Key audit risks and audit procedures during the initial year of the COVID-19 pandemic: an analysis of audit reports 2019-2020

Purpose The purpose of this study is to explore audit procedure disclosures related to key audit risks, during the prior year and the initial year of the COVID-19 outbreak, by reporting on matters published in over 3,000 Australian statutory audit reports during 2019 and 2020. Design/methodology/approach This study partially uses latent semantic analysis methods to apply textual and readability analyses to external audit reports in Australia. The authors measure the tone of the audit reports using the Loughran and McDonald (2011) approach. Findings The authors find that 3% of audit procedures undertaken during 2020 were designed to address audit risks associated with the COVID-19 pandemic. As a percentage of total audit procedures undertaken during 2020, the authors find that smaller practitioners reported much less audit procedures related to COVID-19 audit risks than most larger audit firms. Finally, the textual analysis further found differences in the sentiment or tone of words used by different auditors in 2020, but differences in sentiment or tone were not found when 2020 was compared to the prior year 2019. Originality/value This study provides early evidence on whether auditors designed audit procedures to deal specifically with audit risks that arose due to the COVID-19 pandemic and on the extent and nature of those audit procedures. The study will help policymakers to better understand whether Key Audit Matters provided informational value to investors during a time of global crisis.

Analisis Faktor-Faktor yang Mempengaruhi Keterlambatan Laporan Audit

This study aims to determine the factors that affect delay of audit report. The population of research are companies listed in Indonesia Stock Exchange in 2016 – 2020. The sampling technique used purposive sampling method with 1870 annual report processed. The data analysis technique of this research uses multiple regression and assisted by SPSS software and Eviews software. The result of this research showed that audit opinion and profitability is significantly negative to audit delay, and firm size is significantly positive to audit delay, whereas audit effort, public accounting firm size, debt and ownership concentration have no effect to audit delay. The results of this study are expected to contribute to strengthening agency theory in safeguarding the interests of agents and principals by submitting financial statements in a transparent and timely manner to prevent information asymmetry, as well as strengthening signal theory in explaining the factors for the spread of good news and bad news of companies to investors. In addition, practical contributions for company management can be used as a source of information to find solutions to improve the timeliness of submitting financial reports, for auditors it is expected to be a guide in preparing audit procedures that are more effective in overcoming factors that cause delays in audit reports, and for service authorities. The financial statements are expected to be the basis for policies to strengthen supervision of companies listed on the IDX in submitting annual reports in a timely manner.

General Foundation Programs (GFPs) Student Entry and Exit Standards

This paper assessed the performance of General Foundation Programs (GFPs) in Oman in the area of 'Student Entry and Exit Standards'. Data was collected from the GFP quality audit reports prepared and published by Oman Authority for Academic Accreditation and Quality Assurance of Education (OAAAQA). The study adopted a simple descriptive data analysis method, consisting of identifying the formal conclusions issued by OAAAQA (Commendations, Affirmations, and Recommendations) and analyzing their distribution (frequency of occurrence and percentages) and the issues they covered. The study found out that (a) HEIs are yet to establish sustainable practices in their GFPs in relation to entry and exit standards; and (b) the systems in the GFP are still underdeveloped and practices are largely unsystematic. The paper ended by highlighting four improvement suggestions in order to ensure GFP effectiveness.

ROYAL WAQF IN PERAK: A LEGAL AND HISTORICAL ANALYSIS

This paper analyses the legal and historical development of waqf made by Sultan Idris Murshidul' adzam Shah in Perak (1849 to 1916). There are many untraceable, lost, and perished waqfs in Malaysia. However, Sultan Idris’s waqf is an exception which still exists since its establishment in 1917. As such, this research intends to explore its sustainability factors. The research methodology used is the doctrinal and non-doctrinal research methods. The doctrinal method is used to analyse the enactments, government gazettes, audit reports, journal articles, and history books. Meanwhile, the non-doctrinal legal method, namely semi-structured interview, clarifies findings and information gathered from various documents. The research is essential as there is a lack of comprehensive research done on waqf made by the Sultans or the Head of State in Malaysia. The researcher finds that the waqf was an established under written legal instrument; the waqf by Sultan Idris was made based on the English law of trust, but the spirit and principles of waqf to permanently benefit the beneficiaries remain intact; the appointment of the Sultan's descendants as the trustees alongside a committee proved to be crucial for the sustainability of the waqf; and there was check and balance process through legal provision. This research provides a clearer picture of waqf practice before the establishment of Perak's State Islamic Religious Council and evidenced the Sultan's contribution towards developing and protecting Islam.

