Audit Procedures Research Articles

CryptoAudit: Nature, requirements and challenges of Blockchain transactions audit

CryptoAudit, the process of auditing cryptocurrencies and blockchain-based transactions, is essential in ensuring the accuracy, security, and compliance of activities within the emerging digital asset landscape. This paper explores the unique challenges faced in CryptoAudit, including the absence of a comprehensive regulatory framework, the complexities of blockchain technology, security concerns, valuation difficulties, and the global nature of cryptocurrencies. It also highlights the differences between CryptoAudit and traditional financial audit, emphasizing the need for specialized expertise and adaptability in this evolving field. The study employs a literature review approach and AI-based data analysis to provide insights into existing research and publications related to CryptoAudit. Key findings reveal the importance of staying updated on regulatory developments, collaborating with experts, and developing specialized audit procedures to address these challenges effectively. While CryptoAudit presents significant obstacles, it also offers opportunities for enhancing transparency, efficiency, and trust in the digital financial ecosystem. Auditors play a critical role in ensuring the reliability of cryptocurrency audits, fostering confidence, and facilitating the integration of blockchain technology into accounting and auditing practices. As the cryptocurrency industry continues to evolve, auditors must remain proactive and adaptable to navigate this complex landscape successfully.

Gender of firm leadership, audit committee gender diversity and audit quality through the lens of audit fee: a Ghanaian insight

PurposeThis study aims to examine how woman leadership (i.e., woman board chairperson, woman chief executive officer (CEO) and board gender diversity) affects audit fee and also ascertained the interactive effect of woman leadership and gender diversity on audit committee on audit fee.Design/methodology/approachThe study applied ordinary least square and fixed-effect estimators on the data of 21 universal banks in Ghana for the period 2010–2021 to estimate the empirical results.FindingsIt is revealed that under the leadership of women (woman CEO and board gender diversity), higher external audit quality is ensured as higher audit fee is paid. Interestingly, it was found that with the presence of women on the audit committee, the integrity of internal controls and internal audit procedures are enhanced, which leads to quality financial reporting, calls for lower audit effort, hence lower audit fee.Practical implicationsThe result indicates that firms can rely on the leadership of women in ensuring quality external audit and quality financial reporting, which ultimately helps to minimize the information risk to all stakeholders.Originality/valueThe paper contributes to extant literature by establishing that, under the leadership of women in banking entities from a developing country context, external audit quality and financial reporting are achieved.

Implementasi ATLAS dalam Prosedur Penilaian Risiko Audit (Studi Kasus pada KAP Luthfi Muhammad & Rekan)

This study aims to determine the implementation of ATLAS in audit risk assessment at the Public Accounting Firm Luthfi Muhammad & Partners. The research method used is descriptive qualitative including theoretical studies, previous research, and interview results. Then the results of the theoretical review, previous research and interviews will be analyzed, and conclusions drawn. Until now ATLAS has become a tool used by auditors in carrying out audit procedures. This is because ATLAS has been systematically arranged to make it easier for auditors to carry out their work. In addition, ATLAS will also speed up the audit implementation process and improve audit quality. Based on the results of the interviews conducted, the implementation carried out by the Public Accounting Firm Luthfi Muhammad & Partners is in accordance with auditing standards. The auditing standard in question is Auditing Standard 315 regarding the identification and assessment of the risks of material misstatement through an understanding of the entity and its environment. The renewal of this research is to present the implementation of ATLAS, especially the risk assessment stage, whereas previous research only discussed the implementation of ATLAS in general.

Using an Equity Lens to Audit Medical Student Education Policies and Procedures.

Using an Equity Lens to Audit Medical Student Education Policies and Procedures.

Cervical pessary to prevent preterm birth and poor neonatal outcome: An integrity meta-analysis of randomized controlled trials focusing on adherence to the European Medical Device Regulation.

