The construction of audit partner’s judgment

Purpose The purpose of this study is to explore the social and collective foundations of the auditor’s judgment and specifically highlights that the dialogical dimension of auditors’ judgment is founded on both their interactions with their auditees and their interactions with their colleagues. Design/methodology/approach This qualitative study is based on interviews with 22 audit partners, conducted between March 2013 and October 2016, in France. Findings The research points out the complexity of auditor judgment. Confronted with issues such as equivocal and ambiguous circumstances, auditors must question the relevance of the meanings elaborated to act according to the situation (self-criticism or doubt) and must be wise and not be overconfident toward the information provided by the manager (wisdom). Last but not least, the findings also suggest that contrary advice helps auditors to improve an alternative point of view and hence reach a consensus. Originality/value The research uses a K. Weick sensemaking approach and contributes theoretically to gaining deeper understanding of the social dimension in audit judgment, by showing that professional judgment is an interactive and social practice.

The Impact of Trait Skepticism and Ego Depletion on Auditor Judgment

Prior research finds that trait skepticism influences auditors’ judgments but that situational variables may interact with trait skepticism. We examine whether ego depletion, an exhaustion of individuals’ self-control resources which limits one’s ability to vigilantly process information and apply critical thinking, moderates the relationship between trait skepticism and auditor judgment. We contend that when not depleted auditors’ trait skepticism will influence judgment; conversely, when depleted, auditors’ trait skepticism will not influence auditors’ judgments due to a lack of necessary cognitive resources to vigilantly process information. Depleted auditors are expected to adopt a less cognitively demanding strategy and simply make more skeptical judgments, as they expect this is the more acceptable, safer judgment when accountable. Results from an experiment involving a risk assessment task support our expectations: when not depleted, auditors’ judgments are in-line with their trait skepticism but, when depleted, auditors make more skeptical judgments regardless of their trait skepticism.

Pengaruh Pengalaman Audit, Keahlian Audit, Tekanan Ketaatan, Dan Kompleksitas Tugas Terhadap Audit Judgment Auditor (Studi Pada BPK-RI Perwakilan Provinsi Papua Barat)

This study aims to analyse the influence of audit experience, audit expertise, compliance pressure and complexity of tasks on auditor judgment audits. The sample in this study was an auditor working with the Audit Board of the Republic of Indonesia, representative of West Papua Province. The sample is selected based on purposive sampling method. Data collection was conducted by distributing questionnaires to 42 respondents and returned as many as 32 questionnaires. The data was analyzed using linear regression analysis with SPSS 21. The results of this study show that audit experience affects audit judgment auditors. Audit expertise has no effect on auditors' judgment audits. Compliance pressure affects auditors' judgment audits. The complexity of the task has no effect on the auditor's audit judgment.

The Effect of Auditor Reporting Choice and Audit Committee Oversight on Management Financial Disclosures

We investigate the joint effects of auditor's reporting choice and audit committee effectiveness on management disclosures about complex estimates. A new PCAOB standard requires auditors to report on Critical Audit Matters (CAMs): issues "communicated or required to be communicated to the audit committee" about accounts or disclosures that (1) "are material to the financial statements" and (2) "involved especially challenging, subjective, or complex auditor judgment" (PCAOB 2017a, 11). Consistent with investor arguments, we find that audit committee effectiveness and more detailed CAM reporting encourage managers' disclosures of the risk underlying complex estimates. When the auditor's report is more informative about a complex estimate and the audit committee is more effective, management's related financial disclosures are more forthcoming. However, less informative auditor disclosures or more effective audit committees alone do not prompt greater management disclosure. Thus, expanded auditor reporting and more effective audit committees, together, can enhance the disclosures investors value.

A Potential Unintended Consequence of "Big Data": Does Information Structure Lead to Suboptimal Auditor Judgment and Decision-Making?

This study examines the effects of information structure on auditor judgment and decision-making. Based on cognitive load theory, we predict that the variety of evidence inspired by big data such as visualizations or emails likely lead to increased perceptions of ambiguity which in turn impacts audit-related decisions. Additionally, we examine whether those effects are moderated by time budget pressure. We conduct an experiment with 120 auditors and find that auditors presented with varied data, such as emails or visualizations, provide more conservative risk assessments and write down recommendations in an inventory obsolescence setting than auditors presented with a less ambiguous, more traditional memo format. Our findings also indicate that time budget pressure moderates the effects of information structure resulting in the most conservative obsolescence risk and inventory write-down assessments when presented with varied data in a high time budget pressure environment. We believe our study has important implications that should be considered before the implementation of technology-enabled tools to analyze big data on financial statement audits.

