Audit Quality in the Post-SOX Audit Environment: What Your Auditing Students Must Know about the PCAOB Inspection Process

2008 ◽  
Vol 2 (2) ◽  
pp. A17-A25 ◽  
Author(s):  
Richard R. Riley ◽  
J. Gregory Jenkins ◽  
Pamela Y. Roush ◽  
Jay C. Thibodeau
Keyword(s):  
Audit Quality ◽  
Panel Discussion ◽  
Case Material ◽  
Audit Process ◽  
Education Committee ◽  
Sarbanes Oxley ◽  
Auditing Standards ◽  
Question And Answer ◽  
Inspection Process

SUMMARY: At the American Accounting Association’s (AAA) Auditing Section Midyear Meeting in January 2007, the Education Committee organized a panel to discuss the educational issues that have surfaced as a result of the PCAOB inspection process. The discussion focused on changes that have occurred in the audit environment, particularly concerning audit documentation and the audit process, as a result of the PCAOB auditing standards and feedback to the firms from the PCAOB inspection process. The goal was to provide a forum for panelists to interact with educators, to develop suggestions to help prepare students for their careers in the post-Sarbanes-Oxley auditing environment. In this paper, we first provide an overview of the PCAOB inspection process and then provide a report on the actual panel discussion, which included a spirited question-and-answer session with the audience. We also incorporate the results of follow-up interviews with the three panelists that occurred in April 2008. Finally, we provide case material and other resources to assist professors as they incorporate the panelists’ suggestions related to PCAOB inspection issues in the classroom.

Comments by the Auditing Standards Committee of the Auditing Section of the American Accounting Association on the PCAOB Rulemaking Docket Matter No. 31: PCAOB Release No. 2010-005, Application of the “Failure to Supervise” Provision of the Sarbanes-Oxley Act of 2002 and Solicitation of Comment on Rulemaking Concepts

2011 ◽  
Vol 5 (1) ◽  
pp. C11-C15 ◽  
Author(s):  
Joseph Brazel ◽  
James Bierstaker ◽  
Paul Caster ◽  
Brad Reed
Keyword(s):  
Audit Quality ◽  
Exposure Period ◽  
Public Accounting ◽  
Accounting Firms ◽  
Accounting Firm ◽  
The Public ◽  
Sarbanes Oxley ◽  
Public Company ◽  
Auditing Standards ◽  
Supervision Practices

SUMMARY: Recently, the Public Company Accounting Oversight Board (“PCAOB” or “Board”) issued a release to address, in two ways, issues relating to the responsibilities of a registered public accounting firm and its supervisory personnel with respect to supervision. First, the release reminds registered firms and associated persons of, and highlights the scope of, Section 105(c)(6) of the Sarbanes-Oxley Act of 2002 (“the Act”), which authorizes the Board to impose sanctions on registered public accounting firms and their supervisory personnel for failing to supervise reasonably an associated person who has violated certain laws, rules, or standards. Second, the release discusses and seeks comment on conceptual approaches to rulemaking that might complement the application of Section 105(c)(6) and, through increased accountability, lead to improved supervision practices and, consequently, improved audit quality. The PCAOB provided for a 91-day exposure period (from August 5, 2010, to November 3, 2010) for interested parties to examine and provide comments on the conceptual approaches to rulemaking that might complement the application of Section 105(c)(6). The Auditing Standards Committee of the Auditing Section of the American Accounting Association provided the comments in the letter below to the PCAOB on the PCAOB Release No. 2010-005, Application of the “Failure to Supervise” Provision of the Sarbanes-Oxley Act of 2002 and Solicitation of Comment on Rulemaking Concepts.

scholarly journals ANALISIS IMPLEMENTASI AUDIT PERBANKAN SYARIAH DI INDONESIA

2020 ◽  
Vol 5 (1) ◽  
pp. 1
Author(s):  
Puja Lestari ◽  
Dewi Susilowati ◽  
Wahyudin Wahyudin
Keyword(s):  
Human Resources ◽  
Commercial Bank ◽  
Audit Quality ◽  
Annual Reports ◽  
Islamic Banking ◽  
Audit Process ◽  
Unit Of Analysis ◽  
Reporting Requirements ◽  
Auditing Standards ◽  
Privately Owned

This study aims to analyze the suitability of audit practices in Islamic Banking with existing auditing standards in Indonesia. The unit of analysis in this study is the state-owned Sharia Commercial Bank, namely PT. Bank Syariah Mandiri and privately owned, namely PT. Bank Muamalat Indonesia Tbk. This research uses qualitative methods, using case studies. Data collection was obtained by conducting interviews and analyzing annual reports from 2015 to 2017. The results showed that the audit framework, audit scope, audit quality, audit charter, audit process, and reporting requirements conform to appropriate auditing standards in Indonesia. This study found facts related to sharia auditing in terms of qualified human resources in terms of knowledge of sharia auditing and principles.

scholarly journals Do Auditing Standards Matter?

