The Effect of Audit Standards on Fraud Consultation and Auditor Judgment

We investigate how the strictness of a requirement to consult on potential client fraud affects auditor assessments of fraud risk and the propensity to consult with firm experts. We test two specific forms of guidance about fraud consultations: (1) relatively strict (i.e., mandatory and binding) and (2) relatively lenient (i.e., advisory and non-binding). We predict that a strict consultation requirement will lead to greater propensity to consult and higher fraud risk assessments. We further investigate potentially amplifying effects of a client attribute (underlying fraud risk) and an engagement attribute (deadline pressure). Results from two experiments with 208 Dutch audit managers and partners demonstrate that fraud risk and the consultation propensity are both assessed higher under a strict consultation requirement. For near-partners and partners, this effect is compounded when a client exhibits significant red flags; for managers, it is compounded when deadline pressure is tight. This study demonstrates that the formulation of a standard, such as the consultation requirement, may create adverse incentives that bias risk assessment, which should be considered by regulators and audit firms when developing, formulating and implementing such procedures

Improved automation of dissolved organic carbon sampling for organic-rich surface waters

In-situ UV-Vis spectrophotometers offer the potential for improved estimates of dissolved organic carbon (DOC) fluxes for organic-rich systems such as peatlands because they are able to sample and log DOC proxies automatically through time at low cost. In turn, this could enable improved total carbon budget estimates for peatlands. The ability of such instruments to accurately measure DOC depends on a number of factors, not least of which is how absorbance measurements relate to DOC and the environmental conditions. Here we test the ability of a S::can Spectro::lyserTM for measuring DOC in peatland streams with routinely high DOC concentrations. Through analysis of the spectral response data collected by the instrument we have been able to accurately measure DOC up to 66 mg L-1, which is more than double the original upper calibration limit for this particular instrument. A linear regression modelling approach resulted in an accuracy > 95%. The greatest accuracy was achieved when absorbance values for several different wavelengths were used at the same time in the model. However, an accuracy > 90% was achieved using absorbance values for a single wavelength to predict DOC concentration. Our calculations indicated that, for organic-rich systems, in-situ measurement with a scanning spectrophotometer can improve fluvial DOC flux estimates by 6 to 8% compared with traditional sampling methods. Thus, our techniques pave the way for improved long-term carbon budget calculations from organic-rich systems such as peatlands