Audit Procedures Research Articles

Time Out: Auditor Perceptions and Audit Outcomes When Moving Away from a Time-Based Budget Audit Model

SYNOPSIS The purpose of this study is to examine the benefits and costs of an alternative to the traditional time-based budget audit model. We survey auditors who participated in a real-world, firm-designed, non-time-based budget (NTB) model pilot program during which several engagement teams were not provided with a time budget and auditors did not track time. Results suggest auditors appreciated the autonomy the NTB model allows, felt it improved teamwork, reported less concern about performance evaluations, felt empowered to deliver value-added services to the client, and indicated greater work-life balance and job satisfaction. Firm-provided proprietary archival evidence suggests that efficiency did not differ across the two models, as the timing of audit procedure signoffs was not negatively impacted under the NTB model. Overall, our results suggest a NTB model may be a viable option for audit firms looking to decrease their reliance on time-based budgeting. Data Availability: Please contact Erin M. Hawkins.

Антикорупційний аудит: визначення, інваріантність підходів та форсайт розвитку

The aim of the article is to define the concept of anti-corruption audit, taking into account the invariance of the approaches of different scholars, and to present a forecast for its further development. Ukraine is confidently moving in the European integration direction, so the issue of economic security of our country is crucial, and it is the anti-corruption audit that contributes to the identification, prevention and elimination of corruption risks and practices, verification of compliance with the requirements of national and international legislation in the field of prevention of corruption, and the formation of a culture of rejection of corruption. The article substantiates the need to introduce a single, generally accepted definition of this concept and the introduction of anti-corruption audit in all areas of business and at all levels in government agencies, which will create obstacles to bribery and fraudulent actions of business or government representatives and will help significantly reduce the level of corruption in our country. Thus, it will contribute to the improvement of the investment climate, increase the confidence of foreign investors and the level of economic security of the country. The necessity of introducing additional opportunities to combat corruption, a system of control measures to counter corruption, and the implementation of audit procedures to assess the corruption risks of business processes is also substantiated. The authors emphasize that, despite the fairly wide application of this concept in the business environment and in the public sector, there is no single definition of the concept of «anti-corruption audit», as well as an understanding of the peculiarities of the methodology of its implementation. As a result of the study, an analysis of the existing definitions, their comparison and generalization has been carried out, and the introduction of an improved unified definition of the concept of «anti-corruption audit» has been proposed. It is proved that a systematic increase in the level of public consciousness, ensuring transparency and simplification of business procedures, increasing the efficiency of economic mechanisms of State supervision, control over entrepreneurial activity and the introduction of mandatory anti-corruption audit of companies will allow the country to significantly reduce corruption and minimize the shadow economy in our country.

The role of random forest in internal audit to enhance financial reporting accuracy

Internal audit is a bulwark ensuring the integrity of financial statements, a linchpin for stakeholder trust and informed corporate decision-making. With the proliferation of complex financial transactions, audit teams face mounting challenges in deciphering voluminous transactional data to safeguard financial reporting quality. Machine learning has the potential to identify signifiers of financial reporting quality. Within the Design Science Methodology framework, we apply the Random Forest Classifier technique to metrics such as the error rate to enhance financial reporting. We find that the Random Forest Classifier identifies that certain parameters are critical to error detection, which enhance account receivable accuracy, lower receivable account control risk. This research advances the argument that technologically-enhanced internal audit procedures can play a pivotal role in ensuring that financial reporting mirrors the economic reality of the company.

