scholarly journals Constructing the Audit Risk Assessment by the Audit Team Leader When Planning: Using Fuzzy Theory

Mathematics ◽  
2021 ◽  
Vol 9 (23) ◽  
pp. 3065
Author(s):  
Luis Porcuna-Enguix ◽  
Elisabeth Bustos-Contell ◽  
José Serrano-Madrid ◽  
Gregorio Labatut-Serer
Keyword(s):  
Risk Assessment ◽  
Internal Control ◽  
Fuzzy Theory ◽  
Team Leader ◽  
Audit Risk ◽  
Audit Firms ◽  
Private Data ◽  
Raising Awareness ◽  
Core Conditions ◽  
Audit Team

The aim of this study is to construct the assessment of the expected audit risk by the audit team leader (ATL) during the planification phase of the audit. The ATL plays an important role within the audit, and even more so regarding small and medium-sized (SME) audit firms. The audit risk assessment is critical as relying more (less) on internal controls implemented by the client leads to performing less (more) substantive audit procedures. This is determined by the ATL based on their professional judgement and previous experience. The use of fuzzy theory has powerful potential into the audit arena, as the audit risk assessment (outcome) is critically related to the auditors’ judgement and perception. We argue that ATL characteristics are core conditions in determining the audit risk assessment when planning. Using hand-collected and private data from Spanish SME audit firms, we find that a comprehensive set of conditions must be given for perceived high audit risk. The results indicate that female and inexperienced ATLs planning the audit of indebted firms with high proportions of capital assets, less profitability, and with a larger board sizes, as they are expected to have bad internal control. The same conditions are met when expecting errors, as well as shorter audit tenures. Finally, conditions such as the ATL’s experience gains importance in expecting irregularities. This paper extends our understanding of the role of ATL characteristics on the audit risk assessment when planning and raising awareness on studying SME audit firm behavior.

Client Engagement Risks and the Auditor Search Period

2011 ◽  
Vol 25 (4) ◽  
pp. 685-702 ◽  
Author(s):  
Samer K. Khalil ◽  
Jeffrey R. Cohen ◽  
Kenneth B. Schwartz
Keyword(s):  
Internal Control ◽  
Financial Distress ◽  
Business Risk ◽  
Audit Risk ◽  
Industry Specialization ◽  
Client Engagement ◽  
Or Management ◽  
Auditor Industry Specialization ◽  
Audit Firms ◽  
Internal Control Weaknesses

SYNOPSIS This paper investigates whether client engagement risks lengthen the client acceptance phase for audit firms and result in a longer auditor search period for their clients. Using a sample of auditor resignations over the period 2003–2008, we document that the auditor search period is longer for firms associated with client business risk (financial distress) and audit risk (internal control weaknesses or management integrity issues), while it is shorter for firms representing reduced auditor business risk (auditor industry specialization). These findings highlight the importance of client risk assessment and explain audit firms' response to perceived client risks.

scholarly journals Does Engagement Partners’ Effort Affect Audit Quality? With a Focus on the Effects of Internal Control System

Risks ◽  
2021 ◽  
Vol 9 (12) ◽  
pp. 225
Author(s):  
Suyon Kim
Keyword(s):  
Internal Control ◽  
Audit Quality ◽  
Vital Role ◽  
Fiscal Year ◽  
Audit Process ◽  
Client Characteristics ◽  
Audit Firms ◽  
Audit Reports ◽  
It Departments ◽  
Audit Team

An audit team includes engagement partners, CPAs, and staff. Among them, partners play a vital role in performing tasks that require expertise and experience, such as analyzing and understanding the industry, and supervising the overall audit process. In detail, the partners establish an audit plan, determine the overall audit time, provide the audit input ratio of the engagement team, and review the audit reports. This study examines for association between the partner’s audit hour ratio and audit quality depending on the client firms’ characteristics. Although the role of partners is important, the information about partner audit hours is limited. However, the Korean government requires audit firms to disclose the partner hour information in the audit report starting in the 2014 fiscal year. By the disclosure, it is possible to examine the association between partner audit hours and audit quality. In this study, the information on partner audit hour is hand-collected from the firms’ business reports. Using 6340 observations from 2014 to 2017, the partner audit hour ratio is associated with audit quality, under the characteristics of client firms. Firms’ risks are adopted for client characteristics, and we focused on the operation of internal control. The internal control operation level is measured by the following: (1) the ratio of internal control personnel and (2) experience of the internal control personnel in the accounting and IT departments. The result suggests that for the firms where internal control is not effectively operated, partners make more effort to enhance audit quality.

Information Technology Controls Quality and Audit Fees: Evidence From Italy

2016 ◽  
Vol 33 (1) ◽  
pp. 123-146 ◽  
Author(s):  
Tatiana Mazza ◽  
Stefano Azzali
Keyword(s):  
Risk Assessment ◽  
Information Technology ◽  
Financial Reporting ◽  
Internal Control ◽  
Audit Fees ◽  
Listed Companies ◽  
Audit Risk ◽  
The Impact ◽  
Control Risk

This study analyzes the impact of Information Technology (IT) Controls quality on control risk and audit fees. The impact is expected to occur when regulation increases sensitiveness to audit risk assessment. The research focuses on IT Controls as part of Internal Control over Financial Reporting, particularly on scoping quality, segregation of duties, and Controls framework compliance. The research was conducted with a questionnaire on a population of Italian listed companies. We find that audit fees are lower for higher IT scoping quality, IT Controls segregation of duties, and IT Controls framework compliance. The overall conclusion is that IT Controls quality is related to lower control risk, audit fees, and audit effort.