Findings from randomized trials (RCTs) on cervical pessary treatment to prevent spontaneous preterm birth are inconsistent. Our hypothesis suggests that adhering to the European Medical Device Regulation (MDR) and following the instructions for use are essential prerequisites for successful therapy. Conversely, the non-adherence to these guidelines will probably contribute to its failure. Based on validated criteria from integrity assessments we performed a systematic review identifying 14 RCTs evaluating the effect of cervical pessaries. We analyzed the implications of 14 criteria each accounting for 0-2 points of a score reflecting the clinical evaluation plan (CEP) as proposed by the MDR to evaluate the risk-benefit ratio of medical devices. Seven RCTs in each singleton and twin pregnancies (5193 "cases") were included, detecting a high heterogeneity within control groups (I2 = 85% and 87%, respectively, P < 0.01). The CEP score varied from 11 to 26 points for all studies. The most common reasons for low scores and potential data compromise were poor recruitment rates, no (completed) power analysis, and no pre-registration, but mainly non-adherence to technical, biological, and clinical equivalence to the instructions for use as required by the MDR. All trials with score values greater than 20 had applied audit procedures. Within this group we found significantly reduced rates of spontaneous preterm birth at less than 34 weeks within the pessary group in singleton (odds ratio 0.28; 95% confidence interval 0.12-0.65) and twin pregnancies (odds ratio 0.30; 95% confidence interval 0.13-0.67). Similarly, there was a significant reduction in the composite poor neonatal outcome in singleton (odds ratio 0.25; 95% confidence interval 0.10-0.61) and twin pregnancies (odds ratio 0.54; 95% confidence interval 0.35-0.82) after a pessary as compared with controls. Non-audited RCTs and meta-analyses mixing studies of different clinical quality as pre-defined by a CEP and the MDR pose the risk for erroneous conclusions.

Auditing with data and analytics: External reviewers' judgments of audit quality and effort

AbstractAudit firms hesitate to take full advantage of data and analytics (D&amp;A) audit approaches because they lack certainty about how external reviewers evaluate those approaches. We propose that external reviewers use an effort heuristic when evaluating audit quality, judging less effortful audit procedures as lower quality, which could shape how external reviewers evaluate D&amp;A audit procedures. We conduct two experiments in which experienced external reviewers evaluate one set of audit procedures (D&amp;A or traditional) within an engagement review, while holding constant the procedures' level of assurance. Our first experiment provides evidence that external reviewers rely on an effort heuristic when evaluating D&amp;A audit procedures—they perceive D&amp;A audit procedures as lower in quality than traditional audit procedures because they perceive them to be less effortful. Our second experiment confirms these results and evaluates a theory‐based intervention that reduces reviewers' reliance on the effort heuristic, causing them to judge quality similarly across D&amp;A and traditional audit procedures.

ANALISIS MATERIALITAS PADA PROSEDUR AUDIT VOUCHING ATAS AKUN BEBAN OPERASIONAL

In the era of society 5.0, the auditor profession will continue to exist even though the threat of AI (Artificial Intelligence) has come, bearing in mind that there are many human intelligences that cannot be replaced by any robots. An auditor needs to have an understanding of materiality, where this concept relates to how large a misstatement contained in an assertion can be accepted by the auditor so that users of financial statements are not affected by the magnitude of the misstatement. One of the applications of materiality is the vouching audit procedure. Vouching is a test carried out by the auditor to check the authenticity or correctness of the occurrence of a transaction presented in the financial statements through physical source documents. Vouching for operating expense accounts is important to do because there are many findings indicating irregularities in the presentation of operating expenses in the financial statements. The method used is a qualitative research-descriptive analysis based on the results of interviews with 4 people at Public Accounting Firms and Public ABC as samples and observations. This study aims to get answers regarding the importance of materiality in vouching audit procedures for operating expense accounts.

DETERMINANTS OF THE EFFECTIVENESS OF AUDIT PROCEDURES IN REVEALING FRAUD: ATTRIBUTION THEORY APPROACH WITH TIME PRESSURE AS AN INTERVENING VARIABLE

This study aims to examine the determinants of the effectiveness of audit procedures in revealing fraud, which consists of five variables: independence, objectivity, professional skepticism, ability, and auditor experience. In addition, time pressure is placed as an intervening variable. This research is quantitative with a survey of auditors at the BPK Head Office in Jakarta. An intervening model for the research framework was developed to investigate the role of time pressure intervention. This research provides evidence that the determinants of the effectiveness of audit procedures in revealing fraud in the form of independence, objectivity, professional skepticism, ability, and experience have not been fully proven in predicting the effectiveness of audit procedures in revealing fraud in Indonesia. Independence has a negative effect, while objectivity, professional skepticism, ability, and auditors experiencepositively affect the effectiveness of audit procedures in revealing fraud. However, not all of them are significant. Then, the independence and ability of auditors have a negative effect on time pressure, while objectivity, professional skepticism, and experience of auditors have a positive effect on time pressure. Testing the effect of time pressure on the effectiveness of audit procedures in revealing fraud results have a positive but insignificant effect. 5 (five) determinant variables of the effectiveness of audit procedures in revealing fraud are not proven to increase the effectiveness of audit procedures in revealing fraud through time pressure. This can be explained because this research is the first study to examine time pressure as an intervening variable on the effectiveness of audit procedures in revealing fraud, so the results cannot be compared with previous research, which partially used time pressure as a moderating variable in fraud detection.

A proposed audit model to activate audit procedures in accordance with international standards to improve the continuity of banking activity: An applied study of a sample of commercial banks for the period

A proposed audit model to activate audit procedures in accordance with international standards to improve the continuity of banking activity: An applied study of a sample of commercial banks for the period

Auditing safety leadership: three railroad catastrophes

PurposeThis paper addresses leadership and strategy issues associated with the management of safety. The paper proposes that companies conduct an annual safety leadership audit involving collaboration between their external financial auditors and their internal operational safety experts.Design/methodology/approachThree possible questions auditors should address in such a safety leadership audit are highlighted. The railroad industry is drawn upon for empirical support, including by reference to recent major railroa0d crashes in the US, Greece, and India.FindingsThe paper highlights the potential benefits of conducting a safety leadership audit, including that it will help assess whether a leader’s claims regarding safety are verifiable and accord with the data reported in financial statements. Several matters of critical but under emphasized importance in good safety leadership are highlighted.Originality/valueThis paper explores the somewhat novel idea of using audit procedures and external financial auditors to address matters of safety strategy and leadership. The paper proposes that a leader’s claims in respect of safety should be assessed in terms of whether they encourage a climate of “psychological safety,” report meaningful safety indicators, and use a “vocabulary of safety leadership.”

Effective methods for detecting fraudulent financial reporting: practical insights from Big 4 auditors

PurposeUsing a qualitative grounded theory approach, this study explores the methods experienced external auditors use to detect fraudulent financial reporting (FFR) during standard audits.Design/methodology/approachSemi-structured interviews were conducted with 24 experienced external auditors to explore the methods they used to detect FFR successfully during standard external audits.FindingsThe authors find 58 methods used for FFR detection, out of which the following methods are frequently used and help in detecting more than one type of FFR: (1) specific analytical procedures, (2) positive confirmation, (3) understanding of the client's business and industry, (4) the inspection of specific documents, (5) a detailed analysis of the audit client's anti-fraud controls and (6) investigating tip-offs from suppliers, employees and customers.Research limitations/implicationsBased on the grounded theory approach, the authors theorise that auditors must return to the basics and focus on specific audit procedures highlighted in this study for effective fraud detection.Practical implicationsThe study provides practical guidance, including 58 methods used in audit practice to detect FFR. This knowledge can improve auditors' skills in detecting material misstatements due to fraud. Besides, analytical procedures and positive confirmation helped external auditors in this study detect all forms of FFR, yet they are overlooked in the external audit practice. Therefore, audit firms should emphasise the significance of these audit procedures in their professional audit training programmes. Audit regulators should advise auditors to consider positive confirmation instead of negative confirmation in financial audits to increase the likelihood of FFR detection. Moreover, audit standards (ISA 240 and SAS 99) should explicitly require auditors to conduct a detailed analysis of the client's anti-fraud controls.Originality/valueThis is the first study to identify actual, effective methods used by external auditors in detecting FFR during the ordinary course of an audit.

Analytical procedures of financial audit at Big Four audit firms in Vietnam

One of the methods that is highly appreciated for its effectiveness in auditing financial statements and also quite important and popular in audits is the application of analytical procedures in the audit process. In this article, the group of authors use qualitative methods to investigate the perception of Big Four auditors on the importance of analytical procedures in financial audit and how Big Four auditors apply analytical procedures in audit practice. The results indicate that analytical procedures were important and necessary in an audit engagement at Big Four. Big Four employees actively apply these procedures in all three phases of an audit. Managers mainly perform analytical procedures when planning and partners and seniors might involve. The auditors utilize trend analysis, ratio analysis and reasonable testing in planning state, however, trend analysis is the major technique preferred. During the stage of performing the audit, the application of analytical procedures performed depended on the auditors' experience, audit clients size and characteristics. Big Four auditors use simple analytical techniques such as trend analysis, ratios analysis, and reasonable analysis, but do not use advanced techniques such as regression analysis. The analysis at reviewing stage is performed by team leader, executives, partners. At this stage, the auditors apply the analytical procedures to gain the explanations related to the whole financial statement rather than those related to individual items. Keywords: Big Four; auditors; analytical procedures; analytical techniques; audit work

How auditors identify and report key audit matters - An organizational routines perspective

Despite the volume of auditing research over the last decade, relatively little is known about how auditors apply specific codified requirements. We use organisational routines as a schematic and Power's (2003) distinction between the front and backstage of an audit to explore the link between the broad prescriptions in ISA 701 and the micro-level performances of individual auditors to report key audit matters (KAMs). Interviews with 42 senior staff from large and mid-tier audit firms reveal how the ostensive elements of auditing routines result in coercive, normative and mimetic forces. These forces regulate and coordinate how audit procedures are executed to yield a frontstage representation of technical and procedural rigour. Yet, at the performative level experience, professional judgement and dynamic operating environments counter isomorphic forces. The messier backstage of activities provides an opportunity for minor modifications to audit procedures which can accumulate and impact the routine at the ostensive level. That the responsibility for the reporting KAMs vests with engagement leaders increases the opportunity for variability as they exercise professional judgement to modify the routine. Overall, our paper adds to the literature on how auditing is socially constructed and reveals how technical concepts are “transmitted” among individual practitioners to illuminate an understudied aspect of auditing. The study provides an original action-orientated perspective of how routines work in professional settings. It complements the largely inferential work on KAM determinants and should be relevant for standard-setters conducting a post-implementation review of ISA 701 and regulators monitoring KAM reporting.

The Effect of Non Audit-Services on Auditor’s Professional Scepticism: Stakeholders Perceptive

This study investigates the effect of the provision of non-audit services on Auditor’s professional scepticism evidence from accounting practitioners in Abia State. The study used the Institute of Chartered Accountants of Nigeria (ICAN) and Association of National Accountants of Nigeria (ANAN) domiciled in Abia State. The data for the study were generated from primary source: questionnaires were the major instrument for data collection. The instrument was subject to both content and faces validity by experts. Three questions were structured in Likert scale form and the formulated hypotheses were tested with ordinary Logistic regression using SPSS package. The study found that non-audit services have no effect on auditor’s scepticism, the auditor’s objectivity during his course of audit procedure. The study therefore recommends that the audit committee should have full oversight of the auditor’s scepticism including the nature and extent of the work they do and their fees. The auditors been a professional should strive to maintain his integrity during the course of his duties bearing in mind that good name is better than riches. The audit committee should make his charter public and this should give investor information about how the audit committee chooses its auditors and how it decides the type of services they can provide.

Fair value estimates of investment property, corporate governance and audit pricing: evidence from the Hong Kong real estate industry

PurposeFollowing the adoption of International Financial Reporting Standards (IFRS), firms are required to recognize gains or losses from investment property revaluation in the income statement, instead of equity in the balance sheet. This results in both a “materiality effect” (as auditors set a higher materiality level and require lower audit efforts) and a “cushion effect” (as revaluation gains serve as a cushion and reduce earnings manipulation incentives). Utilizing this unique setting, this study investigates whether the use of fair value measurement for investment property affects audit pricing before and after IFRS convergence in the Hong Kong real estate industry.Design/methodology/approachUsing a sample of 78 real estate companies listed on the Hong Kong Stock Exchange in the pre-IFRS period (2001–2004) and the post-IFRS period (2005–2008), this study employs multivariate regression analyses to test the research hypotheses with respect to the association between investment property revaluation and audit fees and the role of corporate governance structures in the context of family control.FindingsThe empirical results suggest that audit fees decrease with revaluation gains or losses from investment property revaluation after IFRS convergence, but not before. Furthermore, the negative association is stronger in companies controlled by founders, with proportionally more independent directors on the board and with a smaller board size. This is consistent with the moderating effect of corporate governance.Originality/valueThe findings shed more light on the consequences of fair value accounting for non-financial assets and are of interest to regulators for assessing the benefits of the wide use of fair value measurement under IFRS in emerging markets, especially where the corporate ownership structure is typically controlled by founding families. This study also provides recommendations for the audit community to fully consider the impact of asset revaluation on audit procedures and audit pricing.

SEBERAPA EFEKTIFKAH ARTIFICIAL INTELLIGENCE DALAM FRAUD DETECTION PADA MASA COVID-19: SYSTEMATIC LITERATURE REVIEW

The development of increasingly advanced technology certainly has a positive impact in various fields, especially in auditing, especially during and after Covid 19. A technology that is most highlighted today is the use of Artificial Intelligence in detecting digital fraud risks, which can be interpreted as using the technology-based web to commit fraud and misuse of assets for financial gain. This study aims to review the use of AI in fraud detection to support external audits, especially during the Covid 19 period. The research method used in this study is a Systematic Literature Review (SLR) or systematic literature review. Based on the analysis results, Artificial Intelligence (AI) has begun to be applied to audit procedures to support decision-making through machine learning. The success of Artificial Intelligence in detecting fraud and issuing audit opinions must be seen as two complete sides, namely, opportunities and challenges that must be responded to wisely, especially by auditors. During the covid 19 pandemic, AI helps, especially for auditors challenged in creating new methods developed due to the required COVID-19 strategy. This research implies that auditors and companies can switch to using AI, which can help their work efficiency in disclosing fraud that occurs.

Comments by the Ad Hoc Task Force of the Auditing Standards Committee of the Auditing Section of the American Accounting Association on the Proposed Auditing Standard, the Auditor’s Use of Confirmation, and Other Proposed Amendments to PCAOB Standards

SUMMARY On December 20, 2022, the Public Company Accounting Oversight Board (PCAOB) issued a request for comment on its proposed auditing standard, The Auditor’s Use of Confirmation, and Other Proposed Amendments to PCAOB Standards. The proposed auditing standard describes principles-based requirements that apply to paper-based and electronic confirmations, improves integration with risk assessment standards, requires confirmation for cash held by third parties, and carries over existing requirements regarding confirming accounts receivable. Further, it considers additional audit procedures when using negative confirmation requests and clarifies certain activities where the auditor should not use an internal auditor to provide direct assistance. The proposed standard is important, as the audit confirmation process touches nearly every audit. The comment period ended on February 20, 2023. This commentary summarizes the participating members’ views on the questions posed by the PCAOB. Data Availability: Proposed Auditing Standard—The Auditor’s Use of Confirmation, and Other Proposed Amendments to PCAOB Standards, including questions for respondents, is available at PCAOB Proposes New Standard for the Auditor’s Use of Confirmation | PCAOB (https://pcaobus.org/).

