The Effect of Disclosing Key Audit Matters and Accounting Standard Precision on the Audit Expectation Gap

2019 ◽  
Author(s):  
Paul J. Coram ◽  
Leiyu Wang
Keyword(s):  
Accounting Standard ◽  
Expectation Gap ◽  
Standard Precision

scholarly journals The Effects of Accounting Standard Precision, Auditor Task Expertise, and Judgment Frameworks on Audit Firm Litigation Exposure

2020 ◽  
Vol 14 (2) ◽  
pp. P19-P30
Author(s):  
Jonathan H. Grenier ◽  
Bradley Pomeroy ◽  
Matthew T. Stern ◽  
Natalie B. Zielinski
Keyword(s):  
Accounting Standards ◽  
Cost Effective ◽  
Effective Alternative ◽  
Technical Expertise ◽  
High Quality ◽  
Accounting Standard ◽  
Audit Firm ◽  
Cost Effective Alternative ◽  
Professional Judgments ◽  
Standard Precision

SUMMARY This article summarizes the published study “The Effects of Accounting Standard Precision, Auditor Task Expertise, and Judgment Frameworks on Audit Firm Litigation Exposure” (Grenier, Pomeroy, and Stern 2015), where the authors examine ways that auditors can defend their judgment during litigation regarding the appropriateness of clients' application of imprecise accounting standards. The authors find that utilizing technical experts will reduce litigation exposure arising from imprecise accounting standards because it is difficult to challenge judgments made by a recognized expert. However, the study also finds that using a framework for making high-quality professional judgments represents a cost-effective alternative to technical expertise, as doing so also constrains jurors' ability to challenge auditors' judgments. In sum, the study suggests that auditors are well equipped to handle the increased litigation exposure associated with imprecise accounting standards, and the ongoing worldwide transition to such standards is unlikely to lead to auditor herding to industry norms.

The Effects of Critical Audit Matter Paragraphs and Accounting Standard Precision on Auditor Liability

2016 ◽  
Vol 91 (6) ◽  
pp. 1629-1646 ◽  
Author(s):  
Christine Gimbar ◽  
Bowe Hansen ◽  
Michael E. Ozlanski
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Securities And Exchange Commission ◽  
Accounting Standard ◽  
Generally Accepted Accounting Principles ◽  
Auditor Liability ◽  
The Public ◽  
Regulatory Changes ◽  
Public Company ◽  
Standard Precision

ABSTRACT The Public Company Accounting Oversight Board recently proposed amendments to the standard audit report that would require the disclosure of critical audit matters (CAMs), and the Securities and Exchange Commission continues to evaluate the use of principles-based (imprecise) accounting standards within U.S. generally accepted accounting principles. We assert that jurors perceive precise accounting standards to constrain auditors' control over financial reporting outcomes, resulting in a lower propensity for negligence verdicts when the accounting treatment conforms to the precise standard. However, we hypothesize that the use of either imprecise standards or CAMs reduces the extent to which jurors perceive this constraint to exist, leading to increased auditor liability. We present experimental evidence supporting this argument. Our results highlight the similarities between the effects of imprecise accounting standards and CAMs on negligence assessments. These results provide insight for regulators and the auditing profession about the potential consequences of the proposed regulatory changes.

The Great Expectation Gap

2012 ◽  
Vol 45 (5) ◽  
pp. 19
Author(s):  
LARRY GREENBAUM
Keyword(s):  
Great Expectation ◽  
Expectation Gap

Russian Accounting Standard (PBU) 18/02: Principles on the balance method use

2020 ◽  
Vol 23 (12) ◽  
pp. 1356-1382
Author(s):  
E.V. Olomskaya ◽  
A.A. Aksent'ev
Keyword(s):  
Balance Method ◽  
Deferred Taxes ◽  
Accounting Standard ◽  
Scientific Methods ◽  
The Public ◽  
General Scientific ◽  
The Impact ◽  
Original Approach ◽  
Descriptive Method ◽  
Tax Accounting

Subject. This article discusses the methodological features of Russian Accounting Standard (PBU) 18/02 Income Tax Accounting when using the balance method to account for deferred taxes. It considers whether the clarification of permanent tax differences is justified, and it analyzes in detail the features of accounting for temporary differences and offers a visual and descriptive method for determining and correlating them in accounts. Objectives. The article aims to justify the reason for linking permanent tax differences to such accounting categories as Income and Expenses. It also aims to develop a methodological toolkit that simplifies the perception of the balance method and demonstrates the procedure for determining temporary differences. Methods. For the study, we used the methods of analysis, synthesis, observation, comparison, and other general scientific methods. Results. The article justifies the clarification of permanent differences from the position of accounting categories. It offers an original approach that helps visually classify temporary differences. The formalization of the balance method helped identify the logic of its reflection in accounting statements. Conclusions and Relevance. To ensure that accounting is not distorted due to the impact of taxation, it is necessary to develop a unified conceptual framework, as well as develop existing methods and introduce new ones that do not contradict the public concept of interaction between accounting and tax accounting. The research results are intended for training, scientific and practical activities of specialists in the field of accounting and audit, as well as students studying under this program, in order to study the features of applying the balance method for accounting for deferred taxes.

PENGAKUAN DAN PENGUKURAN BELANJA SUBSIDI ENERGI BERBASIS AKRUAL – STUDI KASUS TAHUN 2015

2017 ◽  
Vol 1 (2) ◽  
pp. 115-124
Author(s):  
Azas Mabrur ◽  
Siswanto Siswanto
Keyword(s):  
Financial Reporting ◽  
Large Share ◽  
State Budget ◽  
Accounting Standard ◽  
Financial Reports ◽  
Government Accounting ◽  
Cash Transaction ◽  
Ministry Of Finance ◽  
Accrual Basis ◽  
Energy Subsidy

Subsidy spending has a large share in the state budget (APBN). Thereby affecting the audit results by Supreme Auditor on government financial reports (LKPP). with the implementation of accrual-based government accounting in 2015, subsidy spending not only records transactions/activities based on cash flow but also non-cash transaction such as subsidy expenses and subsidy payable. This study aims to determine the implementation of the accrual basis on the accounting of energy subsidy spending.This study examines whether the recognition and measurement of energy subsidy spending, energy subsidy expenses and energy subsidy obligations have been presented in accordance with accrual-based government accounting standard and whether the recognition and measurement issues set out in the relevant Ministry of Finance Regulation (PMK) are in conformity with the accrual basis of accounting principles.The results show that the accounting of energy subsidy spending has been implemented in accordance with the PMK. However, the results also show that the PMK that regulates the accounting and financial reporting system of accrual-based subsidy spending still needs improvement.The necessary improvements are related to the recognition of subsidy expense over a period, the measurement of subsidy expenses, and the mechanism of subsidy payable disposal.

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