Role and Function of the Public Company Accounting Oversight Board and Auditing Standard No. 5 an Audit Internal Control Over Financial Reporting that Integrated with an Audit of Financial Statements

2010 ◽  
Author(s):  
Felicia Farrar
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Financial Statements ◽  
The Public ◽  
Public Company ◽  
And Function ◽  
Role And Function

Does Recent Academic Research Support Changes to Audit Reporting Standards?

2016 ◽  
Vol 30 (2) ◽  
pp. 255-275 ◽  
Author(s):  
Jean Bédard ◽  
Paul Coram ◽  
Reza Espahbodi ◽  
Theodore J. Mock
Keyword(s):  
Financial Reporting ◽  
Academic Research ◽  
Financial Statements ◽  
Future Research ◽  
Research Support ◽  
The Public ◽  
Market Participants ◽  
Information Gap ◽  
Public Company ◽  
Reporting Process

SYNOPSIS The Public Company Accounting Oversight Board (PCAOB), the International Auditing and Assurance Standards Board (IAASB), and the U.K. Financial Reporting Council (FRC) have proposed or approved standards that significantly change the independent auditor's report. These initiatives require the auditor to make additional disclosures intended to close the information gap; that is, the gap between the information users desire and the information available through the audited financial statements, other corporate disclosures, and the auditor's report. They are also intended to improve the relevancy of the auditor's report. We augment prior academic research by providing standard setters with an updated synthesis of relevant research. More importantly, we provide an assessment of whether the changes are likely to close the information gap, which is important to financial market participants and other stakeholders in the audit reporting process. Also, we identify areas where there seems to be a lack of sufficient research. These results are of interest to all stakeholders in the audit reporting process, as the changes to the auditor's report are fundamental. Additionally, our summaries of research on the auditor's report highlight where there is limited research or inconsistent results, which will help academics identify important opportunities for future research.

Controls, Security, and Audit in Online Digital Accounting

2011 ◽  
pp. 318-383
Author(s):  
Ashutosh Deshmukh
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Annual Report ◽  
Control Structure ◽  
Internal Controls ◽  
Section 404 ◽  
Checks And Balances ◽  
The Public ◽  
Sarbanes Oxley ◽  
Public Company

Internal controls have existed since the dawn of business activities. Internal controls are basically systems of checks and balances. The purpose is to keep the organization moving along desired lines as per the wishes of the owners and to protect assets of the business. Internal controls have received attention from auditors, managers, accountants, fraud examiners and legislatures. Sarbanes Oxley Act 2002 now requires the annual report of a public company to contain a statement of management’s responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and management’s assessment of the effectiveness of the company’s internal control structure and procedures for financial reporting. Section 404 of the Act also requires the auditor to attest to and report on management’s assessment of effectiveness of the internal controls in accordance with standards established by the Public Company Accounting Oversight Board (PCAOB).

Auditors' Internal Control over Financial Reporting Decisions: Analysis, Synthesis, and Research Directions

2012 ◽  
Vol 32 (Supplement 1) ◽  
pp. 131-166 ◽  
Author(s):  
Stephen K. Asare ◽  
Brian C. Fitzgerald ◽  
Lynford E. Graham ◽  
Jennifer R. Joe ◽  
Eric M. Negangard ◽  
...  
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Future Research ◽  
The Public ◽  
Road Map ◽  
Sarbanes Oxley ◽  
Environmental Attributes ◽  
Public Company ◽  
Reporting Decisions ◽  
Five Phases

SUMMARY We synthesize the literature on auditors' evaluation of, and reporting on, internal control over financial reporting (ICOFR), as required by the Sarbanes-Oxley Act. The purpose of the synthesis is (1) to provide information on how and how well auditors perform the task, which serves as feedback to the Public Company Accounting Oversight Board on implementation issues and problems related to auditors' application of the professional standards on ICOFR; and (2) to identify gaps in the current literature and fruitful areas of future research. Consistent with Auditing Standard No. 5, we delineate five phases of the ICOFR audit: (1) planning; (2) scoping; (3) testing; (4) evaluation; and (5) reporting. We structure our synthesis using a framework that classifies the determinants of performance in each phase into five broad areas: (a) the auditor's attributes, (b) the client's attributes, (c) the interaction between the auditor and the client, (d) task attributes, and (e) environmental attributes. Key contributions include providing an ICOFR tasks taxonomy, proposing a model of the determinants of performance for each task, evaluating auditors' performance of the tasks in our taxonomy, highlighting findings and gaps of importance to regulators, and providing a road map for future research.