The going-concern opinion and the adverse credit rating: an analysis of their relationship

Purpose The purpose of this study is to examine the relationship between going-concern (GC) opinions issued by the Big 4 audit firms and adverse credit ratings from the two largest credit rating agencies (CRAs) – Standard & Poor’s (S&P) and Moody’s. This question is relevant because there have been suggestions that auditors and CRAs should become more similar to each other, and because the two largest CRAs have different ownership structures that could affect their ratings. Design/methodology/approach Univariate and multivariate analyses are performed using a sample of firms that filed for bankruptcy between January 1, 2002 and December 31, 2013 that also had an audit opinion signed during the 12 months prior to bankruptcy, along with a credit rating issued by either or both S&P and Moody’s. Both influence each other. The likelihood of an auditor issuing a GC opinion is related to the credit rating issued by both S&P and Moody’s in the month prior to the audit report signing. The results also show differences between the CRAs. S&P reacted in the month after an auditor issued a GC opinion by downgrading its ratings 68% of the time. However, Moody’s did not react as strongly as S&P, downgrading its ratings only 24% of the time. Findings Both audit reports and credit ratings influence each other. The likelihood of an auditor issuing a GC opinion is related to the credit rating issued by both S&P and Moody’s in the month prior to the audit report signing. The results also show differences between the CRAs. S&P reacted in the month after an auditor issued a GC opinion by downgrading its ratings 68% of the time. However, Moody’s did not react as strongly as S&P, downgrading its ratings only 24% of the time. Originality/value Auditors are more likely to issue GC opinions when there is a downgrade to the credit rating, and CRAs are more likely to downgrade their ratings when there is a GC opinion. The study highlights that CRAs with different ownership structures provide different credit rating outcomes.

Does Engagement Partners’ Effort Affect Audit Quality? With a Focus on the Effects of Internal Control System

An audit team includes engagement partners, CPAs, and staff. Among them, partners play a vital role in performing tasks that require expertise and experience, such as analyzing and understanding the industry, and supervising the overall audit process. In detail, the partners establish an audit plan, determine the overall audit time, provide the audit input ratio of the engagement team, and review the audit reports. This study examines for association between the partner’s audit hour ratio and audit quality depending on the client firms’ characteristics. Although the role of partners is important, the information about partner audit hours is limited. However, the Korean government requires audit firms to disclose the partner hour information in the audit report starting in the 2014 fiscal year. By the disclosure, it is possible to examine the association between partner audit hours and audit quality. In this study, the information on partner audit hour is hand-collected from the firms’ business reports. Using 6340 observations from 2014 to 2017, the partner audit hour ratio is associated with audit quality, under the characteristics of client firms. Firms’ risks are adopted for client characteristics, and we focused on the operation of internal control. The internal control operation level is measured by the following: (1) the ratio of internal control personnel and (2) experience of the internal control personnel in the accounting and IT departments. The result suggests that for the firms where internal control is not effectively operated, partners make more effort to enhance audit quality.

General Foundation Programs (GFPs) Student Entry and Exit Standards

This paper assessed the performance of General Foundation Programs (GFPs) in Oman in the area of 'Student Entry and Exit Standards'. Data was collected from the GFP quality audit reports prepared and published by Oman Authority for Academic Accreditation and Quality Assurance of Education (OAAAQA). The study adopted a simple descriptive data analysis method, consisting of identifying the formal conclusions issued by OAAAQA (Commendations, Affirmations, and Recommendations) and analyzing their distribution (frequency of occurrence and percentages) and the issues they covered. The study found out that (a) HEIs are yet to establish sustainable practices in their GFPs in relation to entry and exit standards; and (b) the systems in the GFP are still underdeveloped and practices are largely unsystematic. The paper ended by highlighting four improvement suggestions in order to ensure GFP effectiveness.

