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

[EN] 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.Porcuna-Enguix, L.; Bustos-Contell, E.; Serrano-Madrid, J.; Labatut-Serer, G. (2021). Constructing the Audit Risk Assessment by the Audit Team Leader When Planning: Using Fuzzy Theory. Mathematics. 9(23):1-22. https://doi.org/10.3390/math923306512292

Elwell v. PP&L Inc

United States District Court for the Eastern District of Pennsylvani

The Effect of Internal Audit Quality on Financial Accountability Quality at Local Government

The need for local government audit is actually based on the demands of public accountability to the government by the public entity in order to realize the creation of good governance (good government governance). The role of government internal audit is an important management function in governance both at central and local government. Government internal audit quality is very important, because the internal audit quality will improve the financial accountability that will be produced reliable financial reports as a basis for decision making by the stakeholder's. There are many factors influencing financial accountability quality, including internal audit quality. Based on this background, this research has been aimed to study: (1) the effect of internal audit quality on financial accountability quality. This research uses survey method with description verification approach and type of causal research, conducted on 36 Inspectorate Local Government in West Java and Banten as the unit of analysis, while the unit of observation is a Team Audit such as, Inspector, Inspector of area, audit team leader and members of audit team. The type of data is primary data collected by a questionnaire research instruments containing ordinal scale for measurement. Validity and reliability tests have also been done on the entire collected questionnaire. Furthermore, data are converted into interval scale, then hypothesis test are done using Regression

Constructing the audit risk assessment by the audit team leader when planning: using fuzzy theory

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

The Effect of Internal Audit Quality on Financial Accountability Quality at Local Government

The need for local government audit is actually based on the demands of public accountability to the government by the public entity in order to realize the creation of good governance (good government governance). The role of government internal audit is an important management function in governance both at central and local government. Government internal audit quality is very important, because the internal audit quality will improve the financial accountability that will be produced reliable financial reports as a basis for decision making by the stakeholder's. There are many factors influencing financial accountability quality, including internal audit quality. Based on this background, this research has been aimed to study: (1) the effect of internal audit quality on financial accountability quality.This research uses survey method with description verification approach and type of causal research, conducted on 36 Inspectorate Local Government  in West Java and Banten as the unit of analysis, while the unit of  observation is a  Team Audit such as, Inspector, Inspector of area, audit team leader and members of audit team. The type of data is primary data collected by a questionnaire research instruments containing ordinal scale for measurement. Validity and reliability tests have also been done on the entire collected questionnaire. Furthermore, data are converted into interval scale, then hypothesis test are done using Regression.This research has shown that “The internal audit quality effect the financial accountability quality.” Keywords: Good government governance, Government financial report, Internal audit quality and financial accountability quality

The Impact of Internal Control Effectiveness and Internal Audit Role toward the Performance of Local Government

This study aimed to examine the impact of the internal control effectiveness and internal audit role toward the performance of  local government.This research was conducted by census. Data analysis methods to test the hypothesis was regression analysis using SPSS. The data is primary data collected through questionnaires. This study conducted the validity and reliability test before the hypothesis test.This study concludeds that there was a positive influence of the internal control effectiveness and internal audit role on the performance of local governments both simultaneously and partially. Keywords: Internal Control, Internal Audit, Performance, Local Government

The Impact of Error-Management Climate, Error Type and Error Originator on Auditors’ Reporting Errors Discovered on Audit Work Papers

We examine factors affecting the auditor’s willingness to report their own or their peers’ self-discovered errors in working papers subsequent to detailed working paper review. Prior research has shown that errors in working papers are detected in the review process; however, such detection rates only rarely exceed 50% of the seeded errors. Hence, measures that encourage auditors to be alert to their own (or their peers’) potential errors any time they revisit the audit working papers may be valuable in detecting such residual errors and potentially correcting them before damage occurs to the audit firm or its client. We hypothesize that three factors affect the auditor’s willingness to report post detailed review discovered errors: the local office error-management climate (open versus blame), the type of error (mechanical versus conceptual) and who committed the error (the individual who committed the error (self) or a peer). Local office error-management climate is said to be open and supportive where errors and mistakes are accepted as part of everyday life as long as they are learned from and not repeated. In alternative, a blame error-management climate focuses on a “get it right the first time” culture where mistakes are not tolerated and blame gets attached to those admitting to or found committing such errors. We find that error-management climate has a significant overall effect on auditor willingness to report errors, as does who committed the error originally. We find both predicted and unpredicted significant interactions among the three factors that qualify these observed significant main effects. We discuss implications for audit practice and further research

The interface between internal and external audit in the Australian public sector

This study seeks to answer the research question ‘using reliance as the pivotal consideration, what factors determine the efficient and effective interrelationship between internal and external audit?’, within the context of the Australian public sector. A qualitative approach, framed within agency theory, was adopted using a case study and structured interviews. Findings included factors supporting prior literature as well as some unique to the research described here. As a result, this article makes a contribution to the literature examining public sector internal and external audit interrelationships as well as the literature on police audit and performance. It also has practical implications for both the case study site and similar organisations throughout the world