Download or read book The Effect of Inherent Risk Knowledge Spillover and Litigation Risk on External Auditors Reliance on Client s Internal Audit Functions written by Meshari Al-Harshani and published by . This book was released on 2003 with total page 164 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Effect of Inherent Risk and Control Design Strength on External Auditors Decisions to Rely on Internal Audit Functions written by Mario J. Maletta and published by . This book was released on 1989 with total page 380 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Value Relevance of Accounting Information in Capital Markets written by Ojo, Marianne and published by IGI Global. This book was released on 2016-12-12 with total page 334 pages. Available in PDF, EPUB and Kindle. Book excerpt: Among banking industries and insurance and security sectors, systemic risk and information uncertainty can generate negative consequences. By developing solutions to address such issues, financial regulation initiatives can be optimized. Value Relevance of Accounting Information in Capital Markets is an essential reference source for the latest scholarly research on the importance of information asymmetries and uncertainties and their effects on the overall regulation of financial industries. Featuring extensive coverage on a wide range of perspectives, such as financial reporting standards, investor confidence, and capital flows, this publication is ideally designed for professionals, accountants, and academics seeking current research on the effects of the underlying elements in investing.
Download or read book The Effect of Inherent Risk and Control Design Strength on External Auditors Decisions to Rely in Internal Audit Functions written by Mario J. Maletta and published by . This book was released on 1989 with total page 190 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Laboratory Study of the Effects of Auditor s Business Risk on Audit Scope written by Judith Christina Walo and published by . This book was released on 1990 with total page 504 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Dissertation Abstracts International written by and published by . This book was released on 2004 with total page 620 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Can Audit Committee Expertise Increase External Auditors Litigation Risk The Moderating Effect of Audit Committee Independence written by Jillian Alderman and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether the perceived independence and financial expertise of audit committee members affect external auditors' exposure to legal liability. We use an experiment in which potential jurors make judgments about auditor independence and legal liability for a case involving an audit failure. We find that perceptions of audit committee independence from management are positively associated with judgments of auditor independence and negatively associated with auditor liability. However, financial expertise of audit committee members can be a double-edged sword. Our experiment finds that judgments of auditor liability are higher when the audit committee is perceived to have higher financial expertise but lower independence from management. In assessing litigation risk of current and prospective clients, auditors may want to carefully consider the independence of audit committee members from management, particularly when audit committee members have financial expertise. In the event of an audit failure, the financial expertise of non-independent audit committee members can negatively affect jurors' perceptions of auditor independence and liability.
Download or read book Internal Audit Sourcing Arrangement and the External Auditor s Reliance Decision written by Steven M. Glover and published by . This book was released on 2007 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the effects of internal audit sourcing arrangement on the external auditor's reliance decision in the presence of different levels of inherent risk and task subjectivity. We posit that external auditors will rely more on outsourced than in-house internal audit functions (IAFs) and that this difference will be more pronounced when inherent risk is high or when the work performed by internal auditors relates to a subjective task. Participants in the study were 127 external auditors from a Big 4 firm who completed an experimental case in which we manipulated internal audit sourcing, inherent risk, and task subjectivity. Results from the experiment indicate an interaction between sourcing and inherent risk such that external auditors rely more on outsourced than in-house internal auditors when the level of inherent risk is high but do not differentiate based on sourcing arrangement when inherent risk is low. While we find that reliance is lower for subjective than for objective tasks, we do not find an interaction between sourcing arrangement and the subjectivity of the work performed. We do find a marginally significant interaction between inherent risk and subjectivity of work performed: external auditors are less willing to rely on subjective work performed by internal auditors when inherent risk is high but do not differentiate based on task subjectivity when inherent risk is low. Additional analyses indicate that sourcing arrangement affects the reliance decision both directly and indirectly. The indirect effect appears to be mediated through external auditors' perceptions of internal auditor objectivity.