scholarly journals Audit Partners' Judgments and Challenges in the Audits of Internal Control over Financial Reporting

2020 ◽  
Vol 39 (4) ◽  
pp. 57-85
Author(s):  
Jeffrey R. Cohen ◽  
Jennifer R. Joe ◽  
Jay C. Thibodeau ◽  
Gregory M. Trompeter
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Data Availability ◽  
Audit Committees ◽  
Structured Interviews ◽  
Material Weakness ◽  
The Public ◽  
National Office ◽  
Evaluation Task ◽  
Public Company

SUMMARY Internal control over financial reporting (ICFR) audits have been the subject of intensive examination by the Public Company Accounting Oversight Board (PCAOB) and researchers but the process through which auditors make ICFR judgments is largely a “black box.” To understand ICFR judgments, we conducted semi-structured interviews with 20 audit partners. Common themes in our interviews suggest that the subjectivity inherent in the ICFR evaluation task contributes to resistance against ICFR audit findings and cougnterarguments from management. Moreover, auditors perceive that their judgments are being second-guessed by PCAOB inspectors. Auditors believe that managers have difficulty accepting that material weaknesses can exist without a detected error, that management's reflexive reaction is to deny/avoid a material weakness finding, and managers routinely claim that management review controls (MRCs) would have caught the detected control deficiency. Auditors cope with management's defenses by consulting with their national office and leveraging support from strong audit committees. Data Availability: Requests for the data should be accompanied by a description of intended uses.

scholarly journals Evidence on the Impact of Internal Control over Financial Reporting on Audit Fees

2019 ◽  
Vol 9 (3) ◽  
pp. 1
Author(s):  
Mohamed Gaber ◽  
Samy Garas ◽  
Edward J. Lusk
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Public Information ◽  
Audit Fees ◽  
Stock Trading ◽  
Audit Opinion ◽  
The Public ◽  
Public Company ◽  
Effective Group ◽  
The Impact

Introduction: Circa 1992, the dot.com sector created an irrational stock-trading market where the usual “financial” profiles of: Liquidity, Cash Flow from Operations, and Revenue generation were replaced by Ponzi-esque mayhem. To stabilize the markets, the Public Company Accounting Oversight Board [PCAOB] required a second audit opinion: the COSO Opinion on the adequacy of management’s system of Internal Control over Financial Reporting: [ICoFR].Study Focus: Three COSO-[ICoFR] designations are now required as public information: (i) A “clean” opinion [Is Effective], (ii) Deficiencies are noted, and (iii) Weaknesses reported. Our research interest is to determine, for a panel of randomly selected firms traded on the S&P500 for a eleven-year period: 2005 to 2015, the nature of the effect that the COSO deficiency reporting protocol has on (i) Audit Fees and (ii) the Market Cap of traded firms.Method: To this end we collected, using the Audit Analytics Ô[WRDSÔ] database, various categories of reported Audit Fees and also Market Cap information. This random sample was classified into two sets: the first group: Is Effective SEC 302 Designation and No COSO issues & the second group: Is Not 100% Effective for which there were SEC 302 Deficiencies or Weaknesses noted.Results: Inferential testing indicates that failure to attend to the PCAOB-COSO imperatives results in a relational where there are higher Audit Fees and a slippage of the firm’s Market Cap compared to the Is Effective Group. The PCAOB’s protocol to require the Audit of the firm’s ICoFR system and make that evaluation public information seems to be an excellent corrective “Carrot and Stick”.

