scholarly journals The implications, applications, and benefits of emerging technologies in audit

2020 ◽  
Vol 11 (02) ◽  
pp. 36-44
Author(s):  
Riley Carpenter ◽  
◽  
Dale McGregor ◽  
Keyword(s):  
Technological Innovation ◽  
Audit Quality ◽  
Emerging Technologies ◽  
Emerging Technology ◽  
Large Datasets ◽  
Audit Process ◽  
Business Operations ◽  
Audit Firms ◽  
Prior Literature ◽  
Audit Technology

Technological innovation has given rise to the possibility of implementing emerging technologies to potentially improve business operations. Audit firms, as businesses, could utilise emerging technologies to address several challenges the audit profession currently faces. This paper performs a qualitative analysis of prior literature concerning the potential implications and applications of the use of emerging technology in the audit process and the benefits audit firms can realise from using emerging technology. Using emerging audit technology in the audit process could automate many repetitive, mundane tasks and assist with performing analytical reviews on large datasets, thereby improving audit quality and efficiency. This paper adds value firstly by highlighting the potential for technological innovation within the audit process and how this innovation could supplement the traditional audit processes and procedures audit firms currently use and secondly, by incorporating emerging technologies into the audit process and highlighting key benefits that can be derived by shifting away from manual processes.

scholarly journals Potential threats for the auditing profession, audit firms and audit processes inherent in using emerging technology

2020 ◽  
Vol 11 (02) ◽  
pp. 45-54
Author(s):  
Dale McGregor ◽  
◽  
Riley Carpenter ◽  
Keyword(s):  
Professional Development ◽  
Technology Implementation ◽  
Audit Quality ◽  
New Technologies ◽  
Emerging Technology ◽  
Comprehensive Overview ◽  
Audit Firms ◽  
Efficiency And Effectiveness ◽  
The Status ◽  
Prior Literature

The audit profession currently faces several challenges to improve audit quality and efficiency. In response to these challenges, audit firms have invested considerably in implementing emerging technology. Although technological innovation may improve efficiency and effectiveness of operations, using these technologies creates several threats, which, if not adequately addressed by auditors, may harm audit quality, efficiency, and the professional development of the auditor. This paper performs a qualitative analysis of prior literature regarding the threats created by audit firms implementing emerging technology. These threats include concerns related to the integrity and security of data inputs, the auditor placing too much reliance on technology to the detriment of their professional development and exercise of professional judgement, a shortage of skills, the costs of technology implementation, disruptions to the status quo of the audit profession and auditing standards potentially being outdated. This paper adds value firstly by helping to determine how technology impacts the future of the auditing profession and secondly, by helping firms determine whether to invest in new technologies by providing a comprehensive overview of the threats resulting from such a decision.

scholarly journals Audit quality indicators: perceptions of junior-level auditors

2016 ◽  
Vol 31 (8/9) ◽  
pp. 949-980 ◽  
Author(s):  
Veena L. Brown ◽  
Jodi L. Gissel ◽  
Daniel Gordon Neely
Keyword(s):  
Quality Indicators ◽  
Audit Quality ◽  
Three Dimensions ◽  
Future Research ◽  
Audit Process ◽  
Content Type ◽  
Audit Firms ◽  
Public Company ◽  
Prior Literature ◽  
And Gender