2013 ◽  
Vol 7 (2) ◽  
pp. A1-A16 ◽  
Author(s):  
W. Robert Knechel
Keyword(s):  
Audit Quality ◽  
Economic Value ◽  
Common Denominator ◽  
Audit Process ◽  
Economic Role ◽  
Audit Firms ◽  
Auditing Standards ◽  
Potential Demand ◽  
Information Advantage ◽  
Professional Expert

SUMMARY Properly understanding the economic role of auditing standards is an important step toward improving both audit effectiveness and efficiency. In this essay, I observe that auditing standards are most important when an auditor may have an incentive to under-audit. While this conclusion may not come as a surprise, the conditions under which standards may, or may not, have a desirable effect on audit quality are less obvious. More specifically, I present a number of observations about what standards can do: Standards can (1) compensate for the lack of observability of the audit outcome by focusing on the audit process; (2) partially mitigate the information advantage possessed by the auditor as a professional expert that might motivate the auditor to under-audit; (3) counterbalance the diversity of demand across multiple stakeholders that might drive the audit to the lowest common denominator and create a market based on adverse selection; and (4) provide a benchmark that facilitates the calibration of an auditor's legal liability in the event of a substandard audit. However, I also present a number of observations about what standards should not try to do: Standards should not (1) discourage the use of judgment by auditors; (2) limit the potential demand for economically valuable alternative levels of assurance; (3) lead to excessive procedural routine or standardization in the conduct of the audit; and (4) be set based on an enforcement agenda. In the end, standards overreach may undermine the economic value of the audit to many stakeholders and lead to fee pressure for audit firms. Hopefully, these insights can inform future debates about the level and types of standards that are appropriate for the auditing profession.

PENGARUH KOMPETENSI, INDEPENDENSI DAN PENGALAMAN AUDITOR TERHADAP KUALITAS AUDIT APARAT INSPEKTORAT DALAM PENGAWASAN KEUANGAN DAERAH (Studi Empiris Pada Inspektorat Provinsi Papua)

2021 ◽  
Vol 3 (1) ◽  
pp. 1-7
Author(s):  
Leli Piska Yumame ◽  
Meinarni Asnawi ◽  
Rudiawie Larasati
Keyword(s):  
Multiple Regression ◽  
Audit Quality ◽  
Process Quality ◽  
External Interference ◽  
External Auditors ◽  
Auditing Standards ◽  
Improvement Programs ◽  
Independent Variable

This study aims to examine the effect of competence, independence, and experience on the auditquality of the inspectorate officials in Papua province. A common problem in this study is theexistence of audit findings that are not detected by the inspectorate apparatus as internal auditorsbut found by external auditors, the Supreme Audit Agency (BPK). Operationally, the researchvariables are elaborated into several indicators. The competency variables of the apparatus areelaborated into three indicators, namely mastery of accounting and auditing standards, insight intogovernment, and skills improvement programs. The variables of apparatus independence areelaborated into two indicators, namely personal disturbance and external interference. Theapparatus experience variable is elaborated into several indicators, namely: In terms of length ofwork as an auditor, and the number of audit tasks that have been carried out. The audit qualityvariable is elaborated into four indicators, namely: process quality, result quality, and follow-up onaudit results.The population of this study were officials from the Inspectorate of Jayapura City, Inspectorate, andPapua Province who also carried out regular inspections. Data were taken from questionnairesdistributed to respondents. The variables in this study are the independent variable (independent)competence (X1), independence (X2), and experience (X3), while the dependent variable(dependent) is the quality of the audit (Y). Data were analyzed using multiple linear regressionanalysis (multiple regression).The results showed that competence and experience had a positive and significant effect on auditquality, while the independence variable did not have a significant effect on audit quality. Thecoefficient of determination shows that together competence, independence, and experiencecontribute to the dependent variable (audit quality) by 55.1% while the remaining 44.9% isexplained by factors outside the model of this study.

scholarly journals When the PCAOB Talks, Who Listens? Evidence from Stakeholder Reaction to GAAP-Deficient PCAOB Inspection Reports of Small Auditors

2012 ◽  
Vol 32 (2) ◽  
pp. 1-31 ◽  
Author(s):  
Lawrence J. Abbott ◽  
Katherine A. Gunny ◽  
Tracey Chunqi Zhang
Keyword(s):  
Audit Committee ◽  
Audit Quality ◽  
Agency Conflicts ◽  
Accounting Firms ◽  
Publicly Traded Companies ◽  
Sarbanes Oxley ◽  
Quality Signals ◽  
Public Company ◽  
Inspection Process ◽  
Auditor Reporting

SUMMARY: Section 104 of the Sarbanes-Oxley Act (SOX) created the Public Company Accounting Oversight Board (PCAOB). The PCAOB conducts inspections of registered public accounting firms that provide audits for publicly traded companies. The results of the inspection process are summarized in publicly available reports at the PCAOB website. Using these reports, we categorize the inspection reports into three levels of increasing severity: clean, GAAS-deficient, and GAAP-deficient. We examine the potential use of GAAP-deficient PCAOB inspection reports as perceived audit quality signals for the clients of GAAP-deficient auditors that are inspected on a triennial basis by the PCAOB. Our investigation is predicated on the notion that audit quality is generally not directly observable. Thus, the clients of these auditors may seek to signal their desire for audit quality by dismissing their GAAP-deficient auditors. Our results suggest that the clients of GAAP-deficient, triennially inspected auditors are more likely to dismiss these auditors in favor of triennially inspected auditors that are not GAAP-deficient. In addition, we find that greater agency conflicts, the presence of an independent and expert audit committee, and outside blockholdings magnify this effect. Interestingly, we find no evidence that the clients use GAAP-deficient reports to procure a subsequent-year audit fee discount or more favorable going-concern auditor reporting treatment. Our evidence indicates that PCAOB inspection reports created heterogeneity in auditor brand name among a group of non-Big N/non-national auditors that did not previously exist and are universally treated by prior research as “other auditors.”

Auditor Tenure and the Timeliness of Misstatement Discovery

2017 ◽  
Vol 93 (2) ◽  
pp. 315-338 ◽  
Author(s):  
Zvi Singer ◽  
Jing Zhang
Keyword(s):  
Natural Experiment ◽  
Audit Quality ◽  
Client Engagement ◽  
Audit Firm ◽  
Auditor Tenure ◽  
Sarbanes Oxley ◽  
Auditor Change ◽  
Negative Effect ◽  
Extended Analysis ◽  
Arthur Andersen

ABSTRACT Using the timeliness of misstatement discovery as a proxy for audit quality, we examine the association between audit firm tenure and audit quality in a setting that alleviates the endogeneity problem endemic to this line of research. We find that longer audit firm tenure leads to less timely discovery and correction of misstatements, which is consistent with a negative effect of long auditor tenure on audit quality. In addition, using the non-voluntary auditor change following the demise of Arthur Andersen in 2002 as a natural experiment, we show that the misstatements of its former clients were discovered faster than those of comparable companies that retained their auditors throughout the misstatement. This finding speaks to the benefit of a fresh look by a new auditor. An extended analysis shows that longer auditor tenure also leads to misstatements of greater magnitudes, and that the Sarbanes-Oxley Act has mitigated, but not eliminated, the negative effect of long auditor tenure. Last, we show that the negative association between auditor tenure and timely discovery of misstatements is mainly present in the first ten years of an audit engagement. Our study has implications for regulators who continue to express concern regarding lengthy auditor-client engagement. JEL Classifications: K22; K23; L51; M41; M42; M48.

Not all experts are equal in the eyes of the International Auditing and Assurance Standards Board: On the application of ISA510 and ISA620 by South African registered auditors

2021 ◽  
Vol 24 (1) ◽  
Author(s):  
Marianne Kok ◽  
Warren Maroun
Keyword(s):  
South African ◽  
Audit Quality ◽  
Legal Liability ◽  
Third Party ◽  
Audit Committees ◽  
Test Procedures ◽  
Technical Application ◽  
Auditing Standards ◽  
Testing Complex ◽  
African Context

Background: The article focuses on inconsistencies in audit approaches when auditors place reliance on the work performed by others. It examines differences in the approach followed by auditors when relying on the work of a predecessor versus the work of an auditor’s expert.Setting: The study contributes to the limited body of auditing research focusing on the technical application of International Auditing Standards and the functioning of actual audit practice in a South African context. It outlines how auditors apply their professional judgement when using technical auditing standards when comparing the work of a similarly trained expert in the field of accounting and auditing (per ISA510) versus the work of an expert in a field other than accounting and auditing (per ISA620).Aim: The purpose of this article is to examine and identify inconsistencies in the interpretation and application of ISA510 and ISA620 by a purposefully selected number of registered auditors in South Africa. It considers how inconsistencies in the approach followed when an auditor places reliance on the work of another auditor or an auditor’s expert points to underlying efforts to seek legitimacy and manage legal liability.Method: Detailed interviews are used to explore auditors’ experiences and challenges with the application of these two ISAs.Results: Audit quality is not necessarily a function of compliance with professional standards. While ISA510 and ISA620 deal with a situation where an auditor places reliance on the work of a third party, they are interpreted and applied very differently.Conclusion: The application of ISA510 is part of a rules-based approach to auditing aimed at reducing an auditor’s legal liability rather than enhancing audit quality. The same logic applies to ISA620 except that auditors perceive that their risk exposure is lower because the standard is limited to a single transaction or balance rather than to the entire audit engagement. The application of ISA620 is also useful for convincing internal reviewers, external regulators or audit committees that sufficient appropriate evidence for a complex line item has been obtained. The need to ensure a more robust process for testing complex balances and transactions is not, however, the primary consideration. Regulators and standard setters should not assume that compliance with auditing standards results in better quality audits. At the operational level, the need to manage legal liability and to signal the credibility of test procedures may be more relevant for the execution of audits than ensuring that audit opinions are supported by sufficient appropriate audit evidence. As only two standards, applied in a single jurisdiction, are used to illustrate this point, additional research will be required to determine the extent of inconsistency in the application of auditing standards and how this can result in lower levels of audit quality.

Determinants of Audit Quality with Auditor's Professionalism Skepticism as a Mediating Variable in Public Accounting Firm (KAP) Medan City

2021 ◽  
Vol 8 (9) ◽  
pp. 102-114
Author(s):  
Shabrina Tri Asti Nasution
Keyword(s):  
Audit Quality ◽  
Educational Institutions ◽  
Audit Process ◽  
Public Accounting ◽  
Professional Skepticism ◽  
Accounting Firm ◽  
The City ◽  
And Training ◽  
Good Attitude

The purpose of this study is to detect factors that encourage an increase in auditor professionalism skepticism so that they are able to produce quality audits. It is realized that audit quality comes from a good audit process and the auditor puts forward a good attitude of professional skepticism. The results of this study indicate that the experience and competence of auditors can increase the attitude of skepticism of auditor professionalism and audit quality. In addition, the skepticism of the auditor's professionalism is able to mediate the experience of the auditor and the competence of the auditor affects the quality of the audit. For KAP, especially in the city of Medan, it has an obligation to provide an equal portion of audit assignments to all auditors and provide opportunities for auditors to improve their abilities by attending education and training from both formal and non-formal educational institutions. Keywords: Experience, Competence, Skepticism, Audit Quality.

scholarly journals The Effect of Independence and Integrity on Audit Quality: Is There A Moderating Role for E-Audit?

2021 ◽  
Vol 23 (3) ◽  
Author(s):  
Diza Dianeke Budi Prabowo ◽  
Dwi Suhartini
Keyword(s):  
Industrial Revolution ◽  
Audit Quality ◽  
Practical Implication ◽  
Financial Statements ◽  
Auditor Independence ◽  
Audit Process ◽  
Accounting Firms ◽  
Audit Reports ◽  
The Impact

The financial statements must be reliable and become a benchmark in considering an audit decision on the financial statements. In order for this to be achieved, independence and integrity is required in carrying out the audit process. E-Audit helps overcome challenges in the industrial revolution 4.0 and prevent fraud. This research aims of testing and analyzing the role of e-audit in moderating the impact of auditor independence and integrity on audit quality. The data was collected through a questionnaire distributed to auditors at Public Accounting Firms in Surabaya. There are 36 respondents involved. The data were analyzed using SmartPLS. The results showed that auditor independence positively effect audit quality, auditor integrity positively effect audit quality; e-audit does non moderate the effect of auditor independence on audit quality; ande-Audit negatively moderates the effect of auditor integrity on audit quality. The practical implication of this research is that when determining high audit quality, independent auditors should at least increase their independence and integrity so that the resulting audit reports are of high quality and can be a reference for decision makers.

scholarly journals Fashion Studies Volume 3, Issue 1, Launch Panel Discussion

2020 ◽  
Vol 3 (1) ◽  
Author(s):  
Shawkay Ottmann ◽  
Ellen Sampson ◽  
Philip Sparks ◽  
Cheryl Thompson
Keyword(s):  
Panel Discussion ◽  
Fashion Studies ◽  
Question And Answer

A panel discussion featuring four of our brilliant authors from this new issue: Shawkay Ottmann, Dr. Ellen Sampson, Philip Sparks, and Dr. Cheryl Thompson. This panel was moderated by the journal’s Co-Founders and Co-Editors, Dr. Ben Barry and Dr. Alison Matthews David, and includes a question and answer period with event guests.

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