Audit Judgment Research Articles

Audit risk and significance in observing the principle of undertaking business activity

In determining the appropriateness of applying the principle of business continuity by management personnel, the auditor needs to carry out procedures to identify and assess risks that may entail the termination of the enterprise. A fairly comprehensive list of such risks is given in the ISA, but even if we assume that we know the list of risks of termination of business, there is currently no methodology for measuring such risks. This situation puts the auditor in the face of an audit judgment, which in turn can provoke a mistake. They do not know the size of these risks, we cannot calculate them, to determine which assessment methodology to apply to each risk - quantitative or qualitative. Thus, research and development of methodological approaches for assessing the risks of termination of activity becomes relevant. An analysis of the scientific literature indicates the need for additional development of the issue of methodological and organizational support for determining the size of materiality for individual groups or classes of financial indicators of threats to the continuity of enterprises in accordance with international audit standards. The pirpose is to study and systematize the methodological aspects of determining audit risk and materiality when checking compliance with the principle of business continuity The main results of the study. The study of this issue allowed to reveal a number of methods for determining materiality and on their basis to provide a proposal for calculating the size of materiality for individual groups of assets. Conclusions and specific suggestions of the author. This approach allows you to more accurately calculate the level of material misstatement in determining the degree of excess of liabilities over assets or excess of current liabilities over current assets in the audit of business continuity.

PENGARUH KOMPLEKSITAS TUGAS, PENGALAMAN AUDITOR, SKEPTISME DAN TEKANAN ANGGARAN WAKTU TERHADAP AUDIT JUDGMENT

This study aims to determine the factors that influence audit judgment of the Public Accounting Firm (KAP) in Bali. These factors include task complexity, auditor experience, skepticism, and time budget pressure. The research method used in this study is quantitative. Respondents in this study were auditors working in Public Accounting Firms in Bali who had at least 1 (one) year experience using Purposive sampling technique as a sample determination. The data analysis technique used is multiple linear regression analysis. The test result show that task complexity has a negative effect on audit judgment of KAP in Bali, However auditor experience, skepticism and time budget pressure have a positive influence on audit judgment in Bali. Complexity assignments, auditor experience, skepticism, and time budget pressure influence together or simultaneously on audit judgment of KAP in Bali.Keywords: audit judgment, task complexity, auditor experience, skepticism, and time budget pressure.

Facilitating the application of auditors’ underlying skeptical disposition

PurposeMotivated by ongoing calls for auditors to exercise an elevated level of professional skepticism, this paper aims to examine the relationship between basic human values (values) and an underlying skeptical disposition (trait skepticism). Understanding the values that are associated with levels of trait skepticism will help in the design of audit environments that make the application of an underlying skeptical disposition more likely.Design/methodology/approachA survey was administered in which 140 postgraduate auditing students responded to the Schwartz value survey to measure the relative importance of different values, and the Hurtt trait skepticism scale to measure trait skepticism. The relative importance of the ten values was regressed against trait skepticism.FindingsThis study finds that the importance placed in the values of tradition and power, relative to other values, is negatively associated with levels of trait skepticism.Research limitations/implicationsThe use of postgraduate auditing students as participants may limit the generalizability of the study’s findings.Practical implicationsQualified by the need for future research to test the generalizability of the findings to an audit practitioner sample, the results of this study suggest that auditors with higher levels of trait skepticism may experience negative affect in environments that emphasize values of power and tradition. To the extent that current audit environments emphasize tradition and power, the results may help explain why trait skepticism is not consistently reflected in audit judgments and actions.Originality/valueThe affective implications of the environment within which auditors exercise professional skepticism is emerging as an important area by which to understand and improve audit quality. By identifying the values that those with a high skeptical disposition place relatively less importance in, this study informs an understanding of the circumstances where an underlying skeptical disposition is more or less likely to be reflected in auditor judgments and actions.

The Joint Effects of Rich Data Visualization and Audit Procedure Categorization on Auditor Judgment

We predict that the audit-effectiveness benefits of richer visualization depend on how auditors categorize the procedures used to generate visualized evidence. We experimentally test our prediction using analytical procedures, which can be categorized either as risk assessment or substantive procedures under certain conditions. As predicted, audit-senior participants more frequently identify more richly visualized outliers as high risk, but only when these visuals arise from risk assessment procedures rather than substantive procedures. Richer visuals also increase the comprehensiveness of auditors’ prescribed follow-up tests, again only when risk assessment procedures generate these visuals. Post-experimental responses corroborate our theory: Auditors view evidence as more persuasive and sufficient when categorized as substantive procedures rather than as risk assessment procedures, in which case they view evidence as more preliminary. We conclude that whether and the degree to which richer data visuals improve audit effectiveness depends on how audit procedures generating these visuals are categorized.