Purpose In an effort to develop an audit quality (AQ) framework specific to the US audit market, the Public Company Accounting Oversight Board (PCAOB) recently issued a concept release proposing 28 audit quality indicators (AQIs) along three dimensions: audit professionals, audit process and audit results. Using AQIs initially proposed by the PCAOB, as well as AQIs suggested by prior literature, the authors solicit perceptions from junior-level (senior and staff) auditors to investigate the current state of practice along many of the AQIs relating to audit professionals and audit process. Design/methodology/approach In the study, 78 junior-level auditors responded to the survey. Findings An analysis of the responses suggests auditors engage in activities and audit firms promote conditions that at times improve, and at other times, reduce audit quality. The authors find that individual auditors’ perceptions differ across experience level, gender and audit firm size for certain AQIs. Practical implications The study is useful to the PCAOB because it provides insights to help assess the value of potential AQIs in differentiating AQ. The study is also useful to other regulators because it describes audit staff and seniors’ perceptions of apparent firm and auditor compliance with accounting and auditing standards. Practitioners should find this information useful in helping to identify possible root causes of audit deficiencies, a challenge put forth to firms by the PCAOB. Originality/value This study provides academia with evidence on AQ from practicing auditors, which informs existing and future research along. The study complements existing work by showing how individual auditor characteristics (experience and gender) at the junior levels may impact AQ in practice

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

Risks ◽  
2021 ◽  
Vol 9 (12) ◽  
pp. 225
Author(s):  
Suyon Kim
Keyword(s):  
Internal Control ◽  
Audit Quality ◽  
Vital Role ◽  
Fiscal Year ◽  
Audit Process ◽  
Client Characteristics ◽  
Audit Firms ◽  
Audit Reports ◽  
It Departments ◽  
Audit Team

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.

scholarly journals Determinants of Audit Quality in Indonesia Supreme Audit Institution: A Conceptual Study

2020 ◽  
Vol 12 (2(I)) ◽  
pp. 38-41
Author(s):  
Khoirul Aswar ◽  
Fahmi Givari Akbar ◽  
Noegrahini Lastiningsih
Keyword(s):  
Attribution Theory ◽  
Audit Quality ◽  
Public Institution ◽  
Audit Process ◽  
Internal Auditor ◽  
Internal Auditors ◽  
Audit Failure ◽  
The Public ◽  
Audit Firms

This research is based on the problem of poor audit practices by the Big Four audit firms and the mid-tier audit firms in UK in 2018/2019 cycle, which is indicated as audit failure. This resulted in sanctions and fines that increased significantly from the previous year. Problems related to audit quality are also experienced by government internal auditors in Indonesia. This is due to several factors such as the quality of government internal auditor resources that are still below the lowest service standards as a public institution, lack of available apparatus and low competency, and limited budget. The purposes of this study are to determine the extent of audit quality produced by government internal auditors at the Principal Inspectorate of Indonesia’s Supreme Audit Institution. Based on attribution theory, this study has several objectives, namely to determine the effect of competence, independence, and motivation on audit quality. Therefore, the contribution of this research can be the object of consideration and evaluation for Indonesia’s Supreme Audit Institution auditors regarding the audit process and audit results in the public or government sector, an information for Principal Inspectorate of Indonesia’s Supreme Audit Institution as an effort to maintain and improve the quality of government internal audits, and an information for the public in overseeing the audit quality of the management and responsibility of state finances.

scholarly journals Do Auditing Standards Matter?

2013 ◽  
Vol 7 (2) ◽  
pp. A1-A16 ◽  
Author(s):  
W. Robert Knechel
Keyword(s):  
Audit Quality ◽  
Economic Value ◽  
Common Denominator ◽  
Audit Process ◽  
Economic Role ◽  
Audit Firms ◽  
Auditing Standards ◽  
Potential Demand ◽  
Information Advantage ◽  
Professional Expert