Download or read book Can Audit Committee Financial Expertise Increase External Auditors Litigation Risk The Moderating Effect of Audit Committee Independence written by Jillian Alderman and published by . This book was released on 2019 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This study examines whether the perceived independence and financial expertise of audit committee members affect external auditors' exposure to legal liability. We use an experiment in which potential jurors make judgments about auditor independence and legal liability for a case involving an audit failure. We find that perceptions of audit committee independence from management are positively associated with judgments of auditor independence and negatively associated with auditor liability. However, financial expertise of audit committee members can be a double-edged sword. Our experiment finds that judgments of auditor liability are higher when the audit committee is perceived to have higher financial expertise but lower independence from management. In assessing litigation risk of current and prospective clients, auditors may want to carefully consider the independence of audit committee members from management, particularly when audit committee members have financial expertise. In the event of an audit failure, the financial expertise of non-independent audit committee members can negatively affect jurors' perceptions of auditor independence and liability.
Download or read book The Role of Task Subjectivity and Risk of Material Misstatement on Auditors Configural Processing in Internal Audit Reliance Judgments written by Sudip Bhattacharjee and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a field-based questionnaire administered to practicing auditors, we examine how auditors simultaneously combine the key planning variables, client-level misstatement risk (comprised of inherent risk and control risk) with account-level subjectivity, when utilizing internal audit as a cost management tool. We contend that auditor use of internal audit will reflect a balance between the potential for efficiency gains and the implications regarding audit effectiveness. Prior internal audit research has primarily focused on lower and higher risk conditions with relatively few studies examining the implications of moderate risk scenarios on internal audit use. Data on actual audits from an instrument administered to external auditors reveal significant differences in reliance decisions across lower, moderate, and higher misstatement risk levels. Our results reveal that increases in account-level subjectivity have no effect on auditors' internal audit reliance judgments when risk of material misstatement is at lower levels. However, auditors increase their internal audit reliance when account-level subjectivity increases across moderate misstatement risk. Finally, our results suggest that auditors decrease their internal audit reliance when account subjectivity increases across higher misstatement risk. By examining these risk variables in combination, we provide insight into the complexities associated with external auditors' internal audit usage decisions in the post-SOX era. This research should be of interest to practitioners given PCAOB's limited guidance on how multiple risk factors should be combined when utilizing internal audit.
Download or read book The Effects of Audit Risk and Litigation Risk on Decision Aid Reliance written by Mohamed I. Gomaa and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of the current study is to examine the extent to which audit risk and litigation risk cause auditors to increase reliance on decision aids. These are particularly relevant issues in the era of Sarbanes-Oxley and abundant audit litigation, as decision aids hold the potential to improve audit quality; yet, immense legal and regulatory pressures on audit firms to improve audit quality could lead to a 'check list' mentality where auditors subordinate their audit judgments for the sake of compliance. Based on an experiment involving 118 audit practitioners, we find that auditors rely more on decision aid recommendations when either litigation risk (exogenous to the audit risk model) or internal control risk (endogenous to the audit risk model) is high relative to low. When litigation risk and internal control risk are simultaneously high, there is an interactive effect on decision aid reliance. Further analyses suggest that litigation risk amplifies the auditors' awareness of legal defensibility, which in turn increases decision aid reliance. Disturbingly, when both litigation risk and control risk are high, the auditors appear to deferentially follow the aid's advice to increase the legal defensibility of their decisions, even as their confidence in the quality of their decisions deteriorates.
Download or read book Modeling External Auditors Evaluations of Audit Risk and the Effect of the Task Environment on Consensus written by Frank Alan Orth Buckless and published by . This book was released on 1989 with total page 554 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Effect of Auditor Litigation Risk on Client Access to Bank Debt written by Mahfuz Chy and published by . This book was released on 2020 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: We exploit staggered state-level shocks to third-party auditor legal liability in the U.S. to test whether auditor litigation risk affects client companies' access to private debt markets. We find that an exogenous increase in auditor litigation risk leads to an increase in both clients' likelihood of receiving bank loans and the average amount of the bank loans that clients receive. In support of our proposed mechanism that auditor litigation risk leads to improvements in clients' audit and financial reporting quality, we find that these same shocks lead to a reduction in accruals, an increase in going-concern opinions, a decrease in restatements, and an improvement in accruals' ability to predict future cash flows. We also find that increased auditor litigation risk leads to an increase in the contractibility of clients' accounting numbers, as proxied by the use of debt covenants, and a decrease in the cost of borrowing.
