Contract Audit Research Articles

VarLifter: Recovering Variables and Types from Bytecode of Solidity Smart Contracts

Since funds or tokens in smart contracts are maintained through specific state variables, contract audit, an effective means for security assurance, particularly focuses on these variables and their related operations. However, the absence of publicly accessible source code for numerous contracts, with only bytecode exposed, hinders audit efforts. Recovering variables and their types from Solidity bytecode is thus a critical task in smart contract analysis and audit, yet this is a challenging task because the bytecode loses variable and type information, only with low-level data operated by stack manipulations and untyped memory/storage accesses. The state-of-the-art smart contract decompilers miss identifying many variables and incorrectly infer the types for many identified variables. To this end, we propose VarLifter, a lifter dedicated to the precise and efficient recovery of typed variables. VarLifter interprets every read or written field of a data region as at least one potential variable, and after discarding falsely identified variables, it progressively refines the variable types based on the variable behaviors in the form of operation sequences. We evaluate VarLifter on 34,832 real-world Solidity smart contracts. VarLifter attains a precision of 97.48% and a recall of 91.84% for typed variable recovery. Moreover, VarLifter finishes analyzing 77% of smart contracts in around 10 seconds per contract. If VarLifter is used to replace the variable recovery modules of the two state-of-the-art Solidity bytecode decompilers, 52.4%, and 74.6% more typed variables will be correctly recovered, respectively. The applications of VarLifter to contract decompilation, contract audit, and contract bytecode fuzzing illustrate that the recovered variable information improves many contract analysis tasks.

Decentralized Finance (DeFi) assurance: early evidence

Decentralized finance (DeFi) has emerged to offer traditional financial services such as lending, borrowing, and trading without intermediaries (e.g., banks). DeFi transactions are typically executed using a special digital class of contracts called smart contracts. These contracts are self-executing and hard-coded directly on a blockchain. We observe the emergence of a new class of voluntary audits that evaluate the integrity of these contracts. Using a hand-coded sample of about 8,500 smart contract audit reports, we provide some of the first evidence showing that (1) these audits are pervasive, (2) the audit firm market is composed of new technical audit firms, (3) the scope of these audits can span a variety of contract features, (4) the audit inputs and outputs differ substantively from those of conventional financial audits, and (5) the market reacts positively to the release of these audit reports, suggesting that these reports are value-relevant. These findings highlight the demand for novel assurance services driven by blockchain technology.

DSCAPS: A decentralized smart contract auditing platform based on sidechain

Successful attacks on smart contracts can result in loss of digital assets with potential financial and reputation implications. This reinforces the importance of auditing smart contracts prior to deployment. However, existing auditing approaches are generally non transparent, inefficient, limited to known bugs, and imprecise due to lack of real-world information in the blockchain. Therefore, we design a Decentralized Smart Contract Auditing Platform based on Sidechain (DSCAPS) in this paper. DSCAPS leverages the two-way peg sidechain technology to implement the interactions between the main chain and the sidechain which is used as the audit chain platform. Unlike conventional centralized audits, blockchain users can evaluate the security of contracts in a real-world smart contract execution environment by designing an appropriate incentive mechanism. Thus, detection results will be more comprehensive and precise. Moreover, to prevent multi-party collusion from manipulating the blockchain or audit process, we introduce a margin mechanism. Findings from our security analysis demonstrate that DSCAPS can mitigate potential threats. Evaluation findings based on the system implementation also show that DSCAPS is efficient in auditing a contract with performance overheads of less than 10%.

Bibliometric Analysis of Intelligent Systems for Early Anomaly Detection in Oil and Gas Contracts: Exploring Recent Progress and Challenges

The oil and gas industries are crucial to global economies, influencing geopolitics, driving technological advancements, employing millions, and impacting financial markets. The complexity and the volume of data generated by these industries demonstrate the need for efficient information management, where effective contract audits play a key role in ensuring market stability, transparency, fair revenue distribution, corruption mitigation, and enhancing industry integrity to attract investors. This study employs bibliometric analysis to explore the application of machine learning (ML) in detecting anomalous contracts within the oil and gas industry. This analysis identifies key research and challenges, laying the groundwork for further computational ML advancements. The PRISMA guidelines identify ML’s role from 2018 to 2023, including post-COVID-19. Principal component analysis (PCA) evaluates the bibliometric contributions of different countries and institutions. China, Indonesia, Egypt, Saudi Arabia, the University of Antwerp Operations Research Group, and the University of Pittsburgh emerge as significant contributors. These findings underscore ML’s pivotal role in fraud detection, risk mitigation, and cost savings, concluding that anomalous contract detection remains open to newer ML techniques and ongoing research.