Facilitating Judgment Research on Novice Auditors: Academic Perceptions and Auditor Insights into the Work of Novices

Recent environmental changes have led to novice auditors performing tasks traditionally performed by experienced auditors. Yet, our knowledge of novice auditor task responsibilities has not been updated, and research exploring novice judgments does not constitute a large subset of published auditor judgment research. This study facilitates meaningful research on novice auditors by first understanding the perceptions of 113 academics about this type of research. Academics report less than optimistic views regarding the publication likelihood of these studies and express concerns about peers’ views on the importance of novice work and justifying novice participants during the review process. We then inform the study of novices by providing evidence from over 100 audit interns and 30 supervisors on the procedures that interns perform. Supervisors report asking interns to perform tasks historically assigned to higher-ranked auditors including reviewing the work of shared services center staff and performing work in higher-risk accounts such as revenue. To address academic concerns regarding appropriate justifications for novice participants, we use the Kinney Three Paragraphs (and more) approach (Kinney, 2019) to provide insight into key decision points in the participant selection process. In these ways, this study aims to facilitate future research on novice auditors.

The Influence of Auditor Narcissism and Moral Disengagement on Risk Assessments of a Narcissistic Client CFO

Global capital markets rely heavily on independent and skeptical auditors as gatekeepers to provide assurance that corporate financial reports are free of material fraud. The rise of narcissism among the ranks of both client and audit professionals challenge this gatekeeper function. In addition, auditor moral disengagement may undermine auditor skepticism, further eroding public confidence in the integrity of financial reporting and the audit process. We conduct a quasi-experiment with 118 auditors from three international audit firms. In a simulated interview with a client CFO, we examine whether auditors underestimate risks of fraudulent financial statements due to the interactive effects of (1) client narcissism (manipulated verbally and nonverbally) and (2) auditor narcissism. We also examine the influence of auditor moral disengagement on client risk assessments. Results indicate that CFO verbal and nonverbal narcissism significantly influenced auditors’ assessment of management-related client risk. Moreover, auditor narcissism was found to interactively influence client risk inferences such that auditors higher in narcissism exhibited narcissistic tolerance (lower risk assessments) when the hypothetical CFO displayed high verbal narcissism. Auditor moral disengagement was negatively associated with client risk assessments. We discuss the implication of these findings on future audit judgment research, audit firm policy and training on maintaining auditor skepticism, and the audit oversight role of standard-setters.

Common Individual Auditors and Analyst Forecast Performance

We examine the importance of analysts covering firms with common audit partners to analyst earnings forecast performance (hereafter, we term the analyst, auditor, and the firm as being “common”). We find that analysts issue more accurate and less optimistically biased earnings forecasts for firms with common audit partners than other analysts following the same firm without common audit partners. Consistent with expectations, we identify auditors’ style in making audit judgments as the channel through which analysts accumulate better information from covering firms with common audit partners. In a series of cross-sectional analyses, we find that this result is stronger when: (1) analysts suffer from poor direct access to firm-specific information from managers; (2) the information value from common auditors is higher, evident in their clients having more opaque operations, more difficult-to-forecast earnings, and greater stock price synchronicity; and (3) the quality of information that analysts elicit from auditors is higher, evident in auditors belonging to a large audit firm. Our results are robust to different approaches for addressing the potential endogeneity of analysts’ coverage decisions.

The factors influencing audit quality and its impact upon judgement on materiality level

The purpose of this study is to determine profesionalism, professional ethics and experience on audit quality and effect of auditor upon judgement of materiality level. Data has been obtained by survey questionnaires, which is completed by auditors who work at Registered Public Accountants, started from junior up to partner level. The number of auditors of this study were 103 auditors from 16 Public Accounting Firm, period of January – May 2015. Data analyzed using Structural Equation Modelling (SEM) variance on (Partial Least Square). The result of this study has shown that professionalism and professional ethics have significant and positive influenced the auditor’ judgment on materiality level. And audit quality has significantly and positively influenced the auditor’ judgment on materiality level. Experience has not positively influenced audit quality and auditor’ judgement on materiality level. Keywords: Professionalism, experience , professional ethics, audit quality and auditor judgment on materiality level.

