Auditing: The relationship between the systems examination and the substantive testing of details

It has long been recognised by the Auditing Profession that an examination of the accounting system and its internal controls allows the auditor, provided the results of the systems examination are favourable, to reduce the extent of the detailed substantive testing. Such an approach is conventionally called a 'systems' approach to the audit. It is also recognised that the auditor does not have to place reliance on internal control if he does not judge such an approach to be cost effective. In this case the auditor maintains the level of substantive testing and the approach is termed a 'substantive' approach. In this thesis it is argued that the generally recognised role of the systems examination in allowing a reduction of substantive testing is only one of three important audit roles which the systems examination may play in support of the substantive testing. The other two less well recognised roles are; a) as a source of information to help the auditor select a statistical sampling technique for the substantive testing, and b) as a source of information to help the auditor assess pieces of evidence used in the substantive testing where the evidence has been processed or generated by the system. The main body of the thesis consists of a detailed study of each of the three roles. In the Conclusion it is argued that a recognition of three, rather than one, roles for the systems examination allows a greater understanding of the true distinction between what are conventionally described as the 'systems' and 'substantive' approaches to the audit. Further research is recommended both to substantiate the tentative a priori reasoning of the conclusion and to provide empirical evidence of the extent to which there is a lack of understanding on the part of practising auditors of the three aspects of the relationship between the systems and substantive evidence

Market Risks and Oilfield Ownership - Refining SEC Oil and Gas Disclosures

Our paper uses an extensive sample of 292 oilfields to provide evidence that Securities and Exchange Commission (SEC) supplementary disclosures do not capture the price sensitivities of O&G disclosures implicit in the two main forms of oilfield ownership, concession and production sharing contracts (PSCs). SEC present value disclosures for both forms of ownership are shown to be significantly more responsive to oil prices than stock return sensitivities noted by Rajgopal (1999). Importantly, we show that unlike concessions, reserve and production disclosures vary in response to oil price movements for PSC regimes. Our results highlight the need to differentiate PSC disclosures from concession fields, and to fully reflect price risks implicit in oilfield ownership contracts. We extend findings by Rajgopal (1999) and propose refinements necessary to capture contractual price risk effects on SEC disclosures for assets in the O&G sector

Investigation of the relationship between strata characteristics and longwall caving behaviour

This paper outlines the results of a study to analyse various longwall operations using the Geophysical Strata rating (GSR) to characterize the strata, assess the likelihood of weighting and then correlate this with the various outputs that can be provided by longwall support monitoring analyses. A significant advantage of integrating GSR and longwall datasets is to allow a 3D spatial understanding to be developed between strata characteristics and various support loading related parameters. A caving chart has been developed based on a combination of previous experience in longwall support assessment, strata characterisation, leg pressure data analysis and caving behaviour. The chart provides a link between strata conditions, stresses, panel layout and anticipated support loads via design thresholds that are related to roof convergence. The intent is to provide a means to assess the risk of cavities in the immediate roof and/or the risk of heavy weighting from the overlying roof units

The future of auditing: the debate in the UK

Upon its creation in 1991, the UK's Auditing Practices Board (APB) debated the future of financial statement auditing, leading to a succession of APB publications in 1992, 1994 and 1996. A significant theme of these publications focused on the need for an audit environment in which auditing can be sustained as a professional judgement, in the face of pressures tending to subvert the audit into a process of compliance with rules. This paper articulates an 'accountability model' of the audit, developed as a consequence of APB's debate and underpinning many of the policy implications of the APB papers. This model is articulated in terms of the concepts of lateral and hierarchical accountability. The fear that judgement would be displaced from auditing has for the moment proved groundless given the recent introduction of new judgemental audit methodologies based on an assessment of business risks. Nevertheless, it is argued that the underlying accountability model and its implied imbalance between the hierarchical and lateral accountabilities of the audit engagement partner, still stands.