Access control scheme based on blockchain and attribute-based searchable encryption in cloud environment

With the rapid development of cloud computing technology, how to achieve secure access to cloud data has become a current research hotspot. Attribute-based encryption technology provides the feasibility to achieve the above goal. However, most of the existing solutions have high computational and trust costs. Furthermore, the fairness of access authorization and the security of data search can be difficult to guarantee. To address these issues, we propose a novel access control scheme based on blockchain and attribute-based searchable encryption in cloud environment. The proposed scheme achieves fine-grained access control with low computation consumption by implementing proxy encryption and decryption, while supporting policy hiding and attribute revocation. The encrypted file is stored in the IPFS and the metadata ciphertext is stored on the blockchain, which ensures data integrity and confidentiality. Simultaneously, the scheme enables the secure search of ciphertext keyword in an open and transparent blockchain environment. Additionally, an audit contract is designed to constrain user access behavior to dynamically manage access authorization. Security analysis proves that our scheme is resistant to chosen-plaintext attacks and keyword-guessing attacks. Theoretical analysis and experimental results show that our scheme has high computational and storage efficiency, which is more advantageous than other schemes.

Research on the Influence Mechanism of Media Supervision on Audit Fees

As an informal external governance mechanism, media supervision is known as the "fourth party right" independent of the legislative, judicial and administrative systems, and plays the role of "economic police". Its corporate governance effect has been unanimously recognized by scholars at home and abroad. Audit fees have always been a hot issue in the field of finance. There are many factors that affect audit fees, from the characteristics of companies and firms to risk factors such as corporate governance, and then to the external environment. At present, formal external environmental mechanisms such as laws and regulations and government supervision are considered in the study of the influence of external environmental factors on audit fees. Based on the audit contract theory and signal transmission theory, the "agenda-setting" theory of journalism and communication, the "bedding effect" and "framework" theory of psychology as the analytical framework, this paper uses the controllable accrued profit as the measurement index of audit quality, and studies the mechanism of media supervision on the audit quality from the perspective of negative media reports and media supervision environment, as well as the impact of media supervision on the audit quality of auditor changes. The research shows that the degree of negative media coverage of listed companies and the media supervision environment are positively correlated with audit quality.

Study on factors affecting audit fees and audit quality through auditors’ perceptions: Evidence from an emerging economy

Audit fees and audit quality have received the attention of stakeholders, clients, audit firms, and third parties. Each subject has its own opinion on determining influencing factors and their relationship. This study aims to investigate the determining factors of audit fees and audit quality in Vietnam. Using random data collection, a questionnaire was created on Google forms and sent to auditors from the 4th quarter of 2020 to the end of the 1st quarter of 2021. 267 valid auditors’ responses in 28 audit firms were used for data analysis. Exploratory factor analysis (EFA) was used to determine relationships between observed variables and factors. The measurement model and recommended hypotheses were confirmed by structural equation modeling (SEM) using SPSS 26 and AMOS 26. The study results show that contract types and audit complexity, audit firms’ reputation, size, and risk significantly impact audit fees and audit quality. In addition, the specialization of the audit firms does not have a positive effect on audit quality but on audit fees. The audit tenure has no statistical impact on audit fees and audit quality. Notably, audit fees statistically affected audit quality. Several implications can be applied, such as increasing the firm size, performing the procedures in response to audit risk, separating audit contract types, and determining the complexity of audit projects and specialties.

