Audit Mission Research Articles

Teleworking in the Field of Financial Audit in the Context Generated by the COVID-19 Pandemic

In the sensitive socio-economic context generated by the COVID-19 pandemic, teleworking was, in many fields, a way to continue the activity while complying to the measures imposed by law in order to fight the spread of the new Coronavirus. On the one hand, teleworking offers flexibility in setting the work schedule, eliminates travelling time to and from the worksite and allows to attract competent employees from all over the world, by means of digitalisation. On the other hand, working from home is a challenge. The time required to transfer the activity in the virtual space, and the additional training necessary for the use of innovative information technologies can reduce efficiency and affect the work-life balance. This paper focuses on the audit profession, which had to rethink remote auditing so as to comply with the restrictive measures, but at the same time to avoid affecting the quality of audit missions. The questionnaire distributed among professional practitioners, members of the CFAR, helped us identify the perception of Romanian financial auditors on the variables influencing the efficiency of the audit work carried out in the “new normal” and the extent to which teleworking could become a practice in future financial audit missions.

Performance Audit of Public Revenues of the Administrative Territorial Units

The financial indicators reported in the budget execution accounts of the local public administrations have implications in the assessment of the level of performance regarding the achievement of the own revenues of these public entities. The objective of the paper is to examine the causal link between the level of performance in achieving own revenues and that of the financial autonomy of local public administrations. The paper includes a summary of the evolution of legal regulations in Romania specific to local public administration and own revenue management, as well as an analysis of information highlighted in budget execution accounts published by entities for 2018-2020, and the latest annual reports published by the Court of Accounts of Romania regarding the deviations found and the audit opinion formulated following the financial audit missions in order to identify the aspects that may influence the level of performance in achieving its own revenues at the level of local public administrations. The sample consists of territorial administrative units classified as cities in the Western Region of Romania, which are not municipalities and are found in Arad County. The results of the study revealed that some cities had a fairly high level of performance in generating their own revenues, and some reported increasing capital expenditures from year to year, but in most cases the degree of achievement of their own revenues still remains quite low. The conclusion is that the degree of achievement of own revenues is in most cases at a level that needs to be improved, and payments for capital expenditures are still quite low, so none of the cities in the selected sample have the opportunity to be financed exclusively from own revenues.

Configuration of an Integrated Quality-Social Responsibility-Performance Management System in the Hospitality Industry. Case Studies: Balneary Tourism Romania

The introduction of quality, performance, and social responsibility systems in organizations that are open to learn and wish to permanently improve their activity ensures the sustainable development of those organizations. The purpose of this research is to investigate the characteristics of these three systems in order to identify the common impact areas and the existing interrelations, which would be able to facilitate an integrated approach and create an understanding of equifinalities at the organizational level. Moreover, such an integrated approach highlights the role of economic and financial analysis in the assessment of the quantifiable aspects and the direction in the assessment of the non-quantifiable ones. Through this, we intend to obtain a possible configuration for an integrated quality–performance–social responsibility approach applied to 11 entities in different Romanian health resorts recognized for their natural healing factors. The research was structured on two levels: one addressing the phenomenological approach and one dedicated to the application of the European Foundation for Quality Management. The research presents economic and financial data that are the processed results of a social survey regarding customer satisfaction as well as information from reports provided by internal and financial audit missions. The conclusions of our results reveal three distinct situations: low quality, reduced performance, and stakeholder dissatisfaction; low quality, high performance, and partial stakeholder satisfaction; and appropriate quality, high performance, and adequate stakeholder satisfaction.

Planning and Conducting Internal Audit Missions at the Public Procurement Department Level within a Contracting Authority

Planning and Conducting Internal Audit Missions at the Public Procurement Department Level within a Contracting Authority

Challenges Faced By Auditors When Estimating Fair Values. An Experiment in an Emerging Economy

Abstract Risks related to fair value (FV) estimates and their impact on the audit process represent a crucial topic in accounting and audit literature. Therefore, this paper focuses on one of the influential factors of FV estimation and related risks in audit missions, i.e. the valuation process performed (provider and measurement). In doing so, it addressees a less analysed FV level of estimation – level 3 according to IFRS 13, ’the models’, for the case of tangible assets. An experiment is conducted on a group of auditors, members of the Romanian audit professional body. The results reveal that, if the internal control quality is high, auditors differentiate between FV providers in the case of: FV measurement, i.e. income valuation approach versus cost approach, which implies additional effort for verification and risk of misstatement, when the estimation is provided by a third party instead of management. These findings could be related to the volatility of the investigated economic context and the respondents’ level of knowledge and expertise. We infer that respondents have a moderate understanding of valuation logic and methodology while excessively relying on their own valuator.