The development of audit detection risk assessment system: Using the fuzzy theory and audit risk model

2008 ◽  
Vol 35 (3) ◽  
pp. 1053-1067 ◽  
Author(s):  
She-I Chang ◽  
Chih-Fong Tsai ◽  
Dong-Her Shih ◽  
Chia-Ling Hwang
Keyword(s):  
Risk Assessment ◽  
Risk Model ◽  
Fuzzy Theory ◽  
Assessment System ◽  
Audit Risk ◽  
Audit Risk Model

scholarly journals INTERCOMPANY STANDARDIZATION OF AUDIT OF FIXED ASSETS

2017 ◽  
pp. 127-133
Author(s):  
Клычова ◽  
Guzaliya Klychova ◽  
Закирова ◽  
Alsu Zakirova
Keyword(s):  
Internal Control ◽  
Competent Authority ◽  
External Control ◽  
Sources Of Information ◽  
Audit Risk ◽  
Professional Activities ◽  
Fixed Assets ◽  
Verification Process ◽  
Effective Development ◽  
Audit Team

In modern terms, standardization is one of the key factors, that characterize the effective development of audit activities in the Russian Federation and contribute to its adaptation to the requirements of international auditing standards. During the process of standardization of audit activities, a system of documentation is created, that establishes uniform requirements for the audit procedure, the order of formation and presentation of the audit report and the auditor’s report, internal and external control of auditing quality, training of auditors and assessment of their qualifications. The standard sets out rules, general principles, characteristics, intended for permanent and durable usage and affecting various professional activities and their results. The standard is being developed on the basis of mutual consent of the parties and approved by the competent authority. The unified structure of the standard should include: information on general provisions; basic concepts and definitions, that are used in the standard; aims and objectives of the audit of separate accounting object; normative legal acts and sources of information, used in the verification process; methodological approaches to the testing of the internal control system; audit evidence and analysis procedures, used in the verification process; typical errors and irregularities, detected during the audit. Standards are the basis for high-quality audits, introduction into practice of auditing organizations of scientific achievements, define the professional image of the profession, allow users of financial information to communicate with the auditors in the verification process. The application, discussed in an article, internal standards allows to detail professional conduct, because its use is based on the requirements of the federal standards and self-regulatory organizations of auditors. The use of standard in practice improves the quality of audit operations from fixed assets, reduces audit risk, provides an additional control over the work of the audit team.

IMPLEMENTASI SISTEM PENGENDALIAN INTERNAL PADA PERUSAHAAN JASA

2019 ◽  
Vol 2 (2) ◽  
pp. 110
Author(s):  
Wahyu Wahyu Wahyu ◽  
Marliyati Marliyati Marliyati ◽  
I. Nyoman Romangsi
Keyword(s):  
Risk Assessment ◽  
Operating Procedure ◽  
Internal Control ◽  
Standard Operating Procedure ◽  
Control Environment ◽  
Service Company ◽  
Standard Operating ◽  
Information And Communication

The aim of this article is to analyze internal control in service company. The analyze used the components of internal control according to COSO: control environment, risk assessment, control activities, information and communication, monitoring. Analysis of internal control used the data obtained through observation, questionnaires, interview, and documentary. Based on this analysis results can be concluded, that the dual positions refer with company SOP (Standard Operating Procedure). Separation of task does not work because that the dual positions. Therefore, the component of control activities applied at company is not in accordance with the component of control activities according to COSO. Nonconformity components still results in very effective internal control because the purpose of the internal control still remains to be achieved even though there are components that are not in accordance with the internal control components according to COSO.

Auditors and the Principal-Principal Agency Conflict in Family Controlled Firms

2020 ◽  
Vol 39 (4) ◽  
pp. 31-55
Author(s):  
Chiraz Ben Ali ◽  
Sabri Boubaker ◽  
Michel Magnan
Keyword(s):  
Risk Assessment ◽  
Negative Relationship ◽  
Audit Fees ◽  
Data Availability ◽  
Audit Risk ◽  
Controlling Shareholder ◽  
Voting Power ◽  
The Public ◽  
Agency Conflict ◽  
Jel Classifications

SUMMARY This paper examines whether multiple large shareholders (MLS) affect audit fees in firms where the largest controlling shareholder (LCS) is a family. Results show that there is a negative relationship between audit fees and the presence, number, and voting power of MLS. This is consistent with the view that auditors consider MLS as playing a monitoring role over the LCS, mitigating the potential for expropriation by the LCS. Therefore, our evidence suggests that auditors reduce their audit risk assessment and audit effort and ultimately audit fees in family controlled firms with MLS. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G32; G34; M42; D86.

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