The Reflection of the Adoption of IFRS 17 “Insurance Contracts” on the Procedures for Auditing Insurance Contracts in the Iraqi Environment

IFRS 17 aims to provide a unified basis for accounting for all types of insurance contracts, including reinsurance contracts, in a manner that benefits both investors and insurance companies and enhances the ability of the financial statements of insurance companies for comparison between companies listed in financial markets around the world. According to this standard, insurance contracts are accounted for on the basis of the Asset-Liability Approach and the use of fair values that the standard requires updating regularly in order to provide more useful information to the users of financial statements, as a result of the failure of reporting requirements for insurance contracts in the Iraqi environment to provide adequate and honestly representative information about the result of the activity and the financial position as a result of the failure of the requirements of the unified accounting system for banks and insurance companies with regard to providing appropriate bases for recognition, measurement, presentation and disclosure of insurance contracts compared to IFRS 17. Consequently, the insurance contracts audit program prepared by the Federal Board of supreme audit is insufficient and lacks the necessary procedures, also, this program includes audit procedures for insurance companies only and does not include companies that deal in contracts of an insurance nature, as well as the absence of an integrated program or guide approved by private auditing companies and offices in the Iraqi environment for the purpose of auditing these contracts, which requires a statement of the importance of adopting the International Financial Reporting Standard IFRS 17 and its reflection on the audit procedures that auditors must adopt when auditing insurance contracts. The two researchers relied on the opinions of a sample of academics and professionals specialized in this field by preparing a questionnaire that focused on the importance of adopting IFRS 17 and the reflection of adoption on the procedures for auditing these contracts in the Iraqi environment. The most prominent finding of the research is the need to adopt IFRS 17 because it provides clear and specific guidelines that help provide more useful information to users of financial statements in companies that deal in insurance contracts, as well as the impact of adopting this standard on the insurance contract audit procedures approved by the Federal Board of supreme audit and private auditing companies and offices in the Iraqi environment

Effect of Public Procurement Audit on Performance of State Corporations in Kenya

Purpose: The purpose of the study was to assess the effect of public procurement audit on performance of state corporations in Kenya.Methodology: The study employed a descriptive research design, targeting heads of procurement in state corporations. As a rule of thumb when the population is below 200, a study does a census. The researcher preferred this method because it allowed an in-depth study of the subject. Data was collected using self-administered questionnaires. Pilot study was carried out to establish the validity and reliability of the research instruments. The instruments were designed appropriately according to the study objectives. The data collected was analyzed by use of descriptive and inferential statistics. The study used multiple regression and correlation analysis to show the relationship between the dependent variable and the independent variables. The data generated was keyed in and analyzed by use of Statistical Package of Social Sciences (SPSS) version 24 to generate information which was presented using charts, frequencies and percentages.Results and conclusion: The findings of the study concluded that preparation and planning auditing, information and publicity auditing, evaluation of received tenders auditing, award and execution of contract auditing have a positive relationship with performance of state corporations in Kenya. The independent variables reported R value of 0.876 indicating that there is perfect relationship between dependent variable and independent variables’ square value of 0.768 means that 76.8% of the corresponding variation in performance of state corporations in Kenya can be explained or predicted by (preparation and planning auditing, information and publicity auditing, evaluation of tenders auditing and award and execution of contract auditing) which indicated that the model fitted the study data. The results of regression analysis revealed that there was a significant positive relationship between dependent variable and independent variable at (β = 0.761), p=0.000 <0.05).Unique contribution to theory, policy and practice: The study recommended that public institutions should embrace public procurement audit so as to improve performance and further researches should to be carried out in other public institutions to find out if the same results can be obtained.

Are Your Quality Assessment and Assurance Documents Safe From Prying Eyes?

Are Your Quality Assessment and Assurance Documents Safe From Prying Eyes?