Assurance on XBRL for Financial Reporting

2008 ◽  
Vol 22 (3) ◽  
pp. 353-368 ◽  
Author(s):  
R. David Plumlee ◽  
Marlene A. Plumlee
Keyword(s):  
Financial Reporting ◽  
Academic Research ◽  
Financial Statements ◽  
Securities And Exchange Commission ◽  
Financial Information ◽  
The Public ◽  
Business Reporting ◽  
Paper Version ◽  
Public Company ◽  
Reporting Environment

SYNOPSIS: Since 2004, the Securities and Exchange Commission (SEC) has taken steps toward requiring eXtensible Business Reporting Language (XBRL) to be used in its filings, including a voluntary filing program. “Tagging” financial information using XBRL creates documents that are computer readable and searchable. Once XBRL is required, investors are likely to demand assurance on the tagging process. The Public Company Accounting Oversight Board (PCAOB) has issued guidance on attest engagements regarding XBRL financial information furnished under the SEC’s current voluntary filer program, which relies on the auditor “agreeing” a paper version of the XBRL-related documents to the information in the official EDGAR filing. This approach may be adequate for the current paper-oriented reporting paradigm. However, once filing in XBRL becomes required, the power of XBRL to allow individual financial datum to be extracted from the SEC’s financial database will be realized. This “data-centric” idea is a crucial extension of the traditional reporting paradigm that will alter the way financial and nonfinancial data can be used. The current audit focus on reconciling only the XBRL output with the paper submissions does not address this paradigm shift. In this commentary, we discuss the SEC’s efforts to incorporate XBRL into its filing process and provide a brief overview of the technical aspects of XBRL. The commentary’s principal focus is on several important questions that assurance guidance must address in a data-centric reporting environment, such as, what constitutes an error, or what does materiality mean when individual pieces of financial data will be used outside the context of the financial statements? It also describes some XBRL-related areas where academic research can help guide XBRL-document assurance efforts.

scholarly journals The Determinants of Audit Expectation Gap: An Empirical Study from Kingdom of Bahrain

2018 ◽  
Vol 7 (3) ◽  
pp. 54 ◽  
Author(s):  
Sayed Ali Ahmed Alawi ◽  
Rami Mohammad Abu Wadi ◽  
Gagan Kukreja
Keyword(s):  
Financial Reporting ◽  
Quantitative Research ◽  
Financial Statements ◽  
International Standards ◽  
Kingdom Of Saudi Arabia ◽  
The Public ◽  
Financial Reporting Standards ◽  
Expectation Gap ◽  
Audit Firms ◽  
National Bank

The research aims at identifying the determinants of audit expectation gap between the auditors and the users of financial statements in the Kingdom of Bahrain. This issue is noticed in many frauds or errors or illegal matters by the general public after every scam whether Enron and WorldCom from United States or Satyam and Punjab National Bank from India or Tesco and BHS from United Kingdom or Mobily from Kingdom of Saudi Arabia. As per International Standards on Auditing (ISAs), auditors are not responsible to detect each and every fraud or error or illegal act as it is the responsibility of management. However, auditors are expected to assess the possibility of an error or fraud to occur and assess risks of material misstatement due to error or fraud and they are supposed to express their independent and objective opinion on financial statements whether financial statements are prepared in accordance to suitable criteria (International Financial Reporting Standards in the case of Bahrain).This quantitative research and its descriptive design aims empirically to analyze determinants that may impact the audit expectation gap in the Kingdom of Bahrain. The study used a detailed questionnaire as a measuring instrument across the sample group to measure 4 determinants that are expected to have a significant impact on the level of the audit expectation gap. Those determinants are the efforts of auditors, the skills of auditors, the knowledge of the public about the audit profession and the users’ needs from auditors. The research inferred that identified factors found to have a significant impact on the level of audit expectation gap. It is recommended that audit firms should provide training to the audit staff that how to utilize the required efforts in conducting an audit engagement and go extra miles to fill the gap. Furthermore, the auditors should keep themselves updated about the latest frauds and the best audit practices. 

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