Current Year Audit Opinion and Next Year Audit Fees: Does Family Ownership Matter?

The paper aims to investigate the association between current year audit opinion and the pricing of the next year audit mission and whether this relationship differs with different nature of ownership (family – non-family) in the Egyptian setting. Using a sample of 358 firm-year observations from the Egyptian Stock Exchange (EGX hereafter) over the period 2016-2019, ordinary least square (OLS) regression models are estimated to test the research hypotheses and conduct sensitivity and additional analyses. The author didn’t find significant association between current year audit opinion and next year audit fees. However, if the auditor issues a qualified audit opinion for a family firm, he will ask for a fee premium for the next year audit mission. Results are robust to alternative measures of next year audit fees and current year audit opinion. The paper uses the current year audit opinion as an input to the next yearaudit pricing decision. The paper responds to previous calls to investigate the relationship between audit fees and type of audit opinion and the impact of family ownership on audit fees. In addition, this study uses three alternative measures of next year audit fees and an alternative measure of current year audit opinion. Finally, this study adds evidence to the corporate governance literature in developing countries.

Romanian Auditors’ Perception Concerning the IT Impact in the Big Data Era

Like any business process, auditing is a process that can be perfected, technology complementing a set of advanced data processing skills and techniques. The objective of this paper is to research the way how Romanian auditors work and perceive the impact of IT on audit missions. The results of the conducted survey, based on 102 responses, highlight a series of working tools (Data Analytics, Microsoft Excel, Data Automation) which, through the analysis of the Big Data phenomenon, facilitate the audit process. Regarding the software category, Ciel Audit and Revision, Gaudit, CaseWare are among the most frequently used, auditors considering ready to work with emerging technologies. Continuous professional training is ensured by participation in professional training courses, along with severe documentation about new technologies. In Romania, the current level of performing audits based on new technologies is average, for the future a higher level and a higher forecasting and analysis capacity are expected. The auditing profession will be perfected more and more, the current tasks will be gradually replaced by the new technologies, auditors becoming more appreciated by the external environment. Professional skepticism remains the basic quality of the auditor, along with the understanding of the competitive environment. Uncertainty characterizes the amendment of the International Standards on Auditing (ISA). This paper contributes to the literature by bringing to the fore the current technological context for the audit profession, namely the impact perceived by auditors during the fourth industrial revolution.

Performance audit in the vision of public sector management. The case of Romania

Research Question: What is the impact of the performance audit missions on the activity of the Romanian public institutions? Motivation: Public resources' management and use, public sector entities' performance, in the context of the economic environment turbulences and of the complexity and heterogeneity of the public services demand are of interest to a wide range of interested parties. Thus, the informational valences of the performance audit represent for the public sector management, a credible and relevant information source to substantiate the decision-making process focused on performance and circumscribed to the community members. Idea: The paper includes an empirical research on the investigation of the public sector management perception regarding the impact of the performance audit missions performed by the Romanian Court of Accounts, on the public institutions activity. Data: Information regarding the performed missions and the entities subject to performance audit was collected by reviewing the Romanian Court of Accounts' portfolio of publications (available online on the institution's official website). The email addresses of the respondents were collected by consulting the official web pages of the audited entities (contact section). Tools: The research is based on the study of the public sector management’s perception regarding the performance audit missions performed by the Romanian Court of Accounts. In this regard, we developed and disseminated questionnaires to the management of public sector entities subject to performance audit within the period 2015-2019. Complementarily, in order to identify the tendencies and the respondents’ homogeneous perceptions, the descriptive analysis is completed by cluster analysis and multidimensional scaling. Data processing, clustering and the results’ analysis were performed using the SPSS statistical software. Findings: The research results show that performance auditing contributes to improving the economicity, efficiency and effectiveness in the public resources use, but its usefulness is inversely proportional to the professional experience of the respondents within the audited entity. The respondents also consider that the performance audits’ objectives are appropriate to the sensitive areas related to the activity of public institutions, and their results provide a fair image regarding the public resources' management and use. Concerning the performance audit reports, the respondents consider them objective, rigorous, credible, and the collaboration and communication of the auditors with the entity are appreciated as successful elements of the performance audit missions. Contribution: The paper adds value to the specialized literature, given that the performance audit issue in the vision of the public sector management has not been addressed in Romania, being also limited internationally. The research results are also of interest to both the professional and the socio-economic environment, concerned with the public sector entities performance.

