Download or read book The Effect of Non Strategic Risk of Error on Auditor Sensitivity to Managers Reporting Incentives in a Multi Account Setting written by Dereck Barr-Pulliam and published by . This book was released on 2016 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the effects of making multiple contemporaneous risk assessments on auditor sensitivity to the strategic and non-strategic risk related to managers' financial reporting decisions. We address our research question using a 2x2 between-subjects experiment conducted under the tenets of experimental economics in a multi-account setting. We manipulate whether the two accounts differ in non-strategic risk. We find that when auditors allocate audit resources among accounts that differ in the non-strategic risk of error, auditors will use that difference as a heuristic basis for allocating resources among the accounts, and they will be relatively insensitive to strategic aspects of the audit including the client managers' financial reporting incentives. However, when financial statement accounts do not differ in non-strategic risk, auditor resource allocations are more sensitive to strategic information such as managers' penalties for detected misreporting. Consistent with the neglect of probability literature in psychology, we also find that even when auditors attend to managers' incentives, they do not respond as predicted by game theory but instead increase audit effort when managers' face large penalties for misreporting compared to when those penalties are more modest. This study is of interest to accounting academics, auditors, and regulators.
Download or read book Can Strategic Reasoning Prompts Improve Auditors Sensitivity to Fraud Risk written by Kendall Owen Bowlin and published by . This book was released on 2008 with total page 266 pages. Available in PDF, EPUB and Kindle. Book excerpt: The basic premise of risk-based auditing is that more (fewer) audit resources should be allocated to accounts that are more (less) likely to be misstated. However, financial reporting managers can exploit such allocations by intentionally misstating balances that are less likely to draw auditor attention. If auditors do not recognize this strategic implication of risk-based auditing, undetected misstatements among ostensibly low-risk accounts could be much more common than traditional risk assessment procedures suggest. The purpose of this study is to examine whether prompting auditors to form beliefs about managers' expectations of, and responses to, audit strategies can enhance auditors' sensitivity to the strategic risk of fraud among accounts typically considered low-risk. Using a multi-account audit game, I find that auditors do not naturally attune to strategic risks but instead tend to focus resources on "highrisk" accounts. However, when auditors are prompted to reason strategically, they utilize more resources and devote that increase almost entirely to "low-risk" accounts. I also find that, although increasing available resources does result in an overall increase in the amount of utilized resources, the relative effect of the strategic prompt is robust to the level of available audit resources.
Download or read book Regulatory Commitment to Auditing written by Hui Chen and published by . This book was released on 2012 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this paper is to investigate the impact on pay-performance sensitivity of a commitment by regulatory bodies to monitor the auditing of managers' financial reporting. We approach our investigation first by modeling the effects of an imposed mandatory audit of the auditor. We suggest that in a more rigorous audit environment, the reliability of performance measures increases. In motivating employees to work to their maximum potential, investors can rely on these performance measures to better effect. We then test our model in an empirical setting by comparing managers' pay-performance sensitivity before and after the passage of the Sarbanes-Oxley Act of 2002 (SOX). Our model reveals that both managerial effort levels and pay-performance sensitivity increase from a laissez-faire environment with the introduction of a regulatory commitment to auditing. Consistent with the model's prediction, our empirical tests of the impact on managerial incentive schemes after SOX reveal that pay-performance sensitivity did in fact increase.