PENGARUH PENGALAMAN AUDITOR, PROFESIONALISME, DAN INDEPENDENSI TERHADAP KETEPATAN PEMBERIAN OPINI AUDIT DENGAN AUDIT JUDGEMENT SEBAGAI VARIABEL MODERATING

This study aims to analyze the effect of auditor experience, professionalism and independence influencing audit assessment, which also aims to analyze audit assessments to strengthen auditor experience, professionalism, and independence of the accuracy of audit results. This type of research is quantitative research. The sample in this study was 75 respondents who were calculated using the Slovin formula. The data source of this research is an auditor who works in a public accounting firm in Surabaya. Data collection techniques using a questionnaire taken by drawing. Test the hypothesis by comparing the results of the path coefficient with the T-table with the Partial Least Square (PLS) approach. The results showed that the influence of auditor experience, professionalism, and independence influences the accuracy of opinion results. Audit judgment strengthens experience and independence influences the accuracy of opinion results, while audit judgment does not affect the strengthening of professionalism regarding the accuracy in providing audit opinion.

Does an Audit Judgment Rule Increase or Decrease Auditors' Use of Innovative Audit Procedures?

ABSTRACTThe current audit environment encourages auditors to conduct defensive auditing procedures in lieu of using new, innovative, and potentially more effective audit procedures, due to concerns these procedures may be second‐guessed in litigation or by audit inspectors such as the PCAOB. As a result, auditors may prefer traditional “generally accepted” procedures over innovative procedures that are potentially more effective. We test recent proposals that an Audit Judgment Rule (AJR) encourages the use of innovative, and potentially more effective, audit procedures analogous to the similar Business Judgment Rule that affords legal protections to corporate directors. Under an AJR, litigators or audit inspectors could not second‐guess auditor judgments, even if they perceive that alternate judgments would have ordinarily been reached, provided the auditor's judgment was made in good faith and in a rigorous manner. However, the AJR's requirements that auditors must defend the rigor of their innovative judgments could potentially backfire and lead auditors to select more traditional procedures. Under the framework of goal activation theory, we conduct an experiment with audit managers and seniors and find that an AJR makes auditors less likely to select innovative audit procedures, particularly when audit risk is high. They do so despite believing the innovative procedures to be more effective than the traditional procedures. Findings from a supplementary experiment with experienced auditors further suggest that national office affirmation of the reasonableness of the procedures does not help overcome this effect. Overall, our findings suggest that an AJR may have the unintended consequence of further increasing auditors' focus on more traditional, and potentially less effective, audit procedures.

EFFECT OF AUDIT EXPERTISE, COMPLIANCE PRESSURE, TASK COMPLEXITY, AND EXPERIENCE ON AUDIT JUDGEMENT

This study aims to analyze the effect of audit expertise, compliance pressure, task complexity, and experience on audit judgment. Sampling techniques use in this research is convenience sampling. The sample in this study are 93 respondents in several Public Accounting Firm in Special Capital Region of Jakarta area. This research is using the test of validity, reliability test, multiple linear regression test, F test, and also t-test. Based on the results of the study, shows that the audit expertise, compliance pressure, task complexity, and experience have a positive effect on auditor judgment.

PENGARUH PENGALAMAN KERJA, GENDER DAN PENGETAHUAN MENDETEKSI FRAUD TERHADAP AUDIT JUDGMENT ( PENDAPAT PROFESIONAL AUDITOR )

According to the results of research that has been conducted in KAP East Jakarta are 1. Work experience, gender, and knowledge of detecting fraud have a positive effect on audit judgment because the auditor in conducting audit judgment is seen from experience that matches the criteria and must be professional. 2. The auditor's experience has a positive influence on audit judgment because an experienced auditor will be able to hone sensitivity in information, fraud and misstatement of financial statements, which are related to making Judgment, the experience an auditor has by making the auditor learn from past mistakes in order to be able make better judgment. 3. Based on research that has been done shows that gender has no effect on audit judgment. This means that if gender is increasingly dominated it will not affect the level of understanding of audit judgment. 4. Based on research saying that the knowledge of detecting fraud has a significant effect on audit judgment, which means that the greater the knowledge of an auditor in detecting fraud, then an auditor will make it easier for auditors to examine financial statements