Emerging IT Technologies for Accounting and Auditing Practice

The IT impact can be noticed in all activity fields of this world, and the audit is no exception from the evolution of this technological trend. Motivation: Given that professionals are progressively pursuing experimentation in working with new technologies, the development of Artificial Intelligence (AI), Blockchain, RPA, Machine Learning through the Deep Learning subset is a particularly interesting case, on which the researcher argues for debate. The objective of the article is to present the latest episode of the new technologies impact that outline the auditor profession, the methods and tools used. The quantitative, applied and technical research method allows the analysis of the emerging technologies impact, completing a previous specialized paper of the same author. The results of this paper propose the integration of AI, Blockchain, RPA, Deep Learning and predictive analytics in financial audit missions. The projections resulted from discussions with auditing and IT specialists from Big Four companies show how the technologies presented in this paper could be applied on concrete cases, facilitating current tasks. Machine Learning and Deep Learning would allow a development for prescriptive analytics, revolutionizing the data analytics process. Both the analysis of the literature and the conducted interviews admit AI as a business solution that contributes to the data analytics in an intelligent way, providing a foundation for the development of RPA.

Innovations in Financial Audit based on Emerging Technologies

In the context of assessing the impact of IT concern on financial audit missions, the purpose of this paper is to investigate how new Big Data technologies shape the auditor profession, the methods and tools used. Motivation: technology has put its mark on all fields of activity and professionals tend, step by step, to experiment within auditing by testing new technologies; taking into account the hypothesis of large-scale adoption of modern technologies offered by IT, Big Data development and Data Analytics (BDA) represent a highly interesting case, on which the author pleads for debating. The two qualitative and fundamental research methods, together with the critical observation that consisted in manual selections of the online publications of the professional bodies in audit and accounting, the specialized literature and discussions with IT and audit Big Four specialists support the analysis of Big Data impact, completing previous specialized papers, given the fact that the need for (extended) documentation in this regard is further pointed out. The results of this investigation propose Data Analytics, Hadoop, NoSQL as Big Data top technologies applicable on financial audit missions, in order to simplify audit procedures, improve the organizational performance and reduce the level of risk.

The Quality of Financial Audit Missions by Reporting the Key Audit Matters

The Quality of Financial Audit Missions by Reporting the Key Audit Matters

Aspects Regarding the Auditor-Auditee Relationship in the Context of Negotiation

This paper aims to examine how the relationship between the auditor and the auditee influences the negotiation strategies and also the study of the link between variables related to the relationship between the auditor and the auditee in the negotiation process during the audit engagement. Based on the literature and the working tool (questionnaire), it was possible to demonstrate that the auditor-auditee relationship is a key factor in establishing negotiation strategies between auditors and clients. The bivariate analysis performed in the paper consolidate the research of the specialized literature and confirm the existence of a link between the auditor-auditee relationship/familiarity in the implementation of all the negotiation strategies during the audit mission.

Strategic foresight and auditor's cognitive contribution: the study of cognitive mapping

This research allows acquiring a better understanding of the strategic prospective of the auditor in the accounting audit mission, in which the emphasis is placed on the auditor mind and forward thinking. The analysis of the cognitive approach and the prospective strategy of the auditor using the cognitive mapping allow identifying the factors that enable the auditors to reduce the cognitive problems in their strategy. This paper provides new insights into the cognitive role of the auditors and their strategic foresight. Practitioners and researchers can use the findings of this study to better understand the success audit factors. Moreover, auditing firms may use the findings of this study to improve their foresight audit strategy.

Transparency‐generated trust: The problematic theorization of public audit

AbstractPublic audit has been under‐theorized, the existing literature too dominated by institutional description. Public audit may be interpreted as promoting transparency in order to generate trust, thus leading to legitimacy. Disaggregating transparency and trust, the article develops a subtler analysis of their role in public audit. By integrating collibration into the processes of economization, the governance of public audit and its operational activities are illuminated. Expected to be bloodhound, not just watchdog, public audit space is currently contested and can be forcibly evacuated. Transparency‐generated trust might be the outcome, but providing a well‐evidenced transparency should be public audit's mission.

Contribution à l’évaluation de l’efficacité de l’audit interne dans les banques libanaises

The effectiveness of the internal audit is an attractive subject for contemporary economic studies due to its importance in banks. Internal audit fulfills a crucial role in an economy that is largely dependent on self-produced information. Indeed, internal audit ensures security of transactions within a bank and preserves its credibility for stakeholders. This article will discuss factors contributing to the evaluation of the effectiveness of internal audit in the specific context of Lebanese banks. Through quantitative analysis, the effectiveness of internal audit wasstudied based on the objectivity and competency of the internal auditor, planning the audit mission and interaction between the internal auditor and the external auditor. The design of this study appearedin the conceptual framework and empirical study on internal audit and its effectiveness in order to evoke elements contributing to the evaluation of internal audit effectiveness in a Lebanese bank.