Download or read book Enterprise Risk Management written by James Lam and published by John Wiley & Sons. This book was released on 2003-05-30 with total page 344 pages. Available in PDF, EPUB and Kindle. Book excerpt: Enterprise risk management is a complex yet critical issue that all companies must deal with as they head into the twenty-first century. It empowers you to balance risks with rewards as well as people with processes. But to master the numerous aspects of enterprise risk management, you must first realize that this approach is not only driven by sound theory but also by sound practice. No one knows this better than risk management expert James Lam. In Enterprise Risk Management: From Incentives to Controls, Lam distills twenty years' worth of experience in this field to give you a clear understanding of both the art and science of enterprise risk management. Organized into four comprehensive sections, Enterprise Risk Management offers in-depth insights, practical advice, and real world case studies that explore every aspect of this important field. Section I: Risk Management in Context lays a solid foundation for understanding the role of enterprise risk management in today’s business environment. Section II: The Enterprise Risk Management Framework offers an executive education on the business rationale for integrating risk management processes. Section III: Risk Management Applications discusses the applications of risk management in two dimensions–functions and industries. Section IV: A Look to the Future rounds out this comprehensive discussion of enterprise risk management by examining emerging topics in risk management with respect to people and technology. JAMES LAM is President of James Lam & Associates, an independent risk advisory firm. Before starting his own firm, Lam was founder and president of ERisk and partner of Oliver, Wyman & Company. In 1997, as chief risk officer at Fidelity Investments, he was named the first-ever Financial Risk Manager of the Year by the Global Association of Risk Professionals. Prior to Fidelity, he was chief risk officer of Capital Markets Services, Inc., a GE Capital Company. Lam graduated with honors from Baruch College and received his MBA from UCLA. He is also currently an Adjunct Professor of Finance at Babson College.
Download or read book Audit Error Managerial Incentives and Information Sharing written by Naomi Rothenberg and published by . This book was released on 2014 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the effect of losses due to audit error on audit quality when the auditor's report of earnings is used for managerial compensation and the auditor can learn about the firm's productivity environment by observing the manager's effort. If the auditor observes the manager's effort, he can tailor the audit quality perfectly to the productivity state. However whether the audit quality, and thus compensation, increases or decreases relative to when the auditor is uninformed, depends on whether the losses due to legal liability are more or less than auditor's loss of audit fees due to client or reputational loss. The increase or decrease in audit quality affects the manager's marginal productivity, which affects his compensation. Overall, the principal prefers the auditor to observe the manager's effort when the losses due to legal liability are more significant than the loss of audit fees due to client loss and the incentive problem is less significant, or when losses due to legal liability are less significant and the incentive problem is more significant.
Download or read book Dissertation Abstracts International written by and published by . This book was released on 2005 with total page 610 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Effect of Magnitude of Client Reporting Error and Order of Multiple Issues on Auditor Client Negotiations written by Richard C. Hatfield and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study reports the result of an experiment examining the impact of the magnitude of the difference between an auditor's preferred balance and the client's unaudited balance as well as the order of issues discussed on the outcome of an auditor-client negotiation. Audit quality has been the focus of several streams of research as well as the object of recent and substantial changes in audit regulation. However, the influence of audit quality on the quality of the associated financial statements is contingent upon the discussions and negotiations between auditors and the client's management. This study considers two aspects of the auditing context that normatively should not influence financial statement account balances but that negotiation theory suggests will have an influence: magnitude of the client's unaudited balance and the order of potential adjustments discussed. Theory from negotiation literature suggests that negotiators' initial demands (e.g., client's unaudited balances) as well as feelings of reciprocity created by prior negotiations serve to create expectations for the current negotiation and, in turn, the outcomes of such negotiations. Results of an experiment using audit partners and managers as participants suggest that both the magnitude of the client's initial, and materially misstated, balance as well as the order of discussion of multiple proposed adjustments influences the auditor's expectations regarding the ensuing negotiation (e.g., goals, limits, and initial offer). Further, these manipulations influence the negotiated outcome and this influence is fully mediated by the auditor's starting point in the negotiation (i.e., initial offer). These results suggest that financial statement quality may suffer as a result of these common characteristics of discussions regarding the disposal of audit adjustments.