Critical Technologies of Audit Services

Introduction. In the context of the need to improve the quality of audit services and ensure confidence in their results on the part of interested users of reporting, it is necessary to search for “points of growth” through the development of audit tools that are not inferior in technology to modern accounting and analytics. Purpose of the study is to identify key audit tools relevant for audit assignments and expert consulting activities of auditors, and to determine the possibilities of implementing modern analytical tools to improve the efficiency, effectiveness and quality of audit services. Methods. The study used methods of critical analysis of applicable standards and best auditing practices, audit procedures for assessing the effectiveness of controls and substantive testing, risk mapping, and the abstract-logical method. Results. Key audit tools were identified and classified depending on the stage of the audit, the goal setting of the procedure (compliance or efficiency), and the qualitative characteristics of the audit assignment (customer satisfaction or rationality); General directions and differences in the development trends of audit tools and other types of auditors’ activities have been identified. Conclusion. The identified critical technologies are aimed at maximizing the efficiency of audit activities through risk-based planning, reducing the possibility of manipulating the results of procedures by means of objectification, predicting significant distortions, parameterizing risks and assessing the results of procedures, regulating the qualitative characteristics of the methods used at the levels of the audit organization and the professional association of auditors.

Audit of Non-Financial Reporting in the Focus of Sustainable Development of Russian Companies

Introduction. The article provides an analysis of applying standards of quality management system, audit and sustainable development in Russia for confirming non-financial reporting of organizations. The Russian regulatory framework for confirming the reliability of non-financial reporting in the context of sustainable development was reviewed. The types of independent external confirmation initiated by the organization that issued non-financial statements were examined. A comparative structural analysis of standards for confirming non-financial reporting, which are used in Russian business practice, was carried out. Objective: The study of the concept of the reliability (audit) confirming of non-financial reporting in domestic organizations and identifying measures to improve the efficiency of the audit procedure and procedures. Research design: The object of the study was the conceptual provisions for constructing a domestic system for confirming the reliability of public non-financial reporting. The basis of the research was legislative and regulatory documents, studies and analytical reviews of professional communities, and the works of domestic scientists. The work was based on traditional methods of studying, such as comparative analysis, monographic, abstract-logical and calculation-constructive. Results: The author determined his own judgment about the components of the development paradigm of the institution of confirming the reliability of non-financial reporting in Russia. The article presents directions for improving the legal regulation of procedures for assessing and confirming the reliability of non-financial reporting.

The Influence of Information Technology Based Audit Procedures and Audit Experience on Audit Quality

The Ministry of Finance as one of the regulators in Indonesia has also issued regulation Number 186 /PMK.01/2021 concerning the Development and Supervision of Public Accountants which is effective on March 15 2022 (Janah et al., 2022). This regulation did not appear without reason. Several cases related to audited financial statements have occurred in recent years. Some of the financial reports that are cases include the financial reports of PT. Garuda Indonesia Tbk which was audited by the Public Accounting Firm Tanubrata Sutanto Fahmi Bambang and Partners which is also an international affiliated Public Accounting Firm, namely BDO International, where the financial reports of PT (Setiono et al., 2020).

Audit Quality Reduction Behavior: A Literature Review

Audit quality has become an important issue for accounting professionals. The phenomenon of audit quality criticism from stakeholders such as users of financial statements and the government who shows dissatisfaction with financial statements will pressure auditors to improve audit quality. Auditors do not always apply audit procedures in the audit program. Audit quality behavior is defined as the auditor's actions during the audit process by reducing the effectiveness of existing audit evidence. This study aims to discuss the behavior of audit quality reduction a review of the existing literature related to that issues and then identify empirical evidence from previous research. Data collection techniques through search in national and international journals and selected based on related keywords, audit quality reduction. Based on the results of previous research, it is known that time pressure, work-family conflict, high work stress levels, audit fees, and experience can affect the behavior of decreasing audit quality. In contrast, work-family conflict and experience have no significant effect. The implications of the results of this study are expected to provide an in-depth understanding of the factors that affect the reduction of audit quality so that it can be used as evaluation material to improve audit quality.

