An Analysis of Comment Integration Involving SAS 54

The process by which auditing standards are established in the United States was criticized by the late Senator Metcalf (1977) and more recently by the Treadway Commission (1987). Their allegations involving the Auditing Standards Board (ASB) encompass many perceived deficiencies, ranging from the charge that the large accounting firms dominate the standard-setting process, to the notion that the auditing standards currently promulgated do not address emerging policy issues on a timely basis. However, despite these criticisms, there is a paucity of empirical research involving the actual formulation of auditing standards in the United States. Accordingly, this research investigates certain behavioural facets involving the evolution of Statement on Auditing Standards No. 54, Illegal Acts by Clients , along certain dimensions, including audit-firm size. Specifically, the paper examines reactions to the exposure draft of SAS 54 and the extent to which written suggestions were incorporated into the final standard. The results do not support the proposition that either audit firm size or an employee's membership on the ASB has a significant impact on achieving the integration of a respondent's comments into the final audit statement.     

Corporate fraud and the audit expectations gap: A study among business managers

This paper presents the findings of an empirical study on the audit expectations gap concerning the role of the auditor in corporate fraud cases. The purpose of the study is to assess the significance of a reasonableness gap, a deficient performance gap and a deficient standards gap in the specific context of corporate fraud. In order to distinguish all three elements of the expectations gap, respondents need a certain level of expertise on fraud. Therefore, in this research the audit expectations gap is studied primarily from the perspective of three groups of business managers, based on the fact that they typically have a special responsibility in fraud cases. Bankers are used as a control group to assess the potential differences between the views of business managers and ‘society in general’. This study provides clear evidence of a substantial audit expectations gap in the context of fraud, both with respect to the auditor's performance as well as the auditor's formal obligations as laid down in existing standards. However, compared to bankers, business managers are less inclined to judge auditors’ performance of existing duties as inadequate, and see fewer points where auditing standards should be amended.     

Closing the Loop: Review Process Factors Affecting Audit Staff Follow‐Through

The PCAOB recently expressed concern regarding the sufficiency and effectiveness of review and supervision of audit fieldwork. For the audit review process to succeed as a quality control mechanism, any issues or questions identified by a reviewer must be adequately resolved and documented in the workpapers. If audit review fails to correct for errors/biases in the work of reviewees, there can be serious detrimental effects on audit quality and, in turn, financial statement quality. Our study extends the literature by examining the phase of the review process in which reviewees respond to (or “close”) notes/comments provided by their reviewers. Utilizing an experiment, we find that certain contextual factors (review timeliness and review note frame) influence reviewee follow‐through during this critical phase. Specifically, we find that a delayed review elicits significantly lower effort levels than a timely review. Review note frame (i.e., how the reviewer phrases the rationale given for the underlying directive of a review note) significantly affects reviewee effort and performance when the review is timely. Through mediation analyses, we explore the mediating effect of effort on performance. In addition, we find that reviewer delay leads to greater over‐documentation.     

Size of Audit Fees and Perceptions of Auditors'Ability to Resist Management Pressure in Audit Conflict Situations

Using a multi-factor ANOVA design and forty-nine bankers as subjects, this study examined the effects of audit fee size, management advisory services, audit firm size and competition on perceptions of the auditors'ability to resist management pressure in an audit conflict situation. It postulates that size of the audit fee is a major explanatory factor regardless of the provision of management advisory services, audit firm size or level of competition. Results supported the hypothesized effects of these variables and, in particular, that size of audit fee affects perceptions of the auditors'ability to resist management pressure regardless of the other variables.     

Non‐Audit Service Fees and Financial Reporting Quality: A Meta‐Analysis

Auditing as a corporate governance mechanism has attracted considerable research attention. Because of the information asymmetry between corporate managers and outside shareholders, auditors are hired to provide independent assurance that financial statements are prepared following generally accepted accounting principles. The credibility of such assurance depends on the independence, both in fact and in appearance, of the auditor. Over the years, however, the independence of auditors has come under increased scrutiny because of their joint provision of both audit and non‐audit services. A sizable literature on the impact of non‐audit fees on financial reporting quality has developed. The evidence from this literature, however, remains inconclusive. This paper provides a meta‐analysis of the available literature by assessing (a) the net effect of non‐audit fees on financial reporting quality, and (b) whether there is homogeneity in the financial reporting quality proxies used in the extant literature. Findings suggest that the level of client‐specific non‐audit fees is associated with reduced financial reporting quality. However, the underlying studies used to conduct this meta‐analysis are not homogenous.     

Impact of an audit reporting expert system on learning performance: A teaching note

Audit reporting is a complex process, requiring knowledge of various reporting issues and corresponding report formats. To address the difficulty of presenting audit reporting concepts to students, the authors constructed and used an audit reporting system, named AUDPORT, in their first-level auditing classes at two major state universities. This paper reports the use of AUDPORT as a teaching aid and its impact on students' performance.     