Download or read book Standards for Internal Control in the Federal Government written by United States Government Accountability Office and published by Lulu.com. This book was released on 2019-03-24 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt: Policymakers and program managers are continually seeking ways to improve accountability in achieving an entity's mission. A key factor in improving accountability in achieving an entity's mission is to implement an effective internal control system. An effective internal control system helps an entity adapt to shifting environments, evolving demands, changing risks, and new priorities. As programs change and entities strive to improve operational processes and implement new technology, management continually evaluates its internal control system so that it is effective and updated when necessary. Section 3512 (c) and (d) of Title 31 of the United States Code (commonly known as the Federal Managers' Financial Integrity Act (FMFIA)) requires the Comptroller General to issue standards for internal control in the federal government.
Download or read book Government Auditing Standards 2018 Revision written by United States Government Accountability Office and published by Lulu.com. This book was released on 2019-03-24 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt: Audits provide essential accountability and transparency over government programs. Given the current challenges facing governments and their programs, the oversight provided through auditing is more critical than ever. Government auditing provides the objective analysis and information needed to make the decisions necessary to help create a better future. The professional standards presented in this 2018 revision of Government Auditing Standards (known as the Yellow Book) provide a framework for performing high-quality audit work with competence, integrity, objectivity, and independence to provide accountability and to help improve government operations and services. These standards, commonly referred to as generally accepted government auditing standards (GAGAS), provide the foundation for government auditors to lead by example in the areas of independence, transparency, accountability, and quality through the audit process. This revision contains major changes from, and supersedes, the 2011 revision.
Download or read book Federal Information System Controls Audit Manual FISCAM written by Robert F. Dacey and published by DIANE Publishing. This book was released on 2010-11 with total page 601 pages. Available in PDF, EPUB and Kindle. Book excerpt: FISCAM presents a methodology for performing info. system (IS) control audits of governmental entities in accordance with professional standards. FISCAM is designed to be used on financial and performance audits and attestation engagements. The methodology in the FISCAM incorp. the following: (1) A top-down, risk-based approach that considers materiality and significance in determining audit procedures; (2) Evaluation of entitywide controls and their effect on audit risk; (3) Evaluation of general controls and their pervasive impact on bus. process controls; (4) Evaluation of security mgmt. at all levels; (5) Control hierarchy to evaluate IS control weaknesses; (6) Groupings of control categories consistent with the nature of the risk. Illus.
Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Government Auditing Standards written by Government Accounting Office and published by www.Militarybookshop.CompanyUK. This book was released on 2012 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: Newly revised in 2011. Contains the auditing standards promulgated by the Comptroller General of the United States. Known as the Yellow Book. Includes the professional standards and guidance, commonly referred to as generally accepted government auditing standards (GAGAS), which provide a framework for conducting high quality government audits and attestation engagements with competence, integrity, objectivity, and independence. These standards are for use by auditors of government entities and entities that receive government awards and audit organizations performing GAGAS audits and attestation engagements.
Download or read book Proceedings of the Institution of Civil Engineers written by and published by . This book was released on 2005 with total page 954 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Fair Value Measurements written by International Accounting Standards Board and published by . This book was released on 2006 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Risk Management Handbook written by Federal Aviation Administration and published by Simon and Schuster. This book was released on 2012-07-03 with total page 267 pages. Available in PDF, EPUB and Kindle. Book excerpt: Every day in the United States, over two million men, women, and children step onto an aircraft and place their lives in the hands of strangers. As anyone who has ever flown knows, modern flight offers unparalleled advantages in travel and freedom, but it also comes with grave responsibility and risk. For the first time in its history, the Federal Aviation Administration has put together a set of easy-to-understand guidelines and principles that will help pilots of any skill level minimize risk and maximize safety while in the air. The Risk Management Handbook offers full-color diagrams and illustrations to help students and pilots visualize the science of flight, while providing straightforward information on decision-making and the risk-management process.
Download or read book NCUA Examiner s Guide written by United States. National Credit Union Administration and published by . This book was released on 1997 with total page 602 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book American Doctoral Dissertations written by and published by . This book was released on 1991 with total page 724 pages. Available in PDF, EPUB and Kindle. Book excerpt:
