Applying robotic process automation (RPA) in auditing: A framework

Robotic process automation (RPA) has been widely adopted in many industries, including the accounting industry, to automate well-defined and repetitive tasks; however, its application to auditing has lagged behind because of the unique nature of this industry. This study applies RPA in the auditing area. An RPA framework is proposed that frees auditors from doing repetitive and low-judgment audit tasks and enables them to focus on tasks that require professional judgment. This paper also demonstrates the feasibility of RPA by implementing a pilot project that applies RPA to the confirmation process.     

Academic auditing research: an exploratory investigation into its usefulness

This paper has been produced in reaction to the publication of the AICPA/AAA monograph entitledAuditing Practice, Research, and Education: A Productive Collaboration . In our view, the monograph relied on a narrow conception of auditing-research usefulness. This paper aims to investigate usefulness of auditing research from a perspective more global than that of the monograph. Our theoretical discussion focuses on who may benefit from auditing research and in what ways. We supplemented our theoretical work with an empirical assessment of auditing-research usefulness from the point of view of auditors. In particular, we content analysed a series of auditing-research articles written by North American academics and published in a set of journals that, collectively, play a large role in validating these academics’ knowledge claims. Our results suggest that auditing research is to a large extent “useful" to auditors, that is to say, auditing papers generally possess a relatively high degree of applicability, and the degree to which auditing papers threaten the legitimacy of the auditing profession is relatively low. We then put forward that this degree of usefulness is the result of auditors’ efforts to control the auditing-research community. In fact, research resources, such as business funding of research, allow auditors to exert influence over academic researchers in their quest to capture the research community.     

Accounting education for professionals in Germany — current state and new challenges

In comparison to other countries, the requirements on the education of professional auditors in Germany have been considered to be the toughest in the world. However, German professionals risk losing this position since there are countries which seem to adapt more quickly and appropriately to changes in the accounting environment.The first part of the paper provides a review of the current state of the education for qualified auditors in Germany with special reference to the according EU-Directives and IFAC-Rules. It is shown that there are various issues which have to be accounted for in order to meet the challenges of the future.The remainder of the paper focuses on challenges due to changes in the accounting and auditing environment, on challenges due to an enlargement of the scope of statutory audit and — finally — on challenges due to the need for diversification from auditing to assurance services.     

Attitude toward business environment of auditing,corporate governance and balance between auditing and marketing

The aim of this study was to evaluate the attitude of Iranian auditors toward balance between auditing and marketing with respect to two important components of audit process such as business environment of auditing and corporate governance. The analysis is based on survey data from 257 respondents. To achieve the research aims, we specified four hypotheses based on social theories. The results of this study show that the auditors having positive attitude toward marketing and those who consider it as significant are able, to a large extent, balance spent time for inherent auditing tasks and marketing activities. In addition, the results show that an increase by a unit for the attitude toward business environment results in 0.489 unit increase in attitude toward balance of time spent on marketing and auditing activities, of which 0.396 is direct impact and 0.093 is indirect impact.     

True and Fair': UK Auditors' View

An earlier paper surveyed the behaviour of finance directors of the 900 largest UK companies with respect to giving a true and fair view in annual accounts. This present paper results from personal interviews with technical partners of all the 20 largest UK auditing firms (which includes the auditors of nearly all the companies in the previous survey). The paper examines the operational meaning of ‘true and fair’ to large auditing firms, and how it fits into the context of law and standards. It is concluded that one effect of the requirement as it works in practice is to give support to auditors' views in areas not yet covered by accounting standards. Contrasts emerge between the interpretations of directors and those of auditors.     