Exploring the involvement of tax audit experts in the early stages of tax audits

Tax compliance and evasion pose significant challenges to tax authorities in South Africa and other countries. In recent times, corporate governance issues have increasingly involved tax compliance. This study focuses on unresolved audit issues with the South African Revenue Service (SARS), expensive litigation, and lengthy arbitration with the tax Ombudsman. These issues are complicated by legal elucidations, legislative components, and regulatory frameworks. The paper aims to clarify the purpose of a tax legal audit expert at SARS in the initial phases of an audit procedure. To answer this research question, a thorough mapping review using methodical, technique-based literature evaluation was conducted. The study found that the lack of skilled tax legal audit experts hampers the effectiveness and efficiency of tax audits. Therefore, tax authorities must invest in the skills of tax legal audit experts to improve audit outcomes.

Improving the Audit of Financial Liabilities by Developing the Relationship between the Materiality and the Audit Procedures

The most important aspects of the research are based on the overall study of legal relationships, accounting methodologies and the spectrum of perspective views of the financial audit of financial liabilities presented by the author. The research is focused on the methodological delimitation of the materiality applicable in financial accounting and the one applicable in financial audit for the correct assessment of sources and their use for specific purposes, as well as their influence on the audit results. At the same time, the audit procedures were identified and selected based on materiality research and establishing the complementary relationship. The study also focuses on the application of professional judgment to build a reasoned structure through which the audit procedures present a solid foundation of the materiality applicable in the audit, delimited from that used in financial accounting, as well as identifying the influence and impact of these actions on the information in the audit report.

Impact of Digital Transformation on Internal AuditAn Applied Study on The Egyptian Central Bank

The world is currently witnessing a widespread digital revolution, which is having a profound impact on all aspects of life, including the financial sector. In this context, digital transformation has become a necessity for financial institutions, including banks. This research aims to test the impact of digital transformation technologies on the internal audit function and financial inclusion in Egyptian banks. To achieve this goal, a field study was conducted on a sample of Egyptian government-owned commercial banks. The study found that there is a strong impact of the application of digital transformation mechanisms in banks on the development of internal audit procedures, through the following: (a) Improvement of the efficiency and effectiveness of internal audit activities: Digital transformation technologies help to analyse data faster and more accurately, which contributes to the faster and more effective detection of potential risks. (b) Increased transparency and accountability: Digital transformation technologies help to provide easier and faster access to financial and administrative information, which contributes to the enhancement of transparency and accountability in financial institutions. (c) Support for achieving financial inclusion: Digital transformation technologies help to provide banking services in a simpler, faster, and more efficient manner, which contributes to achieving financial inclusion. Keywords: Digital transformation, banking sector, Egyptian Central Bank

Peculiarities of tax audits during martial law

Introduction. Tax audits are a crucial part of any country’s financial system, ensuring taxpayers comply with the law and pay their taxes on time. However, conducting tax audits during wartime can be complicated due to various factors. Ukraine, currently experiencing an extremely difficult period in its development due to the constant threat of war and geopolitical conflicts, serves as the context for this study. The purpose of the paper is to explore the unique challenges of conducting tax audits during wartime. It seeks to understand the changes in tax legislation and audit procedures during war, the increase in tax violations and abuses, and the challenges faced by fiscal authorities in ensuring tax compliance and maintaining budget stability. Results. The study reveals several key features of conducting tax audits during wartime, including changes in legislation, increased tax violations, challenges for fiscal authorities, and preparation for audits. Based on these findings, practical recommendations have been developed for businesses and taxpayers on preparing for tax audits during military operations. Conclusion. The paper concludes with the need for legislative adaptation, the use of technology to simplify the audit process, promoting transparency and mutual trust between tax authorities and taxpayers, and strengthening control over compliance with tax legislation. Despite the challenges that may arise during a state of war, compliance with tax legislation remains the obligation of every taxpayer.

