The business risk audit: Origins, obstacles and opportunities

Is the business risk audit a better way to assess risks leading to focused audit testing, or is it simply a tool for generating opportunities to sell nonaudit services? Many feel strongly that the latter is more representative of the manner in which business risk audits were implemented. In this paper, I argue that the development of the business risk audit methodology in the 1990s was a complex process that arose naturally from the need to compensate for the commoditization of audits that occurred in the 1980s. The contemporaneous growth of risk management theories and processes provided a powerful perspective on which to base the re-engineering of the audit. However, the process of developing and implementing business risk audits was extremely difficult and may have run up against a number of unforeseen and unmanaged obstacles, particularly in regards to the existing rituals of the traditional audit. Given that the sales culture of consulting was taking hold among auditors at about the same time, it is possible that the well-intentioned efforts to revitalize the audit process were derailed by these difficulties and then diverted to support revenue growth via nonaudit services. When Enron and ensuing scandals occurred, questions arose as to whether the business risk audit was effective, or even appropriate. Regulatory initiatives that followed from the aftermath of Enron, such as an increased focus on management incentives for fraudulent reporting and greater in-depth analysis of internal controls, may provide a viable foundation for reconsidering business risk methods and melding the best of traditional substantive audits with the best of business risk auditing.     

The attitude of Libyan auditors to inherent control risk assessment

Previous empirical evidence contradicts the practices of audit risk assessment recommended by the professional auditing standards. Key differences represent the presumption that auditors can readily distinguish between different categories of risk, how they assess such risks in practice, their application to the different account levels and their capacity to differentiate between what may constitute potentially high or low risks. The paper addresses these differences in the context of the Libyan auditors’ perceptions and practices. The nature and development of the audit profession in Libya makes this a good comparator for the US and UK contexts of audit behaviour. Equally importantly, the religious, political and socio-cultural context combined with Libya's role as an emergent economy is representative of many other economies in the world, thus providing a good comparator for assessing the validity and applicability of the established auditing management principles and procedures. One hundred and sixty four practicing auditors in Libya were investigated, initially by questionnaire and subsequently interview of a smaller sample of 20 auditors. The evidence reinforces prior empirical evidence that inherent and control risks are assessed interdependently, auditors are aware of the risk differentials depending on the level of account and are cognizant of factors normally associated with potentially high and low risk levels.     

小议审计项目风险控制制度的建立

一、建立业务洽谈与客户来访接待登记制度 为约束业务承接行为,在内部机构设置上,业务洽谈或客户来访接待登记部门与具体承办审计业务部门应分别设立,事务所应设立专门的机构人员负责客户的来访登记.     

财务报表审计风险及其规避

一、审计风险的影响 随着涉诉案件的一再发生,审计风险对注册会计师行业的影响越来越受到重视.这种影响有不利的方面,也有有利的方面.     

The business risk audit – A longitudinal case study of an audit engagement

This study examines the impact of the Business Risk Audit (BRA), a development in audit methodology implemented in the late 1990s, on actual audit practice and on practitioners. Evidence is presented through a longitudinal case study developed from a set of actual audit files over a five year period spanning the implementation of the BRA, together with interviews with audit team members. The study contributes to our understanding of the nature of the audit techniques underlying the BRA and the difficulties experienced in implementing them within the existing organizational structures. In addition, the study illuminates the potentially conflicting roles of audit methodology in its organizational context, both in mediating the complex relationship between the administrators and practitioners in the large accounting firms and as the knowledge management structure used to support delivery of the “audit product”.     

Assessing business risk: The case of Premier Punch, Inc

The recently issued Statement on Auditing Standards No. 109, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, emphasizes the need for auditors to understand the client’s business and environment, particularly the client’s business risk [American Institute of Certified Public Accountants (AICPA) (2006a), understanding the entity and its environment and assessing the risks of material misstatement, Statement on Auditing Standards No. 109. New York, NY: AICPA]. However, the manner in which auditors obtain such an understanding, especially an auditor’s assessment of a client’s business risk, is often challenging for students because they lack the business experience necessary to perform such an assessment. This case provides students with an opportunity to assess business risk in a realistic context that includes evidence beyond the content of the financial statements. Company information is provided via a webpage (www.premierpunch.com) with content similar to that of an actual investor relations site. Students must evaluate the information presented in the company’s annual report, press releases and other sources, and consider the impact of that information on several facets of business risk. Students also perform an analytical review of the company’s financial statements and synthesize the case information into a professional memo containing their assessment of business risk.     

The role of audit evidence in a strategic audit

This study examines how audit risk (the probability of false acceptance) and its components change when the auditor obtains audit evidence in an acceptance sampling model. Inherent risk and audit risk increase with audit evidence if the auditee has a sufficiently strong incentive for committing fraud. Detection risk always increases when audit evidence is introduced. If the auditor has a sufficiently strong incentive for avoiding false rejection, audit risk also increases with audit evidence. The analysis indicates that requiring auditors to obtain information is not effective in preventing material misstatements in at least some instances.     

The formation and early development of German audit firms

This paper examines the emergence of audit firms in Germany through an analysis of contemporary sources. Special attention is paid to the range of services offered, their legal forms and ownership structure. In Germany, the demand for external audits developed because the corporate supervisory boards had been unable to fulfil their monitoring task satisfactorily. As a consequence of the major economic crisis of 1929-1931 and the collapse of large corporations caused by the fraudulent actions of managing directors, statutory audits for stock corporations were introduced in 1931. The first German audit and trust company, the Deutsche Treuhand-Gesellschaft, was established much earlier in 1890. Like other trust companies which emerged from 1905 onwards, it was owned by large banks. After the First World War, large commercial groups on the one hand, and the state on the other hand, started to form their own audit firms. Most of the audit and trust companies used the legal form of a corporation. Originally, the main activities of the trust companies were trustee activities and audits. Subsequently, they also offered tax and business advisory services. These features (a broad range of services offered, the corporation as the dominant legal form, and clients who are also owners) help us to understand key characteristics of modern German audit firms such as their limited liability to third parties.     

软件项目研发过程中操作风险管理

软件项目研发操作风险是指在软件项目生命周期的各个环节中,由于不完善的组织管理或有问题的内部工作流程、人员及信息系统或外部事件所造成损失的风     

The SOX 404 control audit and the effectiveness of additional audit effort in lowering the risk of financial misstatements

Review of Quantitative Finance and Accounting - We examine the effectiveness of additional audit effort in lowering the risk of financial misstatements for companies with internal control material...     

Waste Is Our Business,Inc.: The importance of non-financial information in the audit planning process

The objectives of this case are: (a) to alert students to the importance of non-financial information in the audit process; (b) to develop students’ ability to search for relevant financial and non-financial information in the audit planning process; and (c) to emphasize the importance of resisting the natural tendency to over-rely on financial information when conducting the financial statement audit. Students are asked to consider both financial and non-financial information when evaluating a client’s account balances. The client is in the waste business where there are a number of market, regulatory, and political factors that may affect the valuation of different accounts. Students are also directed to consider the importance of non-financial information in the integrated audit mandated by PCAOB Standard 5 and in fraud detection. The case can help students learn to explicitly consider non-financial information and understand the significance of integrating such information with financial data. The case is suitable for use in undergraduate or graduate auditing and assurance courses.     

基于AHP法的银行信贷风险管理绩效评价模型的构建

随着以雷曼兄弟银行破产保护和全球最大保险公司AIG严重财务危机为代表的华尔街金融风暴的出现,全球商业银行都提出了相应的对策,但是,效果如何,还需要通过科学的方法进行评价,以便发现不足之处,然后再继续完善对策,达到对银行信贷风险的最优管理.我国在信贷风险管理绩效评价方面与国际银行相比还比较落后,正处于起步阶段.为此,作者在借鉴国际银行业信贷风险管理绩效已有的方法和经验的基础上,结合我国当前信贷风险管理绩效评价的实践,用层次分析法(AHP)确定评定指标权重;采用模糊综合评判对信贷管理的绩效进行评价,以期建立一套比较可行的信贷管理业绩评价体系.     

The influence of litigation risk and internal audit source on reliance decisions

External auditor reliance on the work of internal auditors in an integrated audit of the financial statements and internal control is an important audit planning procedure that can impact audit efficiency and effectiveness. The purpose of this study is to examine how perceived auditor litigation risk and internal audit source affect external auditors' reliance decisions in an integrated audit environment under varying levels of risk of material misstatement. In an experimental study using 89 practicing Big 4 auditors, this study finds that auditors who perceive low litigation risk from placing reliance on the work of internal auditors will rely more on outsourced internal auditors than in-house internal auditors. The results also show that auditors' reliance decisions are sensitive to the level of account risk consistent with the risk-based approach to the integrated audit encouraged by the PCAOB.     

风险管理应朝哪个方向发展

前不久,在“全球风险协会对外经济贸易大学分会揭牌仪式暨风险管理论坛”上,来自各方面的专家,对风险管理纷纷发表意见.     

基于审计服务需求传递机制视角的上市公司审计委托权定位再思考

本文基于审计服务需求传递机制的视角,提出了对上市公司审计委托权进行科学校正的新思路.本文首先引入审计服务的需求传递机制,分析了影响其有效性的主要因素,并以此为主线对现行审计委托模式存在的问题进行分析,指出审计服务委托权的定位问题实质上就是如何进行恰当的制度安排,使得审计需求传递机制有效运行的问题.在此基础之上,提出一种新的代理需求者--外部审计委员会,通过恰当的制度安排,使得由它作为审计委托方具备了科学性和可行性.     

City foresight and development planning case study: Implementation of scenario planning in formulation of the Bulungan development plan

This article discusses the formulation of the Bulungan Development Plan (2002) that sought to formulate a 25 year city vision. The foresight process included how to prepared the process, implemented the scenario planning method, created consensus amongst stakeholders, and formulated graphic and narrative scenarios that explored alternative future for Bulungan. Based on these scenarios, the stakeholders formulated a vision for the city's preferred future. The vision is “excellence in agro industry supported by qualified human resources”.Project debriefing showed that unlike traditional forecasting or market research, the methods of foresight, especially scenario planning, is a more appropriate and powerful planning tool for integrated regional development. The main reason for this is that the future is unpredictable, and scenarios allow stakeholders to make sense of complexity.     

New development: Running elections during a pandemic

ABSTRACT

The Covid-19 pandemic posed a profound challenge for the delivery of elections worldwide. Elections are indispensable for democracy, but the high volume of human interactions within the electoral process risked spreading the virus. Electoral officials therefore found themselves planning or managing an election during an emergency situation, often for the first time. This article argues that there are several major organizational ‘elephant traps’ that polities will need to side-step during pandemics in order to safely protect the healthy running of elections.     

The threshold effect in expected volatility: a model based on asymmetric information

This article develops theoretical insight into the thresholdeffect in expected volatility, which means that large shocksare less persistent in volatility than small shocks. The modeluses the Kyle-Admati-Pfleiderer setup with liquidity traders,informed traders, and a market maker. Information is modeledas a GARCH process. It is shown that the GARCH process for informationis transformed into a TARCH process (for 'threshold GARCH')for the market price changes. Working with information flowsallows one to derive implications for trading volume and marketliquidity which provide the basis for a more complete test ofthe model.