감사계약 기간 동안 비정상 감사보수 변동과 감사품질 : 초도감사를 중심으로

감사계약 기간 동안 비정상 감사보수 변동과 감사품질 : 초도감사를 중심으로

External Verifiability of Accounting Information and Intangible Asset Transactions

Firms commonly use disaggregated accounting information to facilitate efficient contracting over intangible assets. However, reliance on accounting measures creates information asymmetries and thus a role for contract audits. Using a hand-collected sample of technology licensing agreements with royalties based on product-line revenues, I investigate how perceived weaknesses in the licensee’s accounting system and reporting flexibility affect the design of two key audit terms — (1) the scope of audit rights, and (2) penalties for adverse audit outcomes. I find that perceived weaknesses in the licensee’s reporting system lead to the granting of broader audit rights to the licensor, consistent with licensors demanding broader auditor rights when the licensee’s accounting system is believed to be less reliable. However, when the licensee has greater reporting flexibility, the contracting parties are more likely to include penalties in their agreements, consistent with the deterrence theory that penalties are a more cost-effective means to discourage intentional misreporting. Licenses covering more territory and having longer durations are associated with narrower audit scope terms, consistent with the self-enforcement theory that the greater the opportunity cost of early termination, the greater the licensee’s incentives to self-enforce. Overall, my results suggest that audit scope and penalties can improve contracting efficiency in two ways.

The Effectiveness of Audit Industry Supervision: Empirical Evidence Based on Firm Strategy Choice after CSRC Administrative Punishment

Compared with the audit markets in China and abroad, the disciplinary risks faced by the firms are different. In China, the Ministry of Finance and China Securities Regulatory Commission （hereinafter referred to as CSRC） as the government supervision and administration departments raise the auditors’ disciplinary risks. In recent years, CSRC has gradually stepped up the penalties for accounting firms that fail to provide fair audits due to the disclosure of low-quality audit reports; for instance, Shenzhen Pengcheng （the largest accounting firm in South China） was revoked securities business license because of the auditing failure of Green Globe IPO in May 2013. In 2017, Ruihua, the largest accounting firm with Chinese domestic equities, was judged sparing in its efforts to the business of Yatai Industrial Company and its business partners were required not to leave, step out or change the firm by CSRC. Xinyongzhonghe, another famous audit firm in China was punished for 4.4 million RMB for the lack of diligence in the audit of Dengyun Auto-Parts Co. Therefore, under the circumstance that the trend of supervision and punishment of CSRC is intensified, whether audit quality of accounting firms is improving or not is receiving more and more attention in China. In theory, penalties affect the reputation of accounting firms, resulting in reduced audit fees and the risk of loss of customers. However, penalties could be seen as a signal that leads to changes in audit quality including firms having been punished or not. Their choice could improve the audit quality or do nothing. The existing research only deals with the accounting firms that have been punished; however, the strategies of both punished and unpunished firms about how they react to punishment are worth considering. Therefore, this paper focuses on studying whether accounting firms choose to improve the audit quality or not after being punished by CSRC, and whether those unpunished firms choose to improve the audit quality or not due to the signal of penalty announcement, to probe deeply into the effectiveness of regulatory penalties in the audit industry. Based on the issuance of the Administrative Punishment Announcement of CSRC between 2002 and 2015, the public companies are classified into four types: companies whose punished audit firms are not changed before and after the announcement, companies whose punished audit firms are changed into unpunished one after the announcement, companies whose unpunished audit firms are changed into punished one after the announcement, and companies whose audit firms have never been punished. We match the first three types to the last type. This paper provides a detailed analysis of possible strategy choices made by different firms, and empirically shows that the punished firms may have a passive reputation reshaping behavior due to the increasing disciplinary risk after the announcement, thus improving the audit quality. Contrarily, the unpunished firms, whose audit quality has no significant change, are not affected by the punishment announcement. The ultimate audit qualities of the punished firms are not less than the unpunished ones, indicating the effective supervision of CSRC in improving the quality of the audit industry. Different from the paired sample studies conducted by previous scholars, this paper further analyzes the audit quality of the industry as a whole after a game analysis of the behavior strategies of the unpunished and the punished. The results bring more empirical evidence for the effectiveness of CSRC’s administrative punishment and confirm the restraint effect of the reputation mechanism on the CPA. It also has the policy reference to the regulatory authorities such as CSRC, China AICPA and the Ministry of Finance; moreover, signing an audit contract with an accounting firm also has a very important reference.

The Effect Of Auