Audit Office Research Articles

Designers Drugs-A New Challenge to Emergency Departments-An Observational Study in Poland.

Background and Objective: In the last decade, the phenomenon of using new psychoactive substances (NPS), called designer drugs, has been on rise. Though their production and marketing in Poland is prohibited, reports of the Supreme Audit Office noted that young people are increasingly reaching for new intoxication agents in the form of designer drugs. There is a significant increase in the number of patients with NPS abuse admitted to the emergency departments. As NPS cannot be detected by standard tests for the presence of psychoactive substances, it is difficult to choose the appropriate therapeutic intervention. Therefore, the aim of the present study was to evaluate the patient characteristics in the population of adults and children suspected of using NPS and formulate the protocol for diagnosis and treatment. Materials and Method: The paper is based on a retrospective analysis of medical records of hospitalized patients in the Clinical Emergency Department of The Regional Specialist Hospital in Olsztyn (SKOR WSS, emergency department (ED)) and the Pediatric Emergency Department of the Provincial Specialist Children′s Hospital in Olsztyn (SORD WSSD, pediatric emergency department (PED)) between years 2013 to 2018. The patient records related to their general symptoms at admission, mental state and laboratory diagnostic tests were evaluated. Results: The majority of patients hospitalized due to the suspected use of NPS were adolescents in 2013–2016 and a reversal of this trend was observed in 2017–2018 when number of adults admitted to the emergency department (ED) due to NPS use was higher. The NPS abuse was significantly higher among male patients, alcoholics, people using other psychoactive substances, patients suffering from mental disorders and teenagers in difficult socio-economic family situations. Whereas, the most common symptoms among pediatric patients were co-ordination disorder and aggression, in adults mainly tachycardia and aggression was observed. The laboratory tests in significant number of adult patients showed leukocytosis and ketonuria. Conclusions: In the present study, no unambiguous toxidrome or biochemical pattern characteristic for using NPS was observed. However, evaluation of blood morphology, coagulation parameters, liver and kidney function can be helpful in the diagnostic and therapeutic process. Symptomatic treatment of patients, fluid therapy and sedation was sufficient in most cases to resolve the patient symptoms in 48 h.

The impact of revealing auditor partner quality: evidence from a long panel

We examine whether the revelation of individual audit partner reputation affects client firms’ external financing choice. Specifically, we investigate whether a firm switches its financing choices once its auditor partner is perceived to be a low-quality partner, captured by whether one of the audit partner’s other clients is sanctioned for financial misreporting. We identify firms audited by a low-quality partner as the treatment firms and designate firms audited by other audit partners from the same audit office as the control firms. Using a long panel of data with audit partner identity, we find that, on average, the treatment firm switches from equity financing to credit financing after the discovery of individual audit partner quality. In addition, reduced equity financing is primarily concentrated among firms that choose to keep low-quality partners. By building an implicit link between the non-sanctioned firm and the sanctioned firm through a common audit partner, we show that investors can infer the quality of external audits using the auditor-level information, thus empirically supporting to the new PCAOB rule that requires disclosure of the partner-level information.

Office-Client Balance and Metro Area Audit Market Competition

SUMMARYWe propose a new audit supplier competition construct, the Office-Client Balance (OCB), which consists of the relative abundance of competing audit offices and audit clients in a metropolitan (metro) area. From this construct, we derive a metro level audit competition proxy reflecting surpluses or shortfalls of total metro audit office numbers relative to the national metro OCB norm: the OCB_TOT. Consistent with the predictions of Porter's Five Forces theory, we find that OCB_TOT is associated with lower fees, more auditor turnover, and more (less) office exits (entrances) in metro audit markets. These findings validate OCB_TOT as a proxy for audit market competition. Our results indicate that greater metro level competition among auditors (more positive OCB_TOT) is associated with higher audit quality, proxied by fewer financial statement misstatements. Several additional analyses suggest that OCB_TOT is useful in explaining clients' choices of local (versus remote) audit offices and Big 4 (versus non-Big 4) offices.Data Availability: Data used in this study are available from public sources.JEL Classifications: G18; L10; M42.

PROVEDBA PREPORUKA KOD OBAVLJENE REVIZIJE UČINKOVITOSTI RADA NADZORNIH ODBORA TRGOVAČKIH DRUŠTAVA U VLASNIŠTVU JEDINICA LOKALNE I PODRUČNE (REGIONALNE) SAMOUPRAVE

The State Audit Office of the Republic of Croatia audits companies’ performance and gives recommendations for performance improvement. The Office reviews the implementation of the recommendations and establishes whether the companies acted in accordance with the recommendations. The aim of this paper is to determine whether local and regional self-government units-owned companies, whose supervisory boards’ performance were audited, implemented the recommendations given. In this context, it analyses the types of recommendations given, their occurrence, and failure to implement them. The analysis was conducted into the recommendations’ implementation reports. On the basis of the data collected, the recommendations were surveyed by application of statistical analysis method, comparison, and synthesis. In conclusion, the research results confirmed for a large number of non-implemented recommendations, the assumption that it is necessary to set the written rules and criteria for the appointment of the members of the Supervisory Boards. The results also show that the implementation of the recommendations both affects the line of business and has a positive impact on the public sector.

Experience in applying the effectiveness audit methodology in order to save budget funds for the purchase of medicines in the UK

The article examines the experience of the national audit office of the United Kingdom in conducting an audit of the effectiveness of budget funds aimed at providing medicines to English citizens. The reasons for the sharp increase in budget expenditures for providing the population with reproduced medicines in 2017—2018 are described in detail.The article analyzes the shortcomings of the system of regulation of drug pricing procedures and the resulting risks to the budget of the national health system in United Kingdom.It is concluded that the effectiveness audit has allowed us to identify not only the reasons for significant overspending of the NHS budget to provide the population with medicines, but also to assess the actions of organizations authorized by the UK Government to address issues of regulation of the pharmaceutical market.

The Audit Implications of Cloud Computing

SYNOPSIS Over the last decade, many firms have shifted from in-house managed information systems to cloud computing arrangements. Despite regulatory interest in the audit impact of new technologies, little empirical work has studied how auditors behave when clients introduce cloud platforms into their accounting information system. Ex ante, it is unclear whether cloud computing allows for increased audit efficiency through reliance on service organization control reports or introduces additional complexity and risk to the audit. Leveraging a 2015 accounting standards update from the Financial Accounting Standards Board to identify material cloud users, we find that these firms pay an audit fee premium of approximately 5 percent compared to nonusers. This premium attenuates when hiring an audit office with more cloud users in its portfolio, suggesting that cloud audit experience can reduce auditors' costs when conducting such audits. We also explore how audit lag and subsequent restatements vary cross-sectionally with cloud use. JEL Classifications: M41; M48. Data Availability: Data are available from the public sources cited in the text.

Do Client Bankruptcies Preceded by Clean Audit Opinions Damage Auditor Reputation?*

ABSTRACTThere is a maintained assumption within the accounting literature that client bankruptcies preceded by clean audit opinions (Type II going concern opinion (GCO) errors) damage an auditor's reputation. Consistent with this view, the PCAOB proposes that stakeholders may use Type II GCO errors as indicators of low audit quality. This study examines audit committee and investor responses to Type II GCO errors. I find no evidence that audit offices with Type II GCOs are more likely to be dismissed, have lower subsequent audit fees, or have a lower likelihood of being selected for new audit engagements. These findings are consistent with audit committees not using Type II GCO errors as indicators of low auditor quality. Using event study analysis, I find evidence of modest incremental negative investor responses for clients of audit offices with Type II GCO errors. However, these negative investor responses are found only during the financial crisis period of 2008–2010 and are observed only within windows of 30 days or less. Given this limited evidence that stakeholders do respond to Type II GCO errors, I examine whether stakeholders should respond to Type II GCO errors. I find that audit office Type II GCO errors are positively associated with subsequent restatements, an established measure of low audit quality. Taking the results as a whole, I do not find that audit offices incur substantial reputational costs for Type II GCO errors. However, the negative investor response and the positive association with restatements provide some evidence that Type II GCO errors may serve as indicators of low audit quality.

DEVELOPMENT OF STATE FINANCIAL CONTROL IN THE CONTEXT OF THE FILLING OF THE BUDGET OF UKRAINE

The period of reform of the system of public financial control in Ukraine is becoming permanent. Another change in the name of the subject of state financial control instead of the State Audit Office of Ukraine now has another name, namely the Department of Financial Control. The current system of state financial control provides that previous and current financial control over the filling of the budget is carried out by the Ministry of Finance of Ukraine, state tax authorities, customs authorities, and budget expenditures are controlled by the Accounting Chamber of the Verkhovna Rada, the State Treasury and Financial Control. Therefore, further development and reform of the system of public financial control in the context of filling the budget of Ukraine is unresolved. It is these aspects that determined the relevance of the research topic and determined its purpose. The main purpose of this work is a theoretical justification and practical recommendations for further development of public financial control in the context of filling the budget of Ukraine. The article considers topical issues related to the development of public financial control in the context of filling the budget of Ukraine. The theoretical bases of the concept of "development" are considered, the geographical development of the state financial control in the world is defined. Given these characteristics of development, the authors consider it appropriate to outline the socio-economic processes that preceded the emergence of public financial control in Ukraine, presenting the stages of formation and development of public financial control in Ukraine. It is determined that the second and third periods became a significant period of development of state financial control in Ukraine. A detailed overview of the evolution of control is presented in the study. The authors also find that the transformation of the tasks of the Financial Control Department as a body of state financial control indicates a change in priorities in control activities and a change in the ideology of control. The authors emphasize in the study that in modern conditions the role of internal public financial control as a tool to improve the system of internal control of an institution or organization in accordance with the needs arising in the process of their operation is growing. However, the issues of improving the conceptual apparatus of public financial control, substantiation of target characteristics, mechanism, methods of assessing the level and quality of its development in the context of filling the budget of Ukraine remain insufficiently resolved.

General Principles of Anti-Corruption in V4 Visegrad Countries: Experience of Hungary

Corruption in Hungary poses a significant risk to business, especially in the tax administration and public procurement sectors, which suffer from its high level. The public procurement process and the tendering process are insufficiently protected from irregularities at the local level due to strong informal relations between business and representatives of government at the local level. Public opinion polls on general and specific corruption issues show that a third of Hungarians consider corruption and abuse of power to be widespread in Hungary’s public administration system.
 The purpose of this article is to clarify the origins of the formation and to study general experience in implementing activities aimed at preventing and combating corruption in one of the countries of V4 Visegrad Group – Hungary, a neighbor of Ukraine, post-socialist country and member of the European Union since 2004, as well as to analyze its results and the possibility of implementing certain provisions into national legal system.
 The author has clarified the place of Hungary and Ukraine in the world rankings as the result of the study, in particular in the Corruption Perceptions Index. The author has studied the data of sociological research conducted in Hungary to identify the most corrupt areas of public life, to determine the attitude of the population to the level of corruption and willingness to participate in its reduction, as well as to summarize the factors that led to such results.
 The activities of certain Hungarian state organizations that directly or indirectly prevent and combat corruption, including the Ombudsman, the State Audit Office and the National Defense Service of Hungary, have been considered. The legal basis for the implementation of anti-corruption policy from international acts to the National Program for the Prevention of Corruption in Public Administration has been determined.
 The author has made an attempt to summarize the reasons for the decrease in the level of effectiveness of the implementation of the anti-corruption strategy and recommendations aimed at improving its effectiveness.

Audit Market Competition and Client Portfolio Risk

This study investigates whether audit market competition influences the risk profile of audit offices’ client portfolios and whether an audit office’s client risk profile affects the association between audit market competition and audit quality. Economic theory suggests that market competition can affect a company’s risk-taking, but there is limited evidence on how audit market competition affects audit offices’ client portfolio composition. Two streams of prior research have documented that auditors make portfolio management decisions based on risk avoidance, and that audit market competition affects audit quality, although the results are mixed. We suggest that audit market competition influences audit offices’ acceptance of risky clients by reducing the set of available acceptable clients. The increased riskiness of audit offices’ client portfolio, in turn, affects audit quality provided by the audit office. We find that audit market competition at both the MSA and MSA-industry levels increases the riskiness of audit offices’ client portfolios. Furthermore, results suggest that audit market competition through increases in the audit office’s client portfolio risk explains a significant amount of the total effect of audit market competition on audit quality. This study contributes to the prior literature examining how audit offices manage their client portfolio risk and how audit market competition affects that ability and ultimately affects audit quality.

Problematic Internet Use among Youths

Problematic Internet Use (PIU) has of late come to the major attention of researchers of risky behaviours. For parents and teachers in turn, the various pathological forms of Internet use have become more and more noticeable. In recent years, the operationalisation of the term PIU has also been discussed and attempts to measure its various phenomena have been made. In our study, we used the quantitative method—a diagnostic survey designed on the basis of a tool of the Supreme Audit Office and Scientific and Academic Computer Network (Naukowa i Akademicka Sieć Kompureowa NASK), The survey was conducted in the first half of 2017 in Poland, among 3569 adolescents (median 16, SD = 1.28). The purpose of the research was to investigate the scale of PIU among Polish youths. For most young people, PIU is a major social problem. The majority also declare that more than half of their friends have problems with using electronic media (smartphones and the Internet in particular). On the basis of the data collected, it is estimated that 60% of adolescents use media in a functional way, whereas 40% of young electronic media users show visible PIU symptoms, of which 5% do so at a destructive level (all symptoms). Gender does not co-occur with PIU; however, family structure (where both parents are present), the setting of rules for the use of electronic media, and the place of residence are all protective factors. There is a need for constantly improved tools for measuring PIU, as well as preventive programs focused on developing self-control and helping young people understand their own emotions.

The Effect of Using the Strategy Analysis Approach to Measure Business Risk on the Quality of the Audit Process

The study aims to Identify business risks facing the auditor when performing the audit in Egypt , Contribute to enhancing the auditor’s efficiency through business strategy analysis for the purpose of enhancing predictive ability when judging the continuity of the enterprise and Improve the quality of the audit process, narrow the expectations gap in the audit process to the required level and produce outcomes and recommendations to improve the performance of audit offices , The study reached a set of results, the most important of them It was revealed that, through client strategy analysis, auditors are more able to detect internal and external strategic risks for the client, and therefore increasing the efficiency and effectiveness of the audit process. The total score for the axis was 79% , Avoiding any material misstatements in the financial statements and increasing the auditors’ ability to detect material misstatements leads to a reduction in the inevitable risk. The total score for the axis was 76% , The importance of increasing analytical tests during the audit process in order to minimize the risk of audit tests to the lowest limit as this contributes to increasing the efficiency and effectiveness of the audit process. The total score for the axis was 76%, and It was found that, the audit office can increase the efficiency and effectiveness of the audit process through the fulfillment of promises made to the clients in a timely manner, through maintaining accurate and organized records of its work, and by maintain communication with the clients.

Client Concerns About Information Spillovers from Sharing Audit Partners

We hypothesize that companies in the same product market avoid sharing the same audit partner when they are concerned about possible information spillovers. Consistent with our hypothesis, we find that product market rivals are less likely to share the same partner when they perceive that information spillovers are more costly. While concerns about information spillovers significantly reduce the likelihood of product market rivals sharing the same audit partner, we find that such concerns do not deter them from sharing the same audit office. Lastly, when companies are unconcerned with information spillovers, our results suggest that partner sharing can be beneficial because it can result in lower audit fees and fewer accounting misstatements.

Impact of Audit Quality on the Implementation of Corporate Governance in the Insurance Companies Listed in Amman Stock Exchange

The study aimed to identify the concepts and principles underpinning the corporate governance, and get to know the level of commitment of the Jordanian insurance companies' implementation of the instructions of corporate governance issued by the insurance commission, and determining the effect of audit quality on the level of implementation of the instructions of corporate governance. The study was conducted on a sample consists of 15 Jordanian Insurance Companies listed in the Amman Stock Exchange, during the period from 2011 to 2014. Audit quality was measured by the size of the audit office, audit fees, and auditor retention, relying on the instructions of corporate governance for insurance companies. The researcher designed a questionnaire containing five sections Associated with each of the board of directors, executive management, and the audit committee, risk management, and internal control system, and internal audit, the questionnaire was distributed to insurance company's staff who occupy different managerial positions. To achieve the objectives of the study the researcher used a number of statistical methods that fit the nature of the variables of the study, such as (Simple linear Regression model) and (Multiple Regression model) to test the hypotheses of the study.
 
 The study results showed that the Jordanian insurance companies show an acceptable commitment of the corporate governance instructions implementation; also, it showed that there is an impact of audit quality on the implementation of these instructions. Based on these results, the study provides a set of recommendations including Identify regulators responsible for following up the actual implementation of instructions of corporate governance in insurance companies, and reformulation of these instructions in a way to ensure the protection of the rights of stakeholders, and to clarify the functions and responsibilities of the Audit Committee. In addition, to focusing on the role of the external auditor, and working on increasing external auditor communication with the Audit Committee and Internal Auditors.

John Ridley Pattison: the “man who wouldn’t lie” who chaired the government’s advisory committee on BSE

In 1995 the government appointed John Pattison chair of its advisory committee on bovine spongiform encephalopathy (BSE). Dubbed “the man who couldn’t lie,” Pattison was recommended by agriculture minister Douglas...

Can government environmental auditing improve static and dynamic ecological efficiency in China?

As an important part of external supervision, government environmental auditing plays a significant role in the construction of ecological civilization. With the execution of environmental audit events by the National Audit Office of China (CNAO) during 2008 to 2018, we examine the impact of government environmental auditing on ecological efficiency by using multiple regression method and PSM method. Our analyses show that government environmental auditing can obviously improve both static and dynamic ecological efficiency. Further research suggests that (1) government environmental auditing has a short-term improvement effect on ecological efficiency but nothing in the long run. (2) Government environmental auditing plays a supervisory and warning role in improving ecological efficiency. Those findings provide empirical evidence for the effects of government environmental auditing on ecological efficiency. The current study has some theoretical and practical implications for the government in terms of strengthening the external supervision of environmental protection and improving the ecological efficiency.

The Role of the Public Policy Network in Making and Implementing Anti-Corruption Policies in Palestine

As a result for the official and unofficial interactions between many effective sides on both local and central levels, and as a result for the well of the policies network within its different parts such as the legislative council, civil society organizations, financial and administrative audit office, authors, parities and citizens as well as foreign parts such as the international bank and some donating countries, the polices networks started to develop itself and started to work in cooperation with other parties. The networks accomplished all stages in the absence of the legislative council from 2008 till 2019. However, the result of its accomplishments started with short term plans from 1998-2010, in the last year the corruption law as announced, the anti-corruption commission was established. Therefore, the three pillars of anti-corruption were completed including prosecution and anti - corruption court as a type of judicial independence. The Anti-Corruption Law and Strategy has become a systematic policy in all Palestinian public sector institutions. In mid-2019, the PAA obtained a license from the Palestinian Ministry of Higher Education to open the Anti-Corruption Academy for Higher Education, which follows the vision and objective of the Anti-Corruption Commission, which is administratively independent, which will grant a Master's degree and a higher diploma to its members. Thus, we can note the integrated role of the Anti-Corruption Policy Network from implementation to evaluation.

Owner challenges on major projects: The case of UK government

Many studies agree that owner organisations are important for successful project organising, but they tend to focus on particular aspects of project organising rather than providing a holistic analysis of owners as organisations. Our objective is to collect evidence of the full range of challenges public sector owners face in managing their major projects. After reviewing the literature on owner organisations, we carry out a case survey of 26 major projects to identify the principal challenges using a content analysis of UK National Audit Office Value for Money reports. Our original contribution is that the findings provide the first comprehensive picture of the full range of challenges of project organising faced by owner organisations. These findings push us theoretically to extend the scope of research in project organising to identify an extended core set of dynamic capabilities for project owner organizations to address these challenges.

INTERACTION OF THE NATIONAL ANTI-CORRUPTION BUREAU OF UKRAINE WITH INDIVIDUAL ENTITIES OF PUBLIC GOVERNANCE

The relevance of the article is that the National Anti-Corruption Bureau of Ukraine is the only law enforcement agency with a special status that performs the functions of combating and stopping corruption offenses. But, it is obvious that the forces of this state law enforcement body alone cannot qualitatively fight such a negative social phenomenon as corruption in public authorities. It is worth noting that real success in the fight against corruption can be achieved only through constant and fruitful interaction of this body with other public authorities. Moreover, such cooperation is facilitated by a fairly good construction of state bodies that perform various functions and tasks, including the detection and prevention of corruption, and they can really help the National Bureau of Ukraine in the fight against corruption. The article considers some aspects of the interaction of the National Anti-Corruption Bureau of Ukraine with the State Financial Monitoring Service of Ukraine, the State Audit Office of Ukraine, the National Agency for Prevention of Corruption, law enforcement agencies to detect and combat corruption and crimes, exposing perpetrators of corruption offenses. It was found that the interaction of the National Bureau with the National Agency for Prevention of Corruption has its own specific features and is characterized by the following factors: 1) the method of information exchange (electronic), 2) has a special level of information protection, 3) measures control by the parties to the interaction. A general characteristic of such interaction is that its procedure is clearly defined by laws and regulations of Ukraine and it is carried out in order to perform the tasks and functions assigned to the National Bureau. It is concluded that the interaction is both procedural and managerial in nature. Emphasis is placed on the outdated legal regulation of cooperation between the National Bureau and the State Audit Office of Ukraine and the lack of a legislative procedure for involving the National Bureau as a specialist representative of the State Audit Office of Ukraine.

Taking the long view: the development of the Well-being of Future Generations (Wales) Act

BackgroundThe Well-being of Future Generations (Wales) Act, 2015 (WFG Act), aims to change the ways of working in Wales to be sustainable for the future. Goals within the WFG Act include ‘a healthier Wales’, ‘a more equal Wales’ and ‘a more prosperous Wales’. Reviewing key factors that led to Wales enacting this ground-breaking legislation is worthwhile for other legislatures around the world that may wish to create policy for future generations. We suggest that the drive of individual politicians, events at the time and recent history were the most critical issues in developing a more nuanced piece of legislation – the WFG Act.MethodsTen interviews were conducted with those involved in the development of the WFG Act. Relevant documents were identified through systematic literature reviews and discussion with interviewees. Initial outcomes were tested against policy analysis frameworks, and Kingdon’s Multiple Stream Analysis was selected.ResultsKey ‘policy entrepreneurs’ were found to be important, along with growing evidence of the problems of climate change and recommendations for sustainable development in Wales. The importance of context and capitalising on global and local events by policy actors was significant. A supportive environment, including the third sector, community groups, cross-party backing, committed civil servants and a change of ministers helped with momentum.DiscussionPolicy-makers did not work directly with historians on developing the WFG Act. However, recent history was included with collaboration of the Wales Audit Office, who had evaluated the Welsh Government’s implementation of the duty to promote sustainable development. Sustainable, future-generation policies of other nations were also used to help shape the WFG Act. Kingdon’s Multiple Stream Analysis is a useful theory to interpret the timing and impact of this policy change.ConclusionsThe problem of climate change, suitable policy solutions, political support, timing and, most importantly, policy entrepreneurs were all significant in the development of the WFG Act. Due to multiple factors, policy-makers in Wales have legislated for the long term, placing sustainability and the well-being of present and future generations at the heart of public services and government.