SUMMARY Properly understanding the economic role of auditing standards is an important step toward improving both audit effectiveness and efficiency. In this essay, I observe that auditing standards are most important when an auditor may have an incentive to under-audit. While this conclusion may not come as a surprise, the conditions under which standards may, or may not, have a desirable effect on audit quality are less obvious. More specifically, I present a number of observations about what standards can do: Standards can (1) compensate for the lack of observability of the audit outcome by focusing on the audit process; (2) partially mitigate the information advantage possessed by the auditor as a professional expert that might motivate the auditor to under-audit; (3) counterbalance the diversity of demand across multiple stakeholders that might drive the audit to the lowest common denominator and create a market based on adverse selection; and (4) provide a benchmark that facilitates the calibration of an auditor's legal liability in the event of a substandard audit. However, I also present a number of observations about what standards should not try to do: Standards should not (1) discourage the use of judgment by auditors; (2) limit the potential demand for economically valuable alternative levels of assurance; (3) lead to excessive procedural routine or standardization in the conduct of the audit; and (4) be set based on an enforcement agenda. In the end, standards overreach may undermine the economic value of the audit to many stakeholders and lead to fee pressure for audit firms. Hopefully, these insights can inform future debates about the level and types of standards that are appropriate for the auditing profession.

scholarly journals The perceived association between audit rotation and audit quality: evidence from the UAE

2020 ◽  
Vol 10 (3) ◽  
pp. 345-377
Author(s):  
John Kalimilo Malagila ◽  
Ganga Bhavani ◽  
Christian Tabi Amponsah
Keyword(s):  
United Arab Emirates ◽  
Audit Quality ◽  
Developing Economies ◽  
Research Question ◽  
Auditor Independence ◽  
Exploratory Research ◽  
Developing Economy ◽  
Audit Process ◽  
Content Type ◽  
Audit Firms

PurposeThe purpose of this paper is to explore the perceived association between audit rotation (AR) and audit quality (AQ) using respondents from a sample of audit firms operating in a developing economy, the United Arab Emirates (UAE). The paper addresses the following research question: How do UAE auditors perceive the association between various forms of AR and AQ?Design/methodology/approachThe authors collected perception data from a sample of UAE auditors using a questionnaire, and applied several non-parametric statistical techniques to analyze the data, and to answer five exploratory research questions on the perceived association between various forms of AR and AQ.FindingsThe findings suggest that the UAE auditors in our sample did not perceive the association between individual types of AR and AQ as significantly different, and that AR in general is essential for AQ improvement and enhances trust in the audit process. Similarly, we find more support for the perception that medium audit tenure is associated with a lower impairment effect on auditor independence. Furthermore, we find no significant differences in perception based on gender, but younger/less experienced professionals and professionals in self-employed practices and small audit firms (compared to other demographics) significantly perceived AR enforceability and AT length to be associated with AQ. Our findings help to enrich our understanding of the perceived AR-AQ association in a relatively new context and less researched audit area in a developing economy.Originality/valueAlthough lively debates on the question of AR and AQ within the accounting, finance, investment professions and in the financial media continue, there has been relatively limited knowledge and a dearth of empirical studies on this question in most developing economies. Being the first attempt in the country – the UAE, this study contributes towards addressing this gap in empirical knowledge by exploring the perceived association between various forms of AR and AQ in a developing economy.

scholarly journals IPO underpricing and audit quality: Evidence from the alternative investment market in the UK

2016 ◽  
Vol 12 (2) ◽  
pp. 104-110 ◽  
Author(s):  
Mohammad Alhadab
Keyword(s):  
Audit Quality ◽  
Stock Exchange ◽  
Ipo Underpricing ◽  
High Quality ◽  
Audit Firms ◽  
Prior Literature ◽  
The Uk ◽  
The Relationship ◽  
Quality Evidence ◽  
Alternative Investment

This paper aims to investigate the relationship between audit quality and IPO underpricing for IPO firms that went public on the Alternative Investment Market (AIM) of the London Stock Exchange in the UK. Prior research has examined this relationship; however, there has been no work investigates this relation for IPO firms that went public on the AIM market. Based on a sample of 413 IPOs, the findings of the current study reassure prior literature that high quality auditors are associated with a lower level of IPO underpricing. The findings show that high quality audit firms help to reduce the level of information asymmetry around the IPO and, therefore, this leads to reduce the level of IPO underpricing. Further, size, liquidity ratio, and high litigation industries are found to contribute the IPO underpricing on the AIM market.

