affect the quality of financial statements, (2) the competence of human resources significant positive effect on the quality of financial statements, (3) the role of internal audit significant positive effect on the quality of financial statements.Keywords: role of IT, competence of human resources, role of internal audit, and quality of financial statement

scholarly journals Planning for Substantive Testing at the Assertion Level: A Training Activity and Mini Case

2020 ◽  
Author(s):  
Janice E. Rummell ◽  
Andrea B. Weickgenannt
Keyword(s):  
Planning Process ◽  
Critical Role ◽  
Financial Statement ◽  
Student Survey ◽  
Training Activity ◽  
Audit Planning ◽  
Financial Statement Audit ◽  
Students First ◽  
Survey Responses

This two-part educational resource was developed to enhance students’ understanding of a key aspect of the audit guidance concerning financial statement audit planning for substantive testing at the assertion level. Assuming the role of audit associates at a CPA firm, students first engage in a training activity in which they deconstruct substantive audit tasks into significant financial statement accounts, management assertions, and types of audit procedures related to each task. Then students consider inherent risk factors for a client engagement in a mini case and apply relevant accounts, management assertions, and detailed substantive audit procedures. These resources are easy to implement and require little advanced preparation, yet they provide a rich instructional resource for either new or experienced auditing faculty. Assessment results and student survey responses reveal the effectiveness of these resources in promoting students’ comprehension of the critical role of management assertions in the audit planning process.

Directors' Responsibilities, Accountability, and Business Judgment: The Pierse Contracting Case

2019 ◽  
Vol 35 (1) ◽  
pp. 25-41
Author(s):  
Niamh M. Brennan
Keyword(s):  
Board Of Directors ◽  
Role Play ◽  
Financial Statements ◽  
Financial Statement ◽  
Legal Action ◽  
Going Concern ◽  
Legal Risks ◽  
External Auditor ◽  
Court Proceedings

ABSTRACT This case helps students understand the challenging decisions faced by a company's board of directors (i.e., survival of the company) and the legal risks directors experience when business fails. The case is based on actual court proceedings involving a company's liquidator taking legal action to restrict the tenure of the directors. Key judgments facing the directors and disputed by the liquidator include the valuation of financial statement assets and the preparation of the financial statements on a going-concern basis. The case also addresses directors' relationships with the company's external auditor/advisors. Students are asked to consider whether the directors acted responsibly in relation to their stewardship of the company and whether the directors should be held accountable and sanctioned following the company's collapse. The case adopts a novel courtroom setting, requiring students to role-play by adopting the characters and presenting the plaintiff's and defendants' lawyers' arguments, and the judges deciding the case.

The roles of whistleblowing system and fraud awareness as financial statement fraud deterrent

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nanang Shonhadji ◽  
Ach Maulidi
Keyword(s):  
Capital Investment ◽  
Financial Statements ◽  
Financial Statement ◽  
Theoretical Discussion ◽  
Financial Statement Fraud ◽  
Accounting Firms ◽  
Content Type ◽  
Effective Deterrent ◽  
Fraudulent Financial Statements

Purpose This paper aims to provide new theoretical discussion about the role of whistleblowing system and fraud awareness as an effective deterrent for financial statement fraud. Design/methodology/approach The authors conducted surveys to 13 reputable public accounting firms in East Java, Indonesia. Findings It is well acknowledged, as fraud attacks grow more sophisticated, whistleblowing system and fraud awareness can be possible deterrents. By increasing employees’ fraud awareness, they do not only recognise fraud symptoms and typologies but also support to raise concerns in good faith and on reasonable grounds. This study also suggests the role of fraud awareness as a human capital investment that increase sensitivity on identifying fraud symptoms and discouraging participation in crimes. Originality/value This study produces new theoretical discussion about fraud prevention. Then this study also offers several aspects that can help organisation to establish effective whistleblowing systems and reporting mechanisms. Those aspects identified can encourage an individual to report malpractice or wrongdoing. This study also offers how fraud awareness can support the implementation of whistleblowing system in preventing fraudulent financial statements and other irregularities.

Mandatory Audit Firm Rotation and Audit Quality

2015 ◽  
Vol 31 (3) ◽  
pp. 1089 ◽  
Author(s):  
Hakwoon Kim ◽  
Hyoik Lee ◽  
Jong Eun Lee
Keyword(s):  
Audit Quality ◽  
Global Financial Crisis ◽  
Auditor Independence ◽  
Financial Statement ◽  
Policy Makers ◽  
Audit Firm ◽  
Going Concern ◽  
Financial Statement Audit ◽  
Mandatory Audit Firm Rotation ◽  
First Time

Recently, regulators and policy makers who witnessed the global financial crisis during 20072009 began considering a variety of ways to enhance auditor independence and financial reporting quality, ultimately aiming at investor protection. Since the enactment of the SarbanesOxley Act of 2002 (SOX), the Mandatory Audit Firm Rotation (MAFR) requirement has once again received significant attention from regulators and policy makers around the world, including the European Union (EU) and the U.S. Public Companies Accounting Oversight Board (PCAOB). In this paper, we investigate whether MAFR enhances audit quality in Korea. We find that under MAFR, newly rotated auditors are more likely to issue first-time going-concern audit opinions to financially distressed firms during their initial (first-year) financial statement audit compared with under the Voluntary Audit Firm Change (VAFC). Moreover, firms audited by mandatorily rotated new auditors have less discretionary accruals and higher accrual quality than those audited by voluntarily switched new auditors during the initial audit engagement. These results of earnings quality are more pronounced for firms that received a first-time going-concern audit opinion during the initial financial statement audit under MAFR. Taken together, the findings suggest that MAFR produces better audit quality than the VAFC. Further, our study provides implications for regulators and policy makers of countries considering the adoption of MAFR.

ABC Electronics: An Instructional Case Illustrating Auditors' Use of Preliminary Analytical Procedures

2014 ◽  
Vol 8 (1) ◽  
pp. I1-I10 ◽  
Author(s):  
Paul M. Clikeman ◽  
Jamie Diaz
Keyword(s):  
Risk Assessment ◽  
Financial Statements ◽  
Consumer Electronics ◽  
Financial Statement ◽  
Planning Stage ◽  
Excel Spreadsheet ◽  
Financial Statement Audit ◽  
Analytical Procedures

SUMMARY This instructional case demonstrates auditors' use of analytical procedures during the planning/risk assessment phase of a financial statement audit. An Excel spreadsheet enables instructors to embed up to seven operating problems or potential accounting issues into a fictitious consumer electronics manufacturer's current year financial statements. Questionnaires from students at two universities indicate that the case is effective at helping undergraduate auditing students understand (1) auditors' use of analytical procedures during the planning stage of the audit, and (2) the types of accounting issues and operating problems that might be identified using analytical procedures.

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