An Examination of the Effect of Hypothesis Framing on Auditors'Information Choices in an Analytical Procedure Task

Libby (1985) contends that auditors'search for and evaluation of audit evidence, particularly during analytical procedures, is influenced by an explicitly or implicitly formulated hypothesis. Often a hypothesis may be'framed'in alternative ways. For example, an auditor may frame analytical procedure results in terms of a'misstatement'or a'non-misstatement'frame. The concern arises that alternatively framed, but otherwise identical, audit issues may be treated differently. This concern has led Kinney and Haynes (1990) to propose modifying auditing standards to direct auditors to adopt a'misstatement'frame. The purpose of the present study was to examine whether alternative analytical procedure frames affect auditors'information choices in an analytical procedure task. An experiment was conducted in which auditors listed which information cues were relevant to explain an unusual financial statement fluctuation. Half of the information cues made a misstatement explanation more plausible whereas half of the information cues made a non-misstatement explanation more plausible. The results indicate that hypothesis frame significantly affected auditors'information choices. Specifically, auditors in the misstatement (non-misstatement) frame select more misstatement (non-misstatement) cues as relevant. The hypothesis frame, however, did not significantly affect probability assessments.     

The use of analytical procedures by external auditors in Canada

The Enron debacle and other scandals highlight the issue of whether analytical procedures (APs) or more traditional audit approaches based on substantive testing are more appropriate. This paper surveys the use of APs by Canadian external auditors and augments understanding of the impact of auditing standards on professional practice. Our results demonstrate that APs are extensively applied in practice, particularly by larger firms, and that their use dominates the final review stage of the audit regardless of firm size. While standards do not appear to be an important influence upon practice for audit firms in general, this is not the case for smaller firms. Though auditors place more reliance on APs to reduce tests of detail, there are limits to this reliance. Our results indicate that while auditors may have increased their use of APs with the expectation of efficiency gains, these may be realized at present only partially.     

The impact of the review process in hypothesis generation tasks

This paper examines the performance of auditors in generating hypotheses in an analytical review case both prior to and after review. It partitions two possible sources of gain from the review process, namely the discussion effect and the rank effect. The discussion effect compares review groups with and without discussion. The rank effect compares seniors and audit managers. The study found that the review process results in more plausible hypotheses being generated. Discussion within the review process between reviewer and reviewee was found to be one source of gain from the review process. While there was no difference in the performance of the senior and manager reviewers, managers completed the task in less time.     

高校内部审计质量控制文献研究综述

内部审计在高校的经济管理活动中的作用越来越重要,内部审计质量是内部审计的生命线。内部审计质量的优劣很大程度上影响高校内部审计效用的发挥。因而加强高校内部审计质量控制,是提高高校内部审计质量的关键。文章首先对国内外关于内部审计质量控制的文献进行了回顾。之后系统性的综述了针对高校的内部审计质量控制文献,进行总结并指出其未来的研究方向。     

Note on audit fee premiums to client size and industry specialization

This research note examines the impact of client size on the estimation of audit fee premiums in the Australian market for audit services. Previous research suggests that higher audit fees are expected for both larger clients and for industry specialization. We find that in the Australian market for audit services, the fee premium attributed to industry specialist audit firms is concentrated in the audit fees paid by the largest clients in each industry. One reason for higher fees paid by larger clients is the demand for additional audit services. We find higher fees for companies cross‐listed on US exchanges. We also find that fee premiums to auditors that are city‐industry leaders are strongly related to client size.     

事务所规模、审计行业专长与事务所审计质量传染效应

发生审计失败事务所的审计质量系统性低于未发生审计失败事务所的审计质量,即会计师事务所的审计质量存在传染效应,但该传染效应受到事务所自选择问题的影响;大规模事务所在审计质量传染效应中占据主导地位;事务所行业专长未能抑制审计质量传染效应。     

政府投资建设项目跟踪审计风险及其防范

政府投资建设项目跟踪审计作为我国审计监督体系的重要组成部分,在提高财政资金使用效益、规范建设项目管理、规避审计风险、发挥审计免疫系统功能等方面起到了积极的作用。然而随着社会经济和科学技术的迅猛发展,跟踪审计环境越来越复杂,审计风险也逐渐加大。论文分析了跟踪审计过程中存在的风险,并提出了防范和规避的具体措施和对策。     

The Impact of Consulting Services on Audit Quality: An Experimental Approach

We use experimental markets to examine whether providing consulting services to a non‐audit client impacts audit quality. Our paper directly addresses concerns raised by the Public Company Accounting Oversight Board that the largest public accounting firms’ growth in their consulting practices threatens audit quality. We conduct an experiment proposed using a registration‐based editorial process. We compare a baseline where the auditor does not provide consulting services to conditions where auditors provide consulting to audit clients or where auditors only provide consulting services to non‐audit clients. Our unique design provides evidence on whether providing consulting to non‐audit clients strengthens the salience of a client‐cooperative social norm that reduces audit quality. We do not find differences in audit quality by condition in our planned analysis, however we find greater variation in audit quality in the conditions where auditors provide consulting services compared to the baseline. In unplanned analyses, our results suggest providing consulting services increases auditor cooperation with managers, increasing audit quality when managers prefer high audit quality and decreasing audit quality when managers prefer low audit quality.     

