Benford's Law Test Method in Tax Audit Planning

The purpose of this research is to test whether the Benford’s Law test method can be used in tax audit planning. This research uses data on tax invoices of periodic VAT Tax Return registered in local tax office. The research was carried out by going through the identification and extraction stages of the first and second digits. The results show that Benford's Law can be used as an alternative method to indicate an improper periodic tax invoice. In addition, Benford's Law can also provide an assessment of which sectors and areas have indications of improper periodic tax invoice compared to other sectors and areas. Indications from this assessment can be used as a focus in planning tax invoice audit.

The impact of performance audit planning on the generation of added value, management of public financial resources and heritage. Theoretical aspects and practical approaches

The performance audit is an effective instrument in the process of managing public money by analyzing a border range of matters, conducting an objective and independent evaluation of the extent to which public funding is used using the principles of economy, efficiency, effectiveness. The progress of performance audit in the Republic of Moldova is as well a priority because the allocation of public resources takes place to achieve social and economic objectives, but having regard to that resources are limited and allocated as a result of setting priorities and needs, they are managed based on the principles of "3E". In this regard, the auditors, at the performance audit planning stage, exclude the risk that the audit activities will not be proficient or efficacious, and the results of the audit will not add value to the public entity in managing public financial resources and public heritage. The author, in this study, examines the quality assurance of the processes performed during the performance audit planning stage and proposes to the auditors the use of other tools practiced in developed countries in selecting entities/programs or activities for auditing with the implementation of professional judgment.

Application of Information Digitalization Technology in Audit Process Through Intelligent Process Automation (IPA) Approach

Intelligent Process Automation (IPA) is a technology capable of organizing automation processes for structured, semi-structured, and unstructured data. In audit assignments, there are three types of assignments, namely structured, semi-structured and unstructured assignments. This study aims to identify the possibility of applying IPA (Intelligent Process Automation) in audit assignments. By using IPA technology, it is expected to be able to create efficiency and effectiveness in the audit process. As we know that audit assignments require time and high costs, so IPA technology is expected to be able to shorten audit time and costs without reducing the quality of services provided by auditors. This research is qualitative research using primary data. The respondents in this study are public accountants who work in the Public Accounting Firm (KAP). The research instrument consists of mapping structured, semi-structured, unstructured audit assignments; then identified each with the possibility of applying IPA (Intelligent Process Automation) in each audit process. Respondents in this study were forty-one. The results of the analysis using descriptive analysis and frequency analysis, and it was found that the use of automation of audit procedures at the audit planning stage was still rarely used. With the following details (1) structured assignment, still rarely used; (2) semi-structured assignment, still rarely used; (3) unstructured assignments, sometimes used. Meanwhile, the use of automation of audit procedures at the control and substantive testing stage as well as the overall conclusion (audit completion) stage is sometimes used, both structured, semi-structured, and unstructured assignments.

Effects of digitalisation of organisations on internal audit activities and practices

Purpose This paper aims to investigate how the internal audit function (IAF) modifies its activities and practices in relation to the digitalisation the organisation. This paper specifically examines the use of data analytics and the performance of consulting activities by internal auditors. Design/methodology/approach This paper is based on a survey conducted with 82 chief audit executives based in the USA and members of the institute of internal auditors. Findings Results indicate a positive relation between the organisation’s level of digitalisation and the use of data analytics by internal auditors during their missions. Results also indicate that the organisation’s level of digitalisation has an indirect effect on the proportion of the internal audit planning dedicated to consulting activities. Specifically, the use of data analytics mediates the relationship between the organisation’s level of digitalisation and the proportion of the internal audit planning dedicated to consulting activities. Research limitations/implications This research was conducted amongst internal auditors based in the US Future research could investigate the insights of other internal audit stakeholders and investigate different legal contexts. Practical implications Results show that digitalisation increases the use of data analytics by internal auditors and the performance of consulting activities. The results, therefore, highlight the importance of these two aspects for the IAF to continue to bring value to organisations. Originality/value This research provides more insights on internal audit working practices. The digitalisation of the organisation leads the IAF to use more data analytics and perform more consulting activities.

PENINGKATAN PENILAIAN RISIKO OLEH RISK-BASED INTERNAL AUDITING MELALUI AGILE AUDIT PLANNING PADA ERA NEW NORMAL

Every business organization is currently faced with various large-scale business risks caused by the COVID-19 pandemic and government policies that limit the company's business flow. The business flow from upstream to downstream is disrupted due to the pandemic that occurs and the transition during the new normal period which affects organizational performance, for example, MSMEs. The role of internal auditing is very necessary to ensure that operational performance continues to run effectively and optimally under the uncertainty of the new normal era. Accountants as internal auditors with the concept of risk-based internal auditing must respond and quickly mitigate various risks that may occur as an effort to assist management. The concept of agile portfolio management, namely agile audit planning, is considered relevant in this condition, agile approach is widely studied as a solution in improving internal audit performance. Agile audit planning is considered to be more flexible and effective than traditional audit procedures. This paper provides a solution in increasing risk assessment for internal auditors in the form of risk assessment to mitigate the risks in business uncertainty due to pandemics, which is implemented in local MSME with the aim of assisting in assessing business risks. This paper was prepared using a qualitative descriptive method, with secondary reference sources through literature review from related literature sources and primary by interview method. The result of this paper is an idea of the effectiveness of agile audit planning in assessing the risks obtained from comparative analysis with traditional audit procedures and analysis of the benefits of implementing agile audit planning in MSMEs. This paper will provide an overview of the advantages of implementing agile audit planning in the new normal.Keywords: Agile Audit Planning, Internal Audit, MSME, New Normal, Risk-Based Internal Auditing

The Invisible Fraud: The Impact of Inattentional Blindness on Auditor Fraud Detection

Evidence from major fraud investigations has revealed that auditors often fail to attend to visual fraud cues (i.e., red flags) within substantive testing evidence. Research in psychology on inattentional blindness (IB) provides a theoretical framework to explain why this occurs. Although most forensic research has focused on audit planning, we focus on the detection of visual fraud cues embedded in substantive testing evidence. We examine the impact of two interventions, priming and strategic reasoning, on senior audit associates to determine the extent to which these interventions mitigate IB effects. The results indicate that IB effects hinder auditor visual fraud cue detection during the performance of substantive testing procedures and that priming significantly reduced IB effects. The findings provide important implications for practice by drawing the auditor’s attention to these effects and by suggesting priming as an efficient and cost-effective intervention to assist in mitigating IB effects in the auditing environment.

Investigating Fraud Risks Assessment Practices in Public Sector Audits

Fraud Risk Assessment (FRA) is claimed to be an important activity at the audit planning stage in both the private and public sectors. In fact, because of the importance of FRA activities, Auditing Standards (SAS 99, ISA 240, ISSAI 1240) have required auditors to carry out FRAs at the audit planning stage. FRA is considered as the core activity of financial audit planning because of the impact of fraud on the sustainability of an entity, quality of life, and economic growth. This study aimed to determine the practice of FRA in public sector audits and to find out more about the obstacles faced by auditors during the audit process and to find out the causes of these obstacles by considering the approach to the Audit Standards used. This study found that auditors’ performance can be determined based on their complete compliance with audit standards. We have encountered a serious problem that requires firm action from the government or a competent official, namely the auditor’s willingness in preparing the Fraud Risk Assessment Matrix. In addition, we recommend the Audit Standards Board to adopt international public sector auditing standards and disseminate them through training for auditors, students, and professionals. Keywords: fraud risk assessment, public sector audit, auditor competency