Download or read book The Reliance of External Auditors on Internal Audit s Use of Continuous Audit written by Irina Mălăescu and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: As a response to the increased demand for timely and ongoing assurance over the effectiveness of risk management and control systems, companies are moving towards a more automated control environment through the implementation of continuous audit modules. The purpose of this study is to evaluate external auditors' reliance on internal audit's work when advanced audit techniques are introduced by the internal auditor and the impact this reliance has on budgeted audit hours. Prior literature suggests that internal control deficiencies also have an impact on external auditor reliance and the audit budget. The reliance decision of an external auditor has important economic consequences and implications for efficiency and effectiveness of the overall audit. In recent years, the PCAOB has encouraged greater such reliance to improve audit efficiency. An experiment is conducted with 87 experienced external auditors to investigate the theorized effects. Using a 2 x 2 between subjects factorial design, the frequency of the internal audit (traditional vs. continuous audit) and prior year material weakness (absent vs. present) are manipulated. Consistent with predictions, we find that auditors are willing to rely more on internal audit work in a continuous audit environment than in a traditional environment, and this effect is magnified when the prior year audit report on the effectiveness of internal controls indicates that controls are working properly. The presence of a material weakness, however, negatively impacts judgments on the budget for the valuation of a complex account. In addition, both material weakness and continuous audit have an impact on the overall audit budget, which is reduced only when the company has no prior year material weakness and a functioning continuous audit module is put in place. The results show that auditors increase budgeted hours for the engagement at a higher rate when the client uses traditional internal audit procedures.
Download or read book Primacy Effects and the Role of Risk in Auditor Belief Revision Processes written by Brenda H. Anderson and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Numerous studies in the audit judgment literature provide evidence indicating that auditors can be susceptible to recency effects. This study extends the research by examining auditor susceptibility to primacy, an order effect, which, like recency, can lead to suboptimal audit-planning decisions (see Ashton and Ashton 1988) and yet, unlike recency, has received very little attention in the accounting literature. Specifically, the research investigates whether primacy effects in auditor belief revisions are a conditional function of the level of inherent risk present in the audit environment (high/low) and the nature of the information contained in the latter portion of the information sequence (e.g., whether the information is positive or negative with respect to the client?s internal controls).The results, consistent with expectations, indicate that auditors are susceptible to primacy effects when making likelihood of error and audit-hour planning judgments in settings that are relatively low in inherent risk, and such effects are due to less integration of late positive information in low- as compared to high-risk conditions. No evidence of primacy was found for either judgment when the inherent risk associated with the audit setting was high and, auditors did not differentially revise their beliefs across inherent risk conditions for late negative information. The findings indicate that primacy is essentially the result of insufficient integration of late positive information in low inherent risk settings, suggesting that primacy may lead to overauditing and thus, an inefficient use of audit resources.
Download or read book External Auditors Reliance on Internal Audit Functions written by Zorita Haji Ahmad and published by . This book was released on 1995 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book When the World Isn t Always Flat written by Martin Weisner and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study addresses recent calls for research on the conditions influencing auditor decisions related to PCAOB-encouraged reliance on third-party experts. To this end, the present study explores the effect of psychological distance on external auditors' reliance when induced through physical distance in a telework relationship between an auditee and a specialist. The reliance decision focuses on the auditee's contracting with a computer audit specialist who works remotely through a telework arrangement. The psychological distance associated with this telework arrangement is examined both in the context of variance in the physical distance of the computer audit specialist and the interactive effect of a contextual factor - the historical experience with an auditee's internal audit function. A 2x2 experiment with a total of 121 experienced Big 4 auditors is conducted in which psychological distance (physically proximate or remote specialist) and historical experience with an auditee's internal audit function (presence or absence of a prior year material weakness in internal controls) are manipulated. Consistent with predictions based on construal level theory, we find that psychological distance affects auditors' reliance judgment such that increased distance leads to lower reliance. Furthermore, the historical experience with the auditee's internal audit function creates a halo effect which moderates the effect of psychological distance such that the differential effect of a present vs. absent prior year material weakness on auditors' confidence and associated willingness to reduce budgeted audit hours is larger for a psychologically distant specialist. The results of this study suggest that an auditee's choice of a more proximate specialist may garner greater reliance by the external auditor, particularly when there is a material weakness in the prior year audit that the specialist is intended to help ameliorate.