Kepemilikan Keluarga, Tata Kelola Perusahaan, dan Audit Report Lag

The governance of family companies is still a concern for investors and other stakeholders. This study examines the effect of family ownership and corporate governance on audit report lag (ARL). The research sample is a non-financial company with a dominant family ownership and listed on the Indonesia Stock Exchange for the 2017-2019 period. Using the usual least squares analysis method and multiple regression techniques, the results showed that family ownership and the number of commissioners were able to encourage auditors to complete audit reports faster. Meanwhile, the presence of independent commissioners and audit committees does not significantly affect ARL. Additional analysis enriches the research findings that there are unique characteristics in terms of monitoring and expropriation effects of family ownership on ARL that up to a certain level of ownership, family members carry out the supervisory function well and can issue audited financial reports more quickly. Keywords: Family Ownership; Board of Commissioners; Independent Commissioner; Audit Committee; Audit Report Lag.

Issues related to the regulation of the content of the audit reports

Introduction. Currently, the procedure for providing audit services to public interest entities is being reformed. The main goal of these reforms is to provide more effective protection of legally protected values associated with the activities of such economic entities. The changes also apply to the content of audit reports on their financial statements. The process of revising the relevant regulatory document is still ongoing. Not all of the revised provisions are consistent with each other and the International Standards on Auditing. This will complicate their practical application by auditors and affect the informational value and public utility of audit reports. In addition, since 2017, when the modern format for audit reports was adopted, its application has revealed shortcomings in terms of its content and terminology. This explains the need to develop proposals to eliminate these “sticking points” when regulating the content of the auditor's report. Purpose. The development of recommendations to harmonise the provisions of laws and regulations governing the content of audit reports and federal state control (supervision) of the activities of audit organisations providing services to public interest entities with the International Auditing Standards in order to increase the information value of audit reports. Methods. The research results were obtained using analysis, synthesis, analogy, historical and logical approaches, classification, etc. Results. It was proposed to introduce changes to the text of the Federal Law “On Auditing Activities” of 30.12.2008 No. 307-FZ in order to eliminate contradictions in its provisions regarding the content of audit reports, to ensure their consistency with the International Standards on Auditing and laws and regulations in the field of controlling the activities of audit organisations that provide audit services to public interest entities. The content of the requirements of the International Standards on Auditing regarding the content of audit reports was clarified as well as their official translation into Russian to make the documents more informative and easy to use. Conclusions. The proposed clarifications can be taken into account when making changes to the texts of the Federal Law “On Auditing Activities”, the original version of the International Standards on Auditing and its official translation. They can also be further discussed by specialists.

FORENSIC AUDIT SKILLS ON CONTEMPORARY AUDIT REPORTS AND ORGANIZATIONAL PRODUCTIVITY

<p>This study sought to determine the forensic audit skills on contemporary audit reports and organizational productivity. Two research questions and two null hypotheses were formulated and tested at 0.05 level of significance. The descriptive survey design was adopted and it was carried out in Akwa Ibom State using two organizations namely; Champion Breweries Plc and Akwa Ibom Water Company. The population consists of 2836 staff while the sample size was 351 staff determined statistically using Taro Yamane formula. The purposive sampling technique was used. The instrument used for data collection was Forensic Audit Skills on Contemporary Audit Report and Organizational Productivity Questionnaire (FASCAROPQ). It was validated by three experts from the University of Uyo. The Cronbach Alpha reliability technique was used in which 0.79 index was obtained. The regression analysis was used in answering the research questions as well as testing of null hypotheses at 0.05 level of significance. The findings reveal that data mining skill and computer assisted audit techniques significantly predict organizational productivity to a high level. Based on the findings of the study, it was concluded that forensic audit skills are very paramount to operators of any organization in order to correct the irregularities of contemporary audit report. Therefore, it is recommended among others that owners and managers of organization should ensure that their auditors adhere to data mining skill for effective audit report that would lead to optimal productivity of the organization.</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/edu_01/0976/a.php" alt="Hit counter" /></p>