scholarly journals An analysis of auditors’ perceptions towards artificial intelligence and its contribution to audit quality

Accounting ◽  
2021 ◽  
pp. 755-762 ◽  
Author(s):  
Ibrahim Albawwat ◽  
Yaser Al Frijat
Keyword(s):  
Artificial Intelligence ◽  
Audit Quality ◽  
Descriptive Study ◽  
Ease Of Use ◽  
Perceived Ease Of Use ◽  
Audit Process ◽  
Online Questionnaire ◽  
Audit Firms ◽  
Significant Difference

Artificial intelligence (AI) systems have significantly changed the audit process; nevertheless, the AI revolution opponents view this growth as a step-back as many auditors will fail to adapt to this new environment and will drop behind. Our descriptive study examines the perceived ease of use, usefulness, and contribution to the audit quality of different AI’s types. To address local audit firms concerns about their readiness to use AI systems in auditing processes and to advance auditing research, we examine whether perceived ease of use, usefulness, and contribution to audit quality vary by AI systems type (Assisted, Augmented, and Autonomous). An online questionnaire was used to collect data from 124 auditors representing local audit firms in Jordan. Our results indicate that auditors perceive Assisted and Augmented AI systems as ease of use in auditing while perceiving Autonomous AI systems as complicated to use. Besides, Auditors are underestimating Autonomous AI systems’ capabilities and perceived it as not useful for auditing. The results also reveal a significant difference between the perceived contribution to audit quality by the three AI systems types. This study contributes to the existing literature on AI and auditing by developing and testing a measure for AI systems’ perceived contribution to audit quality. This study also provides empirical evidence on how Jordan local firms auditors perceive AI use in auditing.

scholarly journals Auditor's Perception of Usage and Importance of Audit Technology in Vietnam

2018 ◽  
Vol 3 (3) ◽  
pp. 14
Author(s):  
Binh Ngo Pham ◽  
Thi Que Nguyen ◽  
Manh Dung Tran ◽  
Thi Thanh Phuong Nguyen
Keyword(s):  
Risk Assessment ◽  
Information Technology ◽  
Industrial Revolution ◽  
Audit Process ◽  
High Importance ◽  
Audit Firms ◽  
Administrative Procedures ◽  
Audit Technology ◽  
New Evidence ◽  
Independent Audit

This study is conducted for providing new evidence on the extent to which auditors are aware of the use and importance of audit technology in an age of industrial revolution 4.0. By using interviews and questionnaires of auditors at independent audit firms in the context of Vietnam, the findings show the high importance of using audit technology in technical and administrative procedures, particularly for risk assessment. We also assure the use and importance of audit technology is highly valued. The results help policymakers have guidance on the opportunities and challenges of using information technology in the audit process in independent audit.

How a Shared Auditor Affects Firm-Pair Comparability: Implications of Both Firm and Individual Audit Styles

2020 ◽  
Vol 39 (3) ◽  
pp. 133-160
Author(s):  
Lili Jiu ◽  
Bin Liu ◽  
Yuanyuan Liu
Keyword(s):  
Accounting Standards ◽  
Financial Statement ◽  
Professional Judgment ◽  
Audit Process ◽  
Personal Style ◽  
Audit Firm ◽  
Market Participants ◽  
Audit Firms ◽  
Audit Reports ◽  
Practical Implications

SUMMARY In this study, we examine the roles of audit firms and individual auditors in improving financial statement comparability. We conduct the study in the Chinese setting, in which the identities of signing auditors are revealed in audit reports and accounting standards are principle based. After controlling for audit firm style, we find that firm pairs with shared signing auditors have incrementally greater comparability. Our results indicate that individual auditors exhibit their own personal style in implementing accounting standards and exercising professional judgment in the audit process. Overall, our study underscores the association between individual auditors and comparability, with practical implications for market participants and policymakers.

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