Review of Unmanned Aerial System (UAS) applications in the built environment: Towards automated building inspection procedures using drones

Abstract Unmanned Aerial Systems (UAS – a.k.a. drones) have evolved over the past decade as both advanced military technology and off-the-shelf consumer devices. There is a gradual shift towards public use of drones, which presents opportunities for effective remote procedures that can disrupt a variety of built environment disciplines. UAS equipment with remote sensing gear present an opportunity for analysis and inspection of existing building stocks, where architects, engineers, building energy auditors as well as owners can document building performance, visualize heat transfer using infrared imaging and create digital models using 3D photogrammetry. This paper presents a comprehensive review of various literature that addresses this topic, followed by the identification of a standard procedures for operating a UAS for energy audit missions. The presented framework is then tested on the Syracuse University campus site based on the literature review to showcase: 1) pre-flight inspection procedure parameters and methodologies; 2) during-flight visually identified areas of thermal anomalies using a UAS equipped with Infrared (IR) cameras and; 3) 3D CAD modeling developed through data gathered using UAS. A discussion of the findings suggests refining procedure accuracy through further empirical experimentation, as well as study replication, as a step towards standardizing the automation of building envelope inspection.

Stakeholders' perception about strengthening the audit report

The need for change in the accounting and audit profession is a topic discussed and accepted by both regulators and accounting professionals. As a result of the global financial crisis, users need more information regarding the auditor's work. This study aims to investigate whether users of audit reports agree with the IAASB's proposal to modify the audit report structure and to include a new section, key audit matters, with the purpose of comprising more information concerning the audit mission, with the aim of improving audit communication. The authors achieve this objective by a qualitative research: exposing a theoretical background and a literature review. In order to fulfil the research objective of analysing responses provided to the IAASB 2013 exposure draft, this study uses the method of content analysis. The results show that the respondents agree with the new audit report structure and the inclusion of the key audit matters section in the audit report.

Stakeholders' perception about strengthening the audit report

The need for change in the accounting and audit profession is a topic discussed and accepted by both regulators and accounting professionals. As a result of the global financial crisis, users need more information regarding the auditor's work. This study aims to investigate whether users of audit reports agree with the IAASB's proposal to modify the audit report structure and to include a new section, key audit matters, with the purpose of comprising more information concerning the audit mission, with the aim of improving audit communication. The authors achieve this objective by a qualitative research: exposing a theoretical background and a literature review. In order to fulfil the research objective of analysing responses provided to the IAASB 2013 exposure draft, this study uses the method of content analysis. The results show that the respondents agree with the new audit report structure and the inclusion of the key audit matters section in the audit report.

Paradigm Shifts in Developing a Sustainable Economy. Audit role from an environmental perspective

The paper contains a short presentation of a documentary and applicative research results on recent, confirmed paradigm shifts in the economics: the sustainable economy and the new developments designated as eco-economy and circular economy, including concepts and definitions, and also policy and strategic programs (EU and national). The main contribution of the article consists of presenting the support that the external audit can bring to enhance the new evolutions in the economy and the implementation of the related projects thereof. A specific audit mission with the Ministry of Environment of Romania is described as an applied case study.

HDPE pipes failure analysis and damage modeling

Thermoplastic pipes are used in all the industrial fields such as water, sewage and gas piping systems and other industrial applications, like the transport of minerals and slurries. The choice of the right piping system's material depends on many criteria. First of all, it depends on the conditions of use of each kind of material. Secondly, it depends on the cost of the chosen material and finally the mastering of the material's scenarios of failure. The last criteria are possible through the mastering of the material characteristics and the capability to detect the failure, burst or crack, before its occurrence. The adopted approach must be proactive to facilitate the prediction of the failure and help the maintenance staff to apprehend the piping system's damage at the right time. In this paper, we chose HDPE pipes as material for our study. Then, we leaded a new approach of failure analysis and prediction using new models. These models are obtained through a modified version of the stress controlled unified theory, a static damage model using burst pressures and a static damage model using the time to failure. For that reason, we used burst pressures of undamaged HDPE pipe instead of ultimate stresses. Then, we created groove notches with different levels of depth. The obtained burst pressures from these pipes have been considered as the residual burst pressures used in our damage models. The representation of the obtained data according to the life fraction gave us an idea about the critical life fraction and then the critical groove depth which can be allowed. This information has been confirmed by three damage models. Then, we determined the different stages of damage to help the predictive maintenance to define the safe intervals of the HDPE pipes' service. Moreover, the three developed models, presented in this paper, represent a simplified approach to assess the damage based on static tests only, without doing any dynamic tests. The developed cost-effective approach can be a tool that can help the industrials to have an anticipative maintenance strategy and respect the safety requirements. Also, it can help them to do quick checks or launch audit mission to the manufacturers' factories for HDPE pipes' quality control and conformity check regarding the codes.