现代审计活动中的行为研究

审计作为一种独立的经济监督活动,具体表现为审计人员个体与群体组织的一系列有序的行为,而审计行为与其它行为一样,需要进行科学与合理的规划、领导、组织和控制。因此,在现代审计活动中,必须注重对审计行为的研究,把握个体行为、群体行为两者的内在联系和相互作用,充分调动审计人员的工作积极性和主观能动性,增加审计群体的凝聚力,促进审计组织活动的有效进行。     

An empirical study of audit expectation-performance gap: The case of Libya

The purpose of this research is to empirically examine the causes of the audit expectation gap in Libya. The study builds on the frameworks developed by Porter (1993) and Porter & Gowthorpe (2004) to investigate the influence of the audit expectation gap to the auditing profession in the case of Libya. The data was collected through a questionnaire survey randomly selected members of four broad interest groups including auditors, auditees and audit beneficiaries both inside and outside the financial community were followed by in-depth interviews. A total of 988 questionnaires were distributed from which 431 questionnaires with usable responses were received from four groups. The overall usable response rate was 44%, ranging from 47% for the financial community audit beneficiaries to 41% for the auditors group. The findings of the study revealed that there exists audit expectation-performance gap and that the gap is as result of the following factors in different levels of percentages. Deficiency standards and deficient performance gaps constitute 49% and 15%, respectively, of the audit expectation-performance gap. The audit expectation-performance gap derives from society having unreasonable expectations of auditor’s significant proportion 36% of the gap. As result of the following interviews demonstrated that the objectives of auditing are not as clear to the financial statement users as they are to the auditors and the financial statement preparers in Libyan business environment. Further, we observe that reducing the expectations gap is to improve knowledge responsibilities between the auditors and user groups and understanding of the auditor’s role and responsibilities through the provision of auditing illegal acts.     

AUDITOR'S SKILL,AUDITING STANDARDS,LITIGATION, AND AUDIT QUALITY

This paper introduces a model of the market for audit services in which auditors differ in their levels of skill, which may or may not be observable and capture differences in ability. The model captures the interplay amongst auditing standards, litigation, and auditors’ levels of skill, which determines auditors’ responses to auditing standards. The paper shows that the quality of audit supplied by any auditor is increasing in the auditor's level of skill regardless of whether or not auditors’ levels of skill are observable. An increase in the quality of audit prescribed by auditing standards is shown to induce some auditors endowed with low levels of skill to decrease the quality of their audits so that the average quality of audit and economic welfare may actually decline as auditing standards are raised. Auditors’ choices of audit quality are furthermore shown to be increasing in trial awards. Incentives for trials and out-of-court settlements are shown to depend crucially on whether or not auditors’ levels of skill are observable. Only when auditors’ levels of skill are unobservable do trials obtain with some probability. When auditors’ levels of skill are unobservable, the introduction of either restrictions on costs awarded by the courts or an imperfection in the courts’ technology is shown to lead the most skilled auditors to supply audits of a quality strictly exceeding the quality prescribed by the prevailing auditing standards. When the courts err often enough, the most skilled auditors having exercised due care furthermore make offers to settle when sued.     

Balance between auditing and marketing: An explorative study

This study explores how auditors’ attitudes toward marketing and their views on the importance of marketing affect how they balance their time spent on auditing and marketing activities. The purpose is to understand how changes in the business environment for auditors affect the relationship between the auditing profession and marketing. The study is based on a survey of 672 auditors in Sweden. Findings suggest that auditors with a positive attitude toward marketing spend significantly more time on marketing activities compared to those with a less positive attitude. Furthermore, auditors who view marketing activities as important spend significantly more time on marketing activities. The study controlled for the number of years as an auditor, age of the auditor, and firm affiliation. The results indicate that the theoretical distance between the auditing profession and marketing does not exist in practice to the same degree as in the past. These findings have implications for international auditing theory and practice in illuminating the relationship of marketing and auditing in a wider business context.     

Whistle-blowing by external auditors: Seeking legitimacy for the South African Audit Profession?

Auditing is often cited as playing an important role in managing agency-related costs and, accordingly, being integral to the sound functioning of capital markets. There may, however, be more to the attest function than a technical rational practice. By virtue of relying heavily on claims to technical expertise, professionalism, prudential judgement and public confidence, auditing is both a source of legitimacy for organisations and, paradoxically, dependent on claims to legitimacy for its continued existence. From this perspective, recent regulatory developments, purportedly enacted to increase arms-length control over the profession, may not only be about improving perceived audit quality and practice but also about ensuring continued faith in the well-established ‘rituals’ of the assurance function. A reporting duty imposed on South African external auditors, akin to whistle-blowing, is used as a case study to explore this perspective. In doing so, this paper contributes to the scant body of interpretive research on auditing, simultaneously offering one of the first insights into auditing regulation from an African perspective.     