Analysis of Electrical Energy Consumption in Office Buildings of the Institute Technology of Sumatra in Energy Conservation and Efficiency Efforts

Electrical energy is one of the basic human needs in carrying out various activities or daily activities, especially in office buildings such as office buildings of state higher education institutions, namely the Sumatra Institute of Technology (ITERA). Office buildings are the third highest consumer of electrical energy after shopping centers and hotels. The high demand for electrical energy requires the user sector to make efficiency in energy use. Before making efficiency, it is necessary to know the profile of electrical energy consumption including energy consumption intensity (ECI) and significant energy users. Therefore, in this study, an analysis of electrical energy consumption in each ITERA office building was carried out, through observation and interviews according to SNI / ISO 50002: 2018 energy audit procedures. The results obtained show that the total energy use of the 6 largest buildings (A, B, C, D, E, and F) in May 2023 is 144768 kWh and from the calculation of the ECI value is in the very efficient category (7.44 kWh/m2/month). From 6 existing buildings, there are 3 buildings that are very efficient, 1 building is efficient, and 2 buildings are quite efficient. Then, significant energy users were found by 83% in building C AC. Recommendations for saving energy in the effort of energy conservation and efficiency that can be done include, making changes in habits / patterns of use of electrical energy user equipment, especially in air conditioners and dispensers, so as to save electricity 2-21%, and retrofitting refrigerant AC types of split ducts and cassettes that still use R-22 with MC-22 which can save electricity 15-25%.

Information Systems And Capabilities Auditors Investigative To Effectiveness Implementation Audit Procedure In Proving Fraud (Case Study of the Regional Inspectorate of Karo Regency)

This study aims to examine and analyze the effect of accounting information systems and the ability of investigative auditors on the effectiveness of implementing audit procedures in proving fraud . this research is descriptive statistical analysis, data quality test, classical assumption test, multiple linear regression and hypothesis testing. The independent variables in this study are the flow of accounting information systems and the ability of investigative auditors while the dependent variable is the effectiveness of the implementation of audit procedures in proving fraud. The total population in this study was 47 with use purposive sampling . This study uses primary data. The data analysis used was multiple linear regression with Microsoft Excel and software programs Statistical Package for the Social Sciences (SPSS) 25. The results of this study prove that simultaneously the accounting information system and the investigative auditor's ability have a significant effect on the effectiveness of implementing audit procedures in proving fraud. the effectiveness of the implementation of audit procedures in proving fraud . Study This is the development of research previously by proving that accounting information systems and the ability of investigative auditors influence the effectiveness of the implementation of audit procedures in proving fraud. Study done at the Regional Inspectorate of Karo Regency

Information Systems And Capabilities Auditors Investigative To Effectiveness Implementation Audit Procedure In Proving Fraud (Case Study of the Regional Inspectorate of Karo Regency)

Information Systems And Capabilities Auditors Investigative To Effectiveness Implementation Audit Procedure In Proving Fraud (Case Study of the Regional Inspectorate of Karo Regency)

The Role of Accounting Control In Reducing Financial and Administrative Corruption In Cooperation Between The External Auditor and The Internal Auditor.

Accounting control system represent an important means to reduce of financial and administrative corruption and that these systems. This research highlights the dangerous phenomenon namely financial and administrative corruption, and it is also considered one of the diseases that threaten the entity of economic units that seeks to serve the community, and cannot be eliminated through the development of audit procedures by the internal and external auditor to reduce it. The research concluded that there are weak preventive measures against corruption in the units subject to control and auditing, as well as the lack of audit evidence to address cases of financial and administrative corruption. that prevent cases of corruption in all its forms and types).