我国政府审计质量的实证研究——源于审计署特派办审计结果执行情况的经验数据

自2003年"审计风暴"以来,审计机关的工作受到社会各界的高度重视,公众在期待审计结果公告的同时,也越来越关注审计机关的审计质量。我国政府审计质量不仅取决于审计报告的质量,还取决于审计结果的执行情况,其中审计调查出的主要问题情况是衡量审计报告质量的关键因素。受到可获取数据完整性的限制,本文仅选取审计署特派办2002～2008年审计处理结果的执行情况进行研究,分析了审计结果执行情况与审计处理情况之间的关系。结果表明:司法机关对违规人员的处理能够起到很好的震慑作用;审计结果的执行效果会对政府审计质量产生显著的正面影响。     

A Rejoinder to Commentaries on ‘Integrated Reporting: A Review of Developments and their Implications for the Accounting Curriculum’

This auditing case study focuses on a company presenting significant audit risk for an incoming audit firm. By presenting a variety of audit risks, hence audit implications, the case demonstrates the holistic approach to audit required in order to avoid an inappropriate audit opinion. The case is aimed at undergraduate students of auditing in the final year of their studies and students of the ACCA Paper 6 or equivalent. The case provides an efficient and original vehicle for instruction in auditing and can be used to complement other teaching aids.     

Harmonization of the auditor's report

International efforts to harmonize the audit report, spearheaded by the International Auditing Practices Committee of the International Federation of Accountants (IFAC), culminated in the issuance of International Standard on Auditing (ISA) 13 in 1983. The stated purpose of ISA 13 was to: “provide guidance to auditors on the form and content of the auditor's report issued in connection with the independent audit of the financial statements of any entity.” The purpose of this paper is to assess whether ISA 13 has resulted in greater international harmonization of audit reports. We assess the level of harmonization both by examining the extent to which countries have adopted ISA 13 and by the extent to which the content of the auditor's report has changed. A survey of IFAC's member organizations in 86 countries netted 50 responses. Eighty-six percent of respondents (and 93% of respondents from developing and emerging economies) said they have achieved harmonization with ISA 13. We compared the auditor's reports (in financial reports) of 450 companies in 33 IFAC member countries on two different dates (a pre-ISA 13 date and a post-ISA 13 date). The results suggest a higher degree of conformity with the standard for the post-ISA 13 reports. Finally, cluster analysis was conducted to explore the dynamics of clustering from pre-ISA 13 to post-ISA 13 regimes. A slight drop in the divisiveness coefficient (DC) was observed for the total audit report elements as well as for the form elements, suggesting a less cohesive cluster structure for the post-ISA 13 regime. The empirical evidence, taken as a whole, shows reduced diversity of practices and standards involving the audit report since the issuance of ISA 13. This conclusion should provide encouragement for international standard-setters.     

Social Relations and the Differential Local Impact of Global Standards: The Case of International Standards on Auditing

This article contributes to the literature exploring the contextual conditions that lead international standards to produce a differential impact with regard to inducing convergence in local practice. The article documents three types of responses by local audit firms to the implementation of International Standards on Auditing (ISAs) in Russia, namely: (1) those that claim to follow the national auditing standards modelled on ISAs and mandated by audit law; (2) those that voluntarily provide ISA audits in accordance with original ISAs; and (3) those that provide pseudo audits (‘black audits’) and ignore auditing standards. The study investigates a link between these different responses and the degree of the indigenous firms' social embeddedness in relation to the international audit firms that first introduced ISAs to Russia. The article argues that the higher the embeddedness levels the more likely the audit firms will genuinely commit to following the standards. It also shows that social embeddedness is influenced by a number of conditions, including geographical proximity between the indigenous and international audit firms, as well as commonalities in their professional characteristics, such as aspiration to intraprofessional status and target clientele. The study's findings demonstrate that the local impact of international standards is dependent not just on the characteristics of the local institutional environments in which the adopters operate but also on the social structures and relationships within which they are embedded.     

央行财务审计工作的困惑与对策

中国人民银行自2000年成立内部审计部门以来,财务审计就成为内审部门的一项重要业务。近年来,随着财务工作的发展和变化,财务审计在审计工作中的地位越来越重要,财务审计的内容也越来越广泛。本文结合人民银行财务管理和财务审计工作开展的现状,对影响人民银行财务审计质量的问题进行了详细、深入剖析,并提出了提高财务审计质量的措施和建议。     

Does sharing the same network auditor in group affiliated firms affect audit quality?

We contribute to the literature on audit quality by examining whether sharing the same network auditor among group affiliated firms is related to lower or higher audit quality in China. We find that choosing the same network audit firm among group affiliated firms is associated with more sanctions by regulators regarding fraudulent financial reporting, higher abnormal accruals, larger standard deviation of abnormal accruals, higher likelihood of a downward restatement in earnings, and lower likelihood of receiving a going concern modified opinion. We further identify contexts that moderate audit quality. Higher audit quality is associated with the use of a specialist auditor and firms that operate in more homogeneous industries. Lower audit quality is associated with longer auditor tenure (more than five years), greater geographic distance between a parent company and its subsidiaries, and greater control by a parent company over its subsidiaries.