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Samenvatting Advanced Auditing
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Samenvatting Advanced Auditing Vrije Universiteit Amsterdam van de Master Accounting and Control
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Advanced Auditing samenvattingWEEK 1
Een audit = een professionale service geleverd door experts in respons op economic en
regulatory demand. (Knechel et al.)
‘An audit is a systematic process of objectively obtaining and evaluating evidence regarding
assertions about economic actions and events to ascertain the degree of correspondence
between these assertions and established criteria and communicating the results to
interested users.’ (American Accounting Association)
Waarom is Audit (kwaliteit) belangrijk?
1. Belangrijk voor stabiliteit van financiële markten
• Important (investment) decisions are made on the basis of financial statements.
• If these statements do not reflect a company‘s true financial position and
performance or if a company fails, questions are asked about the auditor and the
quality of audit provided.
2. Vorige (prior) jaren hebben getuigd van high-profile audit scandals wat wijst op een
ontoereikende (deficient) auditkwaliteit
3. Negatieve oversight inspection findings hebben gezorgd voor similar concerns
4. Verlies van het vertrouwen in de audit function, en met dat van de financial statements,
als audit kwaliteit inderdaad ontoereikend (deficient) is.
Audit Quality = “the market assessed joint probability that a given auditor will both
discover a breach in a client’s accounting system, and report the
breach.” (DeAngelo 1981)
”to provide reasonable assurance that the audited financial statements and related
disclosures are (1) presented in accordance with Generally Accepted
Accounting Principles (GAAP), and (2) are not materially misstated whether due to errors or
fraud.” (GAO 2003, p. 13)
What Makes an Audit a Good Audit? – Depends on Whom You Ask (Knechel et al. 2013)
iedereen heeft een andere perceptie
Audit quality – It’s in the Eye of the Beholder
• User of financial reports: absence of error or fraud in f/s
• Auditor conducting the audit: meeting requirements of audit firm
• Audit firm: resistant to claims/litigation
• Clients: added value
• Regulators: in compliance with professional standards
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,• Society: avoid economic problems for a company or the market
Different views suggest different metrics!
Audit Quality: A Balanced Scorecard Approach
Audit Quality Indicators (Knechel et al. 2013 and Francis 2011)
1. Inputs
2. Process
3. Outcomes
4. Context
Input
A. Inputfactoren: Incentives and Motivations
Belangrijk hier: dilemma tussen bescherming van public interest en commerciële incentives:
Auditor independence
B. Inputfactoren beschreven door Francis (accounting firms):
• Partner compensatie
• Audit firm/partner ambtstermijn (tenure)
• Fee afhankelijkheid/druk (dependence/pressures)
• Client retentiedruk (druk om vast te houden aan cliënt)
• Audit firm alumni bekleden posities bij client firms
C. Inputfactoren: Institutional Setting (Francis 2011)
Tight system van regulation/inspecties van accounting en auditing praktijken – potentieel
creëren van countervailing incentives (compenserende stimulansen) die high audit quality
promoten.
Client-gebaseerde BoD & audit committees, die auditor independence promoten en in
charge zijn van de audit oversight
onderzoek toont aan dat dit leidt tot beneficial effects (e.g., board effectiveness)
Legal systems bieden quality-promoting incentives aan (voornamelijk in de U.S. en Australië
waar risico op rechtzaken = litigation hoog zijn)
D. Inputfactoren: Professional Skepticism
Professional skepticism = attitude de volgende zaken omvat: a questioning mind, being
alert to conditions which may indicate possible misstatement
due to error or fraud, and a critical assessment of audit
evidence.” (ISA 200)
• Skeptical judgment versus action
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,• Presumptive doubt versus neutrality
• Trait versus state
E. Inputfactoren: Knowledge and Expertise
• Onderzoek naar wat een expert constitueert (omvat)
• Onderzoek in industry expertise/specialisatie
• Implicaties: compositie van het engagement team
F. Inputfactoren: Within-Firm Pressures
• Supervisory/evaluatie druk
• Time-budget, time-deadline, en andere druk dat input beïnvloed (affecting)
• Wat leidt tot: “Reduced audit quality acts”: underreporting of time and prematurely signing
off on audit workpapers
2. Process
A. Procesfactoren: Audit Evidence (Francis 2011)
Wat is de kwaliteit van audit evidence?
Dit moet bepaald (determined) worden aan de hand van zijn reliabity en relevance.
Gelimiteerd onderzoek naar wat reliable evidence constitueert; auditors vinden het moeilijk
om deze assessment te maken.
Wat leidt tot een ad hoc best-practices approach waar judgment plays een belangrijke rol
speelt, zoals besproken in Knechel et al. (2013)
B. Procesfactoren: Judgment in the Audit Process
● Het audit process is doordrongen (permeated) van (professional) judgment.
Voorbeelden:
1. Hoe betrouwbaar is client-provided evidence?
2. Hoe moeten timing, extent en nature van evidence aangepast worden aan
higher levels of RMM (Risk of Material Misstatement)?
3. Myriad (groot aantal) van judgments in accounting schattingen (uncertainty)
● Vooral door prevalente onzekerheid, identificeert onderzoek veel heuristics en biases
wat leidt tot systematic errors, e.g., anchoring and adjustment, overconfidence, etc.
Daarom is de audit quality afhankelijk van auditor judgment quality.
Enkele stappen in het Audit Process met Judgment
Assessing risk
De beoordeling (assesment) van of AR (audit risk), IR (internal risk), CR (control risk) and
DR (detection risk) and Materiality
3
, Analytical procedures
• Interference effects (storende effecten)
Obtaining and evaluating audit evidence
• Gebruik van audit support systems (als onderdeel van de audit methodology)
• Onzekerheid, nature of estimates, subjectivity,… (e.g. allowances)
Auditor-client negotiations
• Vinden van een optimale balans tussen open/constructive communicaite op de ene hand,
en over-familiarity op de andere – niet zo makkelijk
• Onderzoek naar auditor-client onderhandelingen bieden interessante inzichten, e.g.
auditor experience/rank; tenure
Review and quality control
3. Audit Outcomes (Knechel et al. 2013)
Verschillende types van relevante outputs, e.g.:
Van de auditor
• Auditor’s reports voor gebruikers van de audited financial statements
• Auditor’s reports voor those charged with governance (TCWG) en voor management (not
public)
• Audit firm transparency reports en annual reports (inclusief ‘audit quality indicators’)
Van de entity
• Audited financial statements, inclusief restatements
• Reports van TCWG (e.g., audit committees)
Van de audit regulators
• Reports van individual audit engagements
• Reports van audit firm inspecties
Deze outputs kunnen:
1. Dienen als signalen voor audit quality
2. Een directe impact hebben op audit quality door incentives/pressures te creëren
3. Soms dienen als research proxies voor audit quality
Academic Research: Binary versus Continuum View (Francis 2011)
De binary (legal) view: Audit failure versus no audit failure
Twee problemen:
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