Pengaruh Tekanan Ketaatan, Materialitas dan Risiko Audit terhadap Ketepatan Judgment Auditor pada Kantor Akuntan Publik di Sumatera Utara

The purpose of this study was to determine the effect of compliance, materiality, and audit risk on the judgment of the auditor's judgment on the Public Accounting Firm in North Sumatra. This analysis is based on data obtained from 45 respondents, namely auditors who have senior auditor positions and junior auditors at the Public Accountants office in North Sumatra by distributing questionnaires. This research is census research. The data used is primary data, which is obtained directly from the research subject in the form of respondents' perceptions by circulating the questionnaire in the form of a questionnaire to the respondent. From the number of questionnaires circulated to respondents as many as 52 sheets, only 45 sheets returned with a rate of return reaching 86.53%. Furthermore, the data analysis in this study used multiple linear regression which was processed using a computer program Statistical Product and Service Solution (SPSS) ver 15.0. The results of the study showed that both simultaneously and partially obedient pressure, materiality, and audit risk had an effect on the accuracy of the auditor's judgment at the Public Accounting Firm in North Sumatra. This proves that the higher the pressure of obedience, materiality and audit risk possessed by the auditor, the higher the auditor's judgment. Keywords: Pressure of obedience, Materiality, Audit Risk, and Auditor Judgment.

What Are the Trends in PCAOB Inspections and the Reported Audit Deficiencies?

Although the Public Company Accounting Oversight Board (PCAOB) inspections commenced in 2003, few studies have analyzed the recurring nature of audit deficiencies both within and across U.S. and non-U.S. firms. This study investigates longitudinal trends in PCAOB Part I audit deficiencies and compares these deficiencies between initial and subsequent inspections. We classify the audit deficiencies contained in the inspection reports into three categories relating to Generally Accepted Accounting Principles (GAAP), Generally Accepted Auditing Standards (GAAS), and Internal Controls over Financial Reporting (ICFR). Using 1,551 inspections conducted over the period 2003–2017, we find that 67% of Part I audit deficiencies in the related reports pertain to GAAP and that triennially inspected audit firms have the highest occurrence of these deficiencies. On average, 22% of audit deficiencies relate to GAAS, with the highest incidence of these deficiencies attributable to annually inspected audit firms. Although ICFR has the least audit deficiencies (11%), we find a significant increase from 2009. We find no significant differences in the mean number of GAAP, GAAS, and ICFR audit deficiencies between first- and second-round inspections. However, we find a significant increase in the mean number of ICFR audit deficiencies between the third- to fifth-round inspections. The audit areas of “revenue recognition,”“inventory,” and “fair value measurements” (i.e., those requiring significant auditor judgment) are the most frequent audit deficiencies identified by the PCAOB. This study provides insights into the frequency and nature of audit deficiencies to stakeholders such as investors, auditors, audit committees, and users of financial statements.

Pengaruh Auditor Judgement, Etika Profesi, dan Employee Engagement terhadap Kinerja Auditor dalam Pelaksanaan Pemeriksaan Laporan Keuangan (Studi pada Badan Pemeriksa Keuangan RI)

In financial statement audits, a good auditor's performance is the main key to the success of the results of auditing the financial statements. Some possible causes of auditor performance weakness are because there are still auditors who can be influenced in making auditor judgment, there are weaknesses of auditors in applying the principles of professional ethics, and the auditor's personal attachment to his employer. This study was conducted at the Indonesian Supreme Audit Board. This research aims to find out how much auditor judgment, the application of professional ethics, and employee engagement of an auditor influences the auditor's performance. Data were collected using a survey method with a questionnaire technique. The number of respondents in this study is 86 respondents, but respondent data that can be processed is 84 questionnaires. The data analysis technique used is multiple linear regression. The results showed that auditor judgment, professional ethics, and employee engagement partially and simultaneously had a significant effect on auditor performance. Dalam melaksanakan pemeriksaan laporan keuangan, kinerja auditor yang baik menjadi kunci utama suksesnya hasil pemeriksaan laporan keuangan tersebut. Beberapa kemungkinan penyebab kelemahan kinerja auditor karena masih terdapat auditor yang bisa dipengaruhi dalam pembuatan auditor judgement, terdapat kelemahan auditor dalam menerapkan prinsip etika profesi, dan lemahnya keterikatan pribadi auditor tersebut dengan pemberi kerjanya. Studi ini dilakukan pada Badan Pemeriksa Keuangan RI. Riset ini bertujuan untuk mengatahui seberapa besar auditor judgement, penerapan etika profesi, dan employee engagement seorang auditor berpengaruh terhadap kinerja auditor tersebut. Data dikumpulkan menggunakan metode survei dengan teknik kuesioner. Jumlah responden penelitian ini adalah 86 responden, namun data responden yang dapat diolah adalah 84 kuesioner. Teknik analisis data yang digunakan adalah regresi linier berganda. Hasil penelitian menunjukkan bahwa auditor judgement, etika profesi, dan employee engagement secara parsial dan bersama-sama (simultan) berpengaruh signifikan terhadap kinerja auditor.