Study of Audit Procedures on Group Financial Statements

Study of Audit Procedures on Group Financial Statements

Factors Affecting Change in Audit Quality after COVID-19

Amidst the COVID-19 pandemic, this study examines changes in the audit quality and reliability of financial statements. It explores the impact of increased incentives for earnings management and heightened audit risk for auditors as well as the factors influencing these changes. The key findings include a significant decline in audit quality, measured by discretionary accruals, post COVID-19. However, cases in which auditors demonstrated increased effort compared to the past did not exhibit a decline in audit quality. Moreover, the manufacturing sector has experienced a consistent and notable decrease in audit quality, and companies engaged in overseas operations or with substantial inventory assets have also faced a significant decline. This study emphasizes the need for stakeholders to remain vigilant about financial information reliability during this period of external upheaval, and offers valuable insights for potential audit procedure improvements in similar future situations.

The Effectiveness and Efficiency of Auditors’ Remote Work during COVID-19

SUMMARY The COVID-19 pandemic introduced unprecedented challenges to the audits of public companies. Audit firms, in response, dedicated significant resources to maintain high-quality audit procedures. We leverage a difference-in-differences design to examine the effects of the pandemic on audit outcomes. Despite audit firm efforts, we find evidence of a decline in audit quality in the initial months of the COVID-19 pandemic. Further, in the early days of the pandemic, the SEC made available a unique one-time, 45-day extension to file the audited annual report. In this time period, we observe a significant increase in the likelihood of delayed filings, including those attributed to the auditors’ work. Our study informs regulators and audit firms about the broad impact of an unprecedented stressor on the audit process and on the efficacy of remote work. JEL Classifications: M4; M41; M42.

Artificial intelligence application in auditing

Artificial intelligence (AI) is a rapidly evolving technology that has gained prominence in various industries, including auditing. AI enhances the effectiveness of auditors by automating routine tasks and improving data analysis. Major audit companies, such as EY and PwC, have integrated AI into their practices to save time, increase accuracy, and provide better services to clients. AI applications in auditing include anomaly detection, fraud prevention, revenue analysis, risk assessment, and financial data analysis. Machine learning algorithms, a subset of AI, play a crucial role in analyzing large volumes of financial data, identifying patterns, and making predictions.AI implementation in auditing involves different stages, including pre-planning, planning, contracting, control risk assessment, and substantive tests. The benefits of AI for auditors and clients include improved data analysis, reduced human error, increased efficiency, and enhanced audit quality. However, the successful implementation of AI in auditing requires a clear understanding of its strengths, limitations, and challenges, as well as interdisciplinary collaboration and the development of specialized frameworks.AI has the potential to transform audit procedures, but human expertise and understanding are still essential for its proper use. It is important to recognize that while AI can automate certain tasks, it cannot replace auditors’ judgment and critical thinking skills.There are also challenges associated with AI implementation in auditing. These include the need for extensive data preparation, ensuring data quality and integrity, managing complex algorithms, and addressing regulatory and compliance issues. Furthermore, auditors must stay updated with the latest advancements in AI and continuously adapt their skills to leverage the technology effectively.
 JEL classification: M420

Exploring the Impact of Artificial Intelligence and Digital Transformation on Auditing Practices in Saudi Arabia: A Cross-Sectional Study

The advent of digital technologies and the increasing adoption of artificial intelligence (AI) have transformed various industries and firms, including auditing. Manual auditing procedures have proven to be time-consuming and labor-intensive, leading to lower audit quality and higher costs. The integration of digital transformation and AI in auditing practices offers potential solutions to enhance efficiency and effectiveness in Saudi Arabia. Therefore, this research focuses on examining the impact of digital technologies and AI on audit efficiency, effectiveness, challenges faced during adoption, adjustments in auditors' roles, and the regulatory and ethical considerations arising from the integration. A cross-sectional research design was adopted to collect data from a sample of 400 participants through an online survey, analyzed by statistical tools, including descriptive statistics and correlation and examined the relationships between variables. The findings indicate a positive relationship between the level of digital transformation and the adoption of AI in auditing practices in Saudi Arabia, along with significant challenges, such as resistance to change, technological infrastructure, skills gap, and regulatory compliance concerns, paving a way for further advancements in the field of auditing and digital transformation.