Understanding How Investigative Auditors' Competence, Independence, and Experience Affect the Efficiency with Which Audit Procedures are Implemented in Fraud Proof

Fraud is increasingly widespread in Indonesia. In detecting and proving fraud, a special audit is needed, namely an investigative audit. Auditors who carry out investigative audits are called investigative auditors. This study aims to determine the effect of investigative auditor competence on the effectiveness of audit procedures in proving fraud, the effect of investigative auditor independence on the effectiveness of audit procedures in proving fraud, the effect of investigative auditor experience on the effectiveness of audit procedures in proving fraud, the effect of auditor experience on auditor competence. , and the influence of investigative auditor competence on the effectiveness of the implementation of audit procedures in proving fraud through auditor experience. This study uses a quantitative research method using primary data obtained from the results of questionnaires distributed to investigative auditors at the Supreme Audit Agency (BPK RI). The population in this study is the Main Investigation Auditorate at the Supreme Audit Agency of the Republic of Indonesia. The sample used is the Main Investigation Auditorate at BPK RI. The data analysis technique used is path analysis with a significance level of 5% using SPSS 26 software. The results of this study are that the competence of investigative auditors has a positive effect on the effectiveness of implementing audit procedures in proving fraud, the independence of investigative auditors has a positive effect on the effectiveness of implementing audit procedures in proving fraud, the experience of investigative auditors has a positive effect on the effectiveness of implementing audit procedures in proving fraud, there is a positive effect of auditor experience on auditor competence, and the experience of investigative auditors has a positive effect on the effectiveness of implementing audit procedures in proving fraud through auditor competence.

Forensic Accounting and Investigative Audit on the Effectiveness of Implementing Audit Procedures in Fraud Disclosure

Forensic accounting is a branch of accounting that focuses on investigating, disclosing, and preventing fraud and illegal activities in the business environment. Its main purpose is to identify, collect, analyze and present evidence that can be used in legal proceedings. Meanwhile, an investigative audit is an approach to auditing that is focused on investigating indications of fraud or non-compliance in the financial statements or business processes of an entity. The effectiveness of implementing audit procedures in disclosing fraud involves the application of a careful and careful methodology to identify signs or evidence of fraud in the financial statements and identify signs of fraud, the auditor uses knowledge about the mode of fraud and analysis of data to identify potential indications of fraud in transactions or financial reports, among others, by using forensic techniques. Auditors can use forensic data analysis techniques, digital examinations, and interviews to gather more in-depth and accurate evidence. Carry out segregation of duties. The auditor must examine the internal control system and ensure that there is adequate segregation of duties to prevent opportunities for fraud as well as test the substance of transactions to ensure that transactions reported in the financial statements actually occur and have a valid basis, in collaboration with the forensic team. In complex cases, the auditor needs to work with a forensic team that has special expertise in fraud analysis to detect fraud and the auditor prepares a report that provides a clear description of the fraud, along with recommendations for corrective measures and fraud prevention. The results of investigative audits are used to identify opportunities for improvement in the internal control system so that fraud can be minimized. Forensic accounting and investigative auditing have an important role in helping businesses detect, address and prevent fraud through a careful and evidence-based approach, effective audit procedures can reveal potential fraud and provide guidance for necessary improvements in internal controls.

TAX AUDIT IN THE CONDITIONS OF DIGITALIZATION: CURRENT STATE, PROBLEMS, PERSPECTIVES

The article examines the peculiarities of the functioning and development of tax audit in the conditions of digitalization. It is noted that the formation of the digital economy involves the active implementation of innovations and information and communication technologies in all types of economic activity and spheres of life, including tax audit. It has been proven that the State Tax Service of Ukraine is actively implementing digital tools in its work with taxpayers. Attention is drawn to the fact that the indisputable advantage of using tax electronic audit is a significant reduction in the time spent on tax audits and an increase in the probability of detecting tax evasion. It is noted that the use of digital tools during tax audits is accompanied by certain problems. Ways to solve them are proposed. The expediency of developing and displaying in the relevant legislative acts the algorithm of the Standard Audit File for Tax (SAF-T) electronic audit procedure is substantiated, which will increase its effectiveness, quality and reduce the time for its implementation.