Topical coverage in internal auditing: academic versus practitioner perceptions

This study reports the results of research that investigates whether a gap may exist between academic content and practitioner needs in the area of internal auditing within the USA. Questionnaires were sent to internal auditing faculty and practitioners to identify and quantify the perceived importance of 25 different internal auditing topics, as well as the use of case studies and practitioner classroom visits as pedagogical techniques. Groups were in substantial agreement on the relative importance of the topics. However, some specific topic differences were noted, with educators placing more importance on items including engagement planning, preliminary surveys, audit programmes, risk management and fraud. Practitioners placed more importance on the qualities desired in staff internal auditors, Certificate in International Auditing (CIA) examination preparation, and computer auditing. In addition, there was considerable agreement between the two groups on the use of case studies in the classroom, as well as classroom visits from practicing internal auditors.     

The antecedents of the use of continuous auditing in the internal auditing context

The concept of continuous auditing originated over two decades ago. Yet despite its much touted benefits, its acceptance and use in practice has been slow. To gain insight into the state of affairs, we surveyed 210 internal auditors worldwide on the status of their use of continuous auditing. Using the Unified Theory of Acceptance and Use of Technology (UTAUT) we explore the antecedents of internal auditors' intentions to use continuous auditing technology. Employing the Partial Least Squares method, we find strong support for the model with an R² of 44.3%. Specifically, we find that internal auditors' perceptions of effort expectancy and social influence are significant predictors of their intentions to use continuous auditing. We also find that annual sales volume of the company and voluntariness of use significantly moderate the relationship between performance expectancy and social influence respectively. Additionally, we find regional differences in the significance of key UTAUT antecedents. Specifically, we find that the North American internal auditors are more likely to use continuous auditing due to soft social coercion pressures of Social Influence through peers and higher authorities. On the other hand, Middle Eastern auditors are more likely to use the technology if it is mandated by the higher authorities.     

What factors influence auditors' use of computer-assisted audit techniques?

To meet the challenges of rapid advances in client technology, audit standards urge auditors to use computer-assisted audit tools and techniques (CAATs). However, recent research suggests that CAAT use is fairly low. This paper uses the Unified Theory of Acceptance and Use of Technology (UTAUT) to identify and then examines factors potentially influencing auditors' use or non-use of CAATs. Examining auditor use of CAATs is important because CAATs hold out the promise of improving audit efficiency and effectiveness. Data was obtained from 181 auditors from Big 4, national, regional, and local firms. Results indicate that outcome expectations, the extent of organizational pressures and technical infrastructure support influence the likelihood that auditors will use CAATs.     

External monitoring of private firms: A cross-country empirical analysis

There is limited research which focuses on the use of external monitoring by private companies, domestic or international. We use World Bank data to explore the factors that are associated with the probability of using external monitoring by private firms in emerging and developing countries. In this research, the service of external auditors is considered as a proxy for external monitoring. We tested our results both on the full sample (114 countries) and on 5 different income clusters based on World Bank economic development categorization. From our results, we conclude that there is not a single set of “universal” factors associated with firms' decision to engage external auditors. We observe that factors associated with external auditors, a proxy for monitoring, differ across the various categories of economic development. As a policy implication, there is a need for a voluntary adoption of a uniform set of standards for external monitoring and auditing in this area.     

Do auditors’ early-life socioeconomic opportunities improve audit quality? Evidence from China

Prior research documents significant variation in audit outcomes based on individual auditors' demographic features, working experience, educational background, and social connections. This study examines whether individual auditors' early-life socioeconomic opportunities also affect audit practices. We expect that auditors from big cities have more access to socioeconomic opportunities and accumulate more human capital in early life, thus are more capable of providing high-quality audits after they start careers. Consistent with this hypothesis, we find that auditors from big cities make more audit adjustments to earnings compared with auditors from small towns. Additional tests suggest that this early-life effect on audit quality is moderated when auditors receive higher education or gain more auditing experience and is more pronounced in downward adjustments than in upward adjustments. We also find a fee premium for auditors from big cities. Overall, this paper provides evidence that auditors’ early-life socioeconomic opportunities have a far-reaching influence on audit quality.     

