Developments in Audit Approaches: From Audit Efficiency to Audit Effectiveness?

2012 ◽  
pp. 198-215
Author(s):  
Andrew Higson
Keyword(s):  
Audit Efficiency ◽  
Audit Effectiveness

Considering Multiple Materialities for Account Combinations in Audit Planning and Evaluation: A Cost Efficient Approach

1998 ◽  
Vol 13 (2) ◽  
pp. 151-171 ◽  
Author(s):  
Saurav K. Dutta ◽  
Lynford E. Graham
Keyword(s):  
Relative Cost ◽  
Analytic Framework ◽  
Audit Process ◽  
Audit Risk ◽  
Efficient Approach ◽  
Audit Planning ◽  
Audit Efficiency ◽  
Cost Efficient ◽  
User Perspectives ◽  
Audit Effectiveness

An analytic framework is provided for incorporating different user perspectives on materiality into the audit process. The framework serves as a tool for disaggregating materiality to specific accounts based on materiality criteria for accounts and account combinations. To improve audit efficiency, the planning method incorporates the relative cost of auditing various account balances. It extends existing models of audit risk and materiality by considering explicitly the materiality of account combinations (sums and ratios) to enhance audit effectiveness.

How Do Audit Workpaper Reviewers Cope with the Conflicting Pressures of Detecting Misstatements and Balancing Client Workloads?

2010 ◽  
Vol 29 (2) ◽  
pp. 27-43 ◽  
Author(s):  
Christopher P. Agoglia ◽  
Joseph F. Brazel ◽  
Richard C. Hatfield ◽  
Scott B. Jackson
Keyword(s):  
Audit Quality ◽  
Financial Statements ◽  
Regulatory Environment ◽  
Electronic Interaction ◽  
Audit Firms ◽  
Audit Efficiency ◽  
Audit Effectiveness

SUMMARY: The proliferation of electronic workpapers at audit firms allows audit managers and partners the choice of interacting electronically with their audit teams, as opposed to communicating with them in person. Prior research indicates that in-person discussion during review positively impacts audit effectiveness, while electronic review may improve audit efficiency. Thus, the choice of review format can be viewed as both a crucial and controllable audit input that can affect audit quality and, in turn, the reliability of financial statements. Still, little is known about how this decision is made. We conduct a survey and an experiment to extend the audit literature by examining reviewers’ choice of review format and by considering factors that influence this important choice. Survey evidence suggests that reviewers perceive in-person interaction during review as more effective and electronic interaction as more convenient. Given these findings, we conduct an experiment that explores whether misstatement risk and workload pressure influence the choice of review method. We find that these factors interact to affect reviewer behavior. Specifically, workload pressure can increase the likelihood of electronic review, but only when misstatement risk is low. When risk is high, reviewers choose to employ in-person reviews regardless of workload pressures. These findings are particularly relevant in light of changes in the regulatory environment that both emphasize the auditor’s role in detecting fraud/errors and exacerbate traditional workload pressures during busy times of the year. Our results suggest that reviewers cope with these conflicting pressures by choosing alternative review formats.

scholarly journals A discussion of auditor-client co-production of the audit and the effect on production efficiency

2016 ◽  
Vol 90 (9) ◽  
pp. 348-351
Author(s):  
Systse Duiverman ◽  
Christine Nolder
Keyword(s):  
Financial Reporting ◽  
Production Efficiency ◽  
Audit Quality ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Big 4 ◽  
Audit Efficiency ◽  
Efficiency And Effectiveness ◽  
Audit Production ◽  
Audit Effectiveness

This article provides a reflection on the paper and presentation during the FAR Conference of 9 and 10 May 2016 of “Auditor-client co-production of the audit and the effect on production efficiency” by Gaeremynck, Willekens, and Knechel (GWK). The authors examine the effect of auditor-client co-production on the efficiency of an audit, a topic relevant to the whole audit-client financial reporting and assurance supply chain. Using a sample of working papers from a Belgium Big 4 firm, the authors explore the controllable (i.e., managerial) and non-controllable (i.e., environmental) factors that contribute to variations in audit efficiency within the auditor-client coproduction of financial reporting quality. The results suggest that partner tenure positively contributes to the efficiency of the audit engagement, but the audit work prepared by the client, interim-work by the auditor, and the final audit work performed during off-peak season negatively affect audit efficiency. While this may be surprising from an efficiency standpoint, it may be that such measures add to the audit effectiveness to an extent that outweighs any efficiency loss. Audit quality or audit production, after all, is a matter of efficiency and effectiveness. GWK offer a number of important insights for practitioners interested in the delicate balance of managing efficiency and effectiveness. In the paragraphs that follow, we aim to both summarize the GWK research and highlight the importance of the findings to practice.

Audit effectiveness versus audit efficiency: are the two in conflict?

1999 ◽  
Vol 3 (2) ◽  
pp. 121-133 ◽  
Author(s):  
Karen V. Pincus ◽  
Richard A. Bernardi ◽  
Stephen E. Ludwig
Keyword(s):  
Audit Efficiency ◽  
Audit Effectiveness

The Effect of Early Career Experience on Auditors' Assessments of Error Explanations in Analytical Review

2012 ◽  
Vol 24 (2) ◽  
pp. 211-229
Author(s):  
Alex C. Yen
Keyword(s):  
Early Career ◽  
Data Availability ◽  
Full Time ◽  
Career Experience ◽  
Audit Firms ◽  
Audit Efficiency ◽  
Analytical Review ◽  
Level I ◽  
Audit Effectiveness ◽  
Staff Level

ABSTRACT In this paper, I examine the analytical review judgments of staff-level auditors. Heiman (1988) finds that students do not perform as well as senior-level auditors when performing certain analytical review procedures. I conduct an experiment based on Heiman (1988, 1990) to examine the analytical review judgments of those individuals who fall in between the two groups studied by Heiman—staff-level auditors who have some full-time experience, but are not yet at the senior level. I find that staff-level auditors' judgments are similar to the senior-level auditors' judgments observed in Heiman (1990). The results provide evidence about the readiness of staff-level auditors to perform certain analytical review procedures, which has staffing implications for audit firms looking to maximize audit efficiency without sacrificing audit effectiveness. The results also provide insights about the transition of an auditor from novice to expert. Data Availability: Available upon request.

Audit Effectiveness Versus Audit Efficiency: Are The Two in Conflict?

1999 ◽  
Vol 3 (2) ◽  
pp. 121-133 ◽  
Author(s):  
Karen V. Pincus ◽  
Richard A. Bernardi ◽  
Stephen E. Ludwig
Keyword(s):  
Audit Efficiency ◽  
Audit Effectiveness

Team-Oriented Leadership and Auditors' Willingness to Raise Audit Issues

2016 ◽  
Vol 91 (6) ◽  
pp. 1781-1805 ◽  
Author(s):  
Mark W. Nelson ◽  
Chad A. Proell ◽  
Amy E. Randel
Keyword(s):  
Team Leader ◽  
Data Availability ◽  
Speaking Up ◽  
Team Members ◽  
Audit Efficiency ◽  
Team Success ◽  
Audit Team ◽  
Speak Up ◽  
Audit Effectiveness

ABSTRACT This paper reports five studies examining audit team members' willingness to raise audit issues. The first study is a survey of interacting audit teams that provides evidence that team members are more willing to speak up when they view their leader as team-oriented (i.e., emphasizing team success as opposed to the leader's own personal advancement). Experiments 1–3 provide converging evidence that audit seniors are more willing to speak up to a team-oriented leader and about issues that are aligned with that leader's concerns. Experiment 4 provides evidence that the effect of team-oriented leadership on willingness to speak up is mediated by team members' commitment to the team leader and, to a lesser extent, by their identification with their team, but not by concerns about the immediate or eventual repercussions of speaking up. Together, these studies provide evidence that auditors' willingness to raise audit issues is affected by what the auditor has to say and how they think their message will be received, potentially affecting audit effectiveness and audit efficiency. Data Availability: Contact the authors.

scholarly journals Is PCAOB Standard No. 5 Impairing Auditor Objectivity?

2015 ◽  
Vol 9 (2) ◽  
pp. C1-C7 ◽  
Author(s):  
Richard G. Brody ◽  
Christine M. Haynes ◽  
Craig G. White
Keyword(s):  
Financial Reporting ◽  
Internal Controls ◽  
Internal Auditors ◽  
External Auditors ◽  
Sarbanes Oxley ◽  
Audit Efficiency ◽  
Client Relationships ◽  
External Auditor ◽  
The Impact ◽  
Audit Effectiveness

SUMMARY Auditing Standard No. 5 (AS5) urges external auditors to rely on the work of internal auditors when auditing internal controls over financial reporting. Although relying on the work of internal auditors may enhance audit efficiency, this paper examines whether such reliance is achieved at the expense of audit effectiveness. Specifically, this commentary questions whether conformity with AS5 is advisable given that changes in auditor/client relationships may have impacted internal and external auditor objectivity. Research has demonstrated that since the implementation of the Sarbanes-Oxley Act of 2002 external auditor objectivity has improved, ostensibly due to a reduced conflict of interest between external auditors and their clients. Although this result has positive implications for relying on the work of internal auditors, research also shows that internal auditors' objectivity has not improved over time. Thus, in complying with AS5, external auditors may be incorporating internal auditors' biases into their own judgments. The impact and implications of this problem are discussed.

Auditor-Provided Nonaudit Services and Audit Effectiveness and Efficiency: Evidence from Pre- and Post-SOX Audit Report Lags

2012 ◽  
Vol 31 (4) ◽  
pp. 85-114 ◽  
Author(s):  
W. Robert Knechel ◽  
Divesh S. Sharma
Keyword(s):  
House Of Representatives ◽  
Data Availability ◽  
Audit Report ◽  
Sarbanes Oxley ◽  
Audit Efficiency ◽  
Financial Restatements ◽  
Effectiveness And Efficiency ◽  
Nonaudit Services ◽  
Audit Effectiveness

SUMMARY The Sarbanes-Oxley Act of 2002 (SOX) effectively bars an auditor from providing nonaudit services to an audit client based on the belief that the resulting economic bonding undermines the auditor's independence and quality of the audit (U.S. House of Representatives 2002). The accounting profession has strongly debated this view and counter-argues that auditor-provided nonaudit services benefit the client. We contribute to this debate by examining the effect of auditor-provided nonaudit services on the effectiveness and efficiency of the audit. We find that higher nonaudit service fees are associated with shorter audit report lags—a potential indicator of audit efficiency—prior to the passage of SOX, but such effects dissipate after SOX. We find that discretionary accruals and financial restatements—potential indicators of audit effectiveness—do not increase when shorter audit lags occur in conjunction with high nonaudit service fees. We also find that the firms with the highest levels of nonaudit service fees prior to SOX have the largest increase in audit lags after SOX. These results suggest that there is some merit to the profession's argument that auditor-provided nonaudit services benefit clients without leading to a loss of audit effectiveness. Data Availability: All data are publicly available from sources identified in the text.

Improving Tax Audit Efficiency

2020 ◽  
Vol 11 (1) ◽  
pp. 115-143
Author(s):  
Kwang-Sook Lee ◽  
Eun-Sun Ki
Keyword(s):  
Audit Efficiency ◽  
Tax Audit
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