The Auditor as a Determining Factor on Derivative Financial Instrument Disclosures

Based on the premise that the quality of the audit is related to the quality of the financial reporting, the purpose of this chapter is to verify if the audit is a determining factor in derivative financial instruments disclosures. However, the academic literature has revealed that audit quality is influenced by a number of factors, such as gender, experience, and auditor's fees, as well as the type of audit firm (Big4 or not Big4). In order to achieve the proposed objective, a disclosure index was prepared, based on the requirements of the International Accounting Standards Board (IASB), applied to companies listed on Euronext Lisbon, excluding the sports corporations. The results revealed that the level of disclosure is influenced by the size of the audited company and by the auditor's gender, being greater in the larger companies and in the companies audited by a male auditor.

Internal Audit Structure and Fraud Risk Assessment From a Regulatory Perspective

This chapter aims to depict the role of internal audit in Turkish capital markets by comparing the internal audit structure and its role in detecting fraud in financial institutions and developing a framework for assessing fraud risk in intermediary institutions. The newly constructed regulations concerning banks, intermediary institutions, and portfolio management companies are compared to a global benchmark by using a conceptual and descriptive approach. According to the results of this comparison, it is clear that Turkish legislation needs to be improved in critical areas. “Integrity” should be incorporated as a founding concept of the internal audit function. Certification of internal auditors needs to be encouraged, and internal audit standards need to be adapted. As a result, a fraud risk assessment template influenced by the new regulatory framework is developed for intermediary institutions.

The Transformation of Auditing From Traditional to Continuous Auditing in the Era of Big Data

Massive usage of internet and digital devices make it easier accessing the desired information. In the past, auditing was a periodic, reactive approach, but this must change. Today, volume, velocity, variety, veracity, and value of the information, which are the main criteria of big data, are crucial. Decision makers demand timely, true, and reliable information. This need has affected every sector including auditing. For this reason, the continuous auditing system comes to debate in the big data era. The main aim of this chapter is to shed light on how traditional auditing transformed into the continuous auditing and where big data stands in this transformation. It is concluded that even though many obstacles arise, continuous auditing systems and harvesting big data benefits are crucial to gain a competitive advantage. Also, using big data analytics and continuous auditing system together, management and shareholders gain detailed information about the company's present situation and future direction.

An Overview on Mobile Cloud Computing

Mobile cloud computing is a concept that has been gaining popularity, resulting from the synergistic integration of cloud computing and mobile computing with the goal of minimizing some of the limitations inherent in mobile computing (bandwidth, storage, autonomy, etc.) and giving greater plasticity to the services of the cloud computing providers. This new paradigm of computation has similar limitations to those associated with the paradigms that are at its origin. Therefore, it is essential that the research carried out in this area is concerned about understanding its impact on audit processes, which aim to verify and evaluate the mechanisms of the internal control system implemented to minimize threats to integrity, confidentiality, and availability of the information assets (data and/or information) stored on these platforms. Based on a literature review, this chapter aims to list a set of challenges associated with the adoption of mobile cloud computing within the scope of organizational auditing.

Audit Education in the Polytechnic Institute of Cávado and Ave and the Audit Expectation Gap

The audit expectation gap (AEG) is present in society and, while there, will encourage discrediting the auditors. Given the seriousness of this situation, several solutions have been pointed out, one of which is to promote audit education. The aim of this chapter is to verify if adult education, taught at the Polytechnic Institute of Cávado and Ave (IPCA), reduces the AEG, considering the perceptions of its students about the role assigned to the auditors and the degree of success of the auditors in certain situations. The application of a questionnaire allowed to conclude that, as the literature review showed, audit education changes the perceptions of IPCA students about the role and degree of success of the auditors, generally reducing the AEG.

Transparency in Latin American and Caribbean Supreme Auditing Institutions

One of the objectives of supreme audit institutions (SAIs) is to promote transparency and accountability of the public sector entities. But, at the same time, SAIs must improve their own transparency and accountability. The use of information and communication technologies plays an essential role in making this disclosure. The International Organization of the Supreme Audit Institution (INTOSAI) recognizes that communication is a strategic factor of SAIs. Studies have analyzed information dissemination practices carried out in developed countries. However, SAIs elsewhere, such as the Latin American and Caribbean, have not been the object of research. This chapter analyzes whether these SAIs are using the internet as a means to enhance transparency and interaction with stakeholders. The results indicate that, although in general the institutions analyzed publish the information required by INTOSAI, there is still ample room for improvement, especially regarding interaction with their stakeholders.

Open Source Software in Financial Auditing

The auditing software is an essential tool to the auditor, being a mechanism that helps to achieve auditing goals to obtain efficiency, quality, and to increase reliability on data analysis and evidence collection. The auditing software can be proprietary software or free and open source software. The purpose of this chapter is to understand which factors affect open source software adoption. To achieve these goals, a survey aimed at financial auditors was carried through, and 64 complete answers were collected. Results indicate that the most used software is the proprietary software and that 43% of the respondents belong to the first stage of open source software assimilation. Additionally, it was verified that the external environment is the macro factor, which positively affects the adoption of open source software in auditing.

ISO Standards and Audit

Standards are applicable to any kind of activity and could be defined, in a general way, as an activity aiming to apply an ordered system to repetitive functions that take place in the context of industry, technology, science, and economy. Auditing is deeply connected to the implementation of any standard, and this chapter aims to do its connection. Standardization can stimulate international comparability eliminating obstacles arising from some different national practices in accounting and in auditing using IFRS and ISA, in risk analysis using ERM or ISO 31000, in people's safety, in the product or in the environment. A case study about ISO 31000 in a municipality where IFRS and ISA are followed and ISO 9001, 14001, 18000 are a reality will frame this issue. ISO 26000 about corporate social responsibility will be the new future challenge.

Corporate Governance Characteristics and Audit Fees

The purpose of this chapter is to analyze the effect that corporate governance measures have in external audit fees in two countries where this matter is not much developed: Portugal and Spain. The analysis includes a sample of 39 listed companies on the Portuguese Stock Exchange and 104 listed companies on the Spanish Stock Exchanges for the years 2013 to 2015 using an OLS regression model. For the Spanish sample, the results show that the capital hold by the Board of Directors influence negatively external audit fees. The results are in accordance with the supplier perspective which states that better corporate governance practices decrease the control risk and, consequently, audit fees. On the other hand, the Board of Directors' diligence also affected external audit fees but positively, that is, the greater the number of meetings the greater the demand for an audit with quality which result in higher fees charged (demand perspective). For the Portuguese sample it can be observed that corporate governance characteristics do not affect external audit fees.

The Influence of Internal Audit on External Audit

The main purpose of this chapter is to analyze the relationship between internal and external audit and its effect on external audit fees, through a questionnaire addressed to the external auditors of Portugal and Spain. It obtained 131 answers for Portugal and 149 answers for Spain. According to the results, the competencies and characteristics of internal auditors, as well as the type of activities performed by them and the communication between internal and external auditors, have a significant influence on the decision of using the internal audit work. However, the Portuguese external auditors do not consider this influence to be so significant that it affects the number of substantive tests, the quality of external audit, and external audit fees. However, for Spanish auditors using internal audits decreases the planned hours, the number of control and substantive tests, and improves external audit quality, but does not reflect in the fees to be charged to the client.