Big Data and changes in audit technology: contemplating a research agenda

This study explores the most recent episode in the evolution of audit technology, namely the incorporation of Big Data and Data Analytics (BDA) into audit firm approaches. Drawing on 22 interviews with individuals with significant experience in developing, implementing or assessing the impact of BDA in auditing, together with publicly available documents on BDA published within the audit field, the paper provides a holistic overview of BDA-related changes in audit practice. In particular, the paper focuses on three key aspects, namely the impact of BDA on the nature of the relationship between auditors and their clients; the consequences of the technology for the conduct of audit engagements and the common challenges associated with embedding BDA in the audit context. The study’s empirical findings are then used to establish an agenda of areas suitable for further research on the topic. The study is one of the first empirical accounts providing a perspective on the rise of BDA in auditing.     

How do auditors respond to low annual report readability?

We show that increased audit effort is associated with lower annual report readability to compensate for a perceived increase in the risk of financial misstatement for United States (US) firms. In particular, we find that lower annual report readability is associated with longer audit delays and higher audit fees for Form 10-K for US auditors, suggesting that auditors spend more effort auditing clients when annual reports have lower readability. We also find that low readability increases the likelihood of auditors using more explanatory language in unqualified audit reports.     

Negotiating the credibility of performance auditing

This paper reports the results of a longitudinal field study of a performance audit which used in-depth interviews and observation to examine the process by which auditees and auditors in the Australian National Audit Office (ANAO) negotiated their relationship. The findings enhance understanding of auditee reactions to both the practice of performance auditing and the auditors themselves and the impact that these have on the credibility of performance auditing. Using the lens of Oliver's typology of strategic responses, the study confirmed the prevalence of auditee responses to performance auditing by the ANAO which ranged from co-operative acquiescence and co-operation to confrontational defiance. The paper addresses recent and ongoing calls for more studies of public sector auditing in action to deepen our understanding of the responses or manoeuvring of auditors and auditees during the process of performance auditing. A key contribution of the paper is confirmation that performance auditing continues to be a contested activity and its credibility in practice remains uncertain. The empirical (and historical) evidence suggests that audits that are perceived as especially politically sensitive can provoke active forms of resistance, including avoidance and defiance.     

Standard-setting in auditing: Insights from PCAOB inspections

We explore whether the Public Company Accounting Oversight Board (PCAOB) consistently follows its own standard-setting policies. We do this using a methodology that combines the reports of audit partners, the timing of enacted auditing standards, and the issuance of PCAOB inspection findings. Rules governing standard-setting are critical to ensure that auditing standards are appropriate, efficient, and are therefore likely to be generally accepted. Our results suggest that in some instances auditors were penalized for omitting evidence from their working papers which is not specified in the standards, in effect, changing or removing auditor judgment in the amount and nature of audit evidence to be gathered in corroboration of management’s assertions and creating new auditing standards outside of the formal standard-setting process. Beyond the societal benefits of standard-setters adhering to their own policy-making rules, changes in auditing procedures impact the behavior of both auditors’ and managers and is costly. Although subject to limitations, we believe our results are informative to policy makers and other participants in PCAOB standard-setting.     

Management Forecast Regulation and Practice in Germany – Firm and Auditor Perspectives

The German regulation on future-oriented reporting is unique in the international context. Its scope is extensive and it specifically pertains to a two-year time horizon in the management forecast section of the annual report. The goal of our research is to provide insights into the perspectives of forecasters on the one hand and auditors on the other, as well as to contrast their viewpoints in order to promote the regulatory debate. Applying the multiple case study method, we exploratively interview forecasters and auditors in order to extract perspectives on the regulation itself, the forecasting process and their mutual relationship. Our main results show that the auditing of forecasts is a regular cause of friction and that most firms and auditors are dissatisfied with the current regulation. In particular, its concreteness and detail are criticised because the forecasting behaviour of firms is generally rather heterogeneous in practice. The management of small enterprises and auditors of smaller firms seem to view management forecasts even more critically. Our research provides evidence for the ongoing regulatory discussion in the German and international contexts and allows for greater insight for both auditors and forecasters into the viewpoints of their respective counterparts.