Audit Judgment of Government Auditors: Study in Supreme Audit Institutions of Republic Indonesia South Sumatera Representative Office

Audit Judgment of Government Auditors: Study in Supreme Audit Institutions of Republic Indonesia South Sumatera Representative Office

Pengaruh Tekanan Ketaatan Pada Audit Judgment Dengan Religiusitas Sebagai Variabel Pemoderasi

Obedience pressure is one of the factors that can influence audit judgment. This compliance pressure arises due to the expectation gap that occurs between the entity examined and the auditor that has caused conflict for the auditor. Previous research suggest that obedience pressure is not consistently affecting audit judgment. The aim of this research is to gather empirical evidence of the effect of obedience pressure on audit judgment with religiosity as moderating variables. The sample for this research is taken with census sampling method. The data were collected by using questionnaire, given to 65 auditors who work at Public Accountant Firm all over the Province of Bali. The data were analysed using Simple Linier Regression and Moderated Regression Analysis (MRA). The result showed that obedience pressure is negatively affecting audit judgment and religiosity is able to moderate the effect of obedience pressure on audit judgment. 
 Keywords : Obedience Pressure; Audit Judgment; Religiosity.

When Is the Averaging Effect Present in Auditor Judgments?

ABSTRACTAuditing standards task auditors with collecting sufficient appropriate evidence to form audit judgments. Yet, cognitive psychology documents a robust finding in which people evaluate a bundle of relevant, directionally consistent evidence as though averaging the strength of the components. In consequence, a bundle of evidence may be viewed as weaker evidence than the bundle's strongest evidence item alone. We experimentally examine whether this averaging effect occurs in an audit context, and we test a potential moderator. In three independent mini‐cases, we ask auditor participants to make judgments about going concern, internal controls, and fraud risk. We present auditors with unfavorable audit evidence relevant to each judgment, manipulating whether we present a single strong evidence item or bundle it with a weaker evidence item. We also manipulate the auditor's initial impression of the client's state. We find that experienced auditors succumb to the averaging effect, making more strongly unfavorable judgments in response to the single evidence item than the bundle, and that this bias is reduced when the observed evidence is inconsistent with the auditor's initial impression. We interpret our results as consistent with the dual‐processing theory of cognition.

Sistem Informasi dan Auditing (ASPSIA-Publik)

ABSTRAKUntuk melihat konsistensi dari kinerja suatu perusahaan dibutuhkan suatu alat yaitu laporan keuangan. Agar laporan keuangan relevan, handal, dan bebas dari salah saji material maka diperlukan penilaian pihak independen yaitu auditor. Auditor dalam proses auditnya mengeluarkan opini berdasarkan audit judgement terhadap laporan keuangan yang diperiksanya. Penelitian ini bertujuan untuk menguji pengaruh aspek perilaku individu yang terdiri dari pengetahuan, pengalaman audit, tekanan ketaatan dan kompleksitas tugas serta aspek psikologis self efficacy sebagai variabel moderating terhadap audit judgement auditor di Kantor Akuntan Publik Surabaya.Objek penelitian ini adalah pengujian terhadap pengetahuan, pengalaman audit, tekanan ketaatan, kompleksitas tugas dan self efficacy terhadap audit judgement. Data yang digunakan dalam penelitian ini diperoleh dari kuesioner yang disebarkan pada auditor yang bekerja di Kantor Akuntan Publik di Surabaya yang terdaftar dalam Directory Institut Akuntan Publik Indonesia 2017, dengan masa kerja minimal 2 tahun (auditor partner). Analisis data yang digunakan yaitu SmartPLS 3.0. Hasil penelitian ini menujukkan bahwa pengetahuan berpengaruh positif signifikan terhadap audit judgement. Sementara pengalaman audit tidak berpengaruh positif terhadap audit judgement dan tekanan ketaatan serta kompleksitas tugas tidak berpengaruh negatif terhadap audit judgement. Self efficacy sebagai variabel moderating hanya mampu memoderasi tekanan ketaatan terhadap audit judgement.

PENGARUH GENDER, TEKANAN KETAATAN, INDEPENDENSI, TEKANAN ANGGARAN WAKTU, DAN PENGALAMAN AUDITOR TERHADAP AUDIT JUDGMENT (Studi Empiris Pada Auditor Kantor Akuntan Publik Di Wilayah Surabaya)

ABSTRACTAuditor must always have the nature and character (Gender) whether men and women in making decisions or audit judgment. And auditors should follow the rules and policies and applicable regulations in Indonesia, if the auditor comply (Pressure Obedience) regulation it certainly will occur independent character in taking decisions (audit Judgment) accurate. If an independent identity is formed in the auditor the company's health will be better again. The auditor also should be able to share time in taking decisions affecting the value of the services because negotiated between the client (Time Budget Pressure) allow for quicker completion and immediately take a decision (judgment audits) within the deadline specified by the client. Not only this, but of all of them, in the auditor's experience can also influence the decision where to experience - previous experience could be a reference to a decision (audit judgment). This study aimed to determine the effects of gender, stress obedience, independence, time budget pressure, and the experience of auditors on audit judgment. This study uses a quantitative descriptive approach. The population in this study is the external auditor who worked in public accounting firms Surabaya of 60 people. A sampling technique that uses purposive sampling, in order to obtain 41 respondents. The data analysis technique used is multiple linear regression. The results showed that the partial variables: (1) Gender has a positive and significant impact on the Audit Judgment with sig (0.013 <0.05), (2) Pressure Obedience does not have a positive and significant impact on the Audit Judgment with sig (0882 <0.05), (3) Independence of positive and significant influence on the Audit Judgment with sig (0.048 <0.05), (4) time Budget pressure does not have a positive and significant impact on the Audit Judgment with sig (0076 <0 , 05), (5) experience auditors do not have a positive and significant impact on the Audit Judgment with sig (0433 <0.05). From the above results showed that only two variables that affect audit judgment, namely gender and independence.Keywords: Gender, Obedience Pressure, Independence, Time Budget Pressure, Experience Auditor, and Audit Judgment.

Apakah Audit Judgment Dipengaruhi oleh Ukuran Perusahaan, Tekanan Ketaatan, dan Pengetahuan Auditor?

This study aims to examine the effect of company size, compliance pressure, and auditor knowledge on audit judgment. This type of research is quantitative research. The sampling technique was purposive sampling with a sample of 18 companies 56 financial statements. The data analysis technique used in this study is a statistical regression using the IBM SPSS Statistics version 22 program. The results show that: obedience pressure and auditr knowledge influence audit judgment because obedience pressure is influenced by the client and the senior auditor and the level of knowledge influence judgment given the auditor. The size of the company does not affect audit judgment because a small amount of assets does not affect the evaluation results of the auditor's judgment.

Would an Audit Judgment Rule Improve Audit Committee Oversight and Audit Quality?

SUMMARYThe current regulatory environment encourages auditors to engage in “defensive auditing.” That is, auditors must show that they complied with widely accepted standard procedures in order to reduce their exposure to PCAOB inspectors and courts. This could discourage innovation in auditing, since new and innovative procedures are not standard practice. A new stream of research examines a proposed change to legal rules that would protect auditors from being second-guessed, even when they make non-standard judgments, provided that they are made rigorously and in good faith. This proposed “Audit Judgment Rule” (“AJR”) could potentially improve audit quality by encouraging innovation. We review two studies that examine the effects of such an AJR on the judgments of audit committee members and auditors. Results of these studies suggest that an AJR may have unintended consequences, reducing audit innovation and audit quality. We discuss implications for implementing an AJR, including directions for future research.

APAKAH BESARAN INSENTIF, KOMPLEKSITAS TUGAS, DAN PENGETAHUAN BERPENGARUH TERHADAP PERTIMBANGAN AUDIT?

This research aims to examine and analyze the influence of work incentives, task complexity, and knowledge of auditors to audit judgment. This research is a qualitative research using primary data from the questionnaire. The sampling method used is convenience sampling, obtained with a sample of 144 auditor respondents from 21 Public Accountants Firm in DKI Jakarta Region registered in Directorate of Indonesian Institute of Certified Public Accountants. The data analysis technique is Structural Equation Model (SEM) based on Analysis Of Moment Structure (AMOS) with AMOS analysis tool 24. This research shows that work incentive and auditor's knowledge have positive and significant influence to audit judgment, while for task complexity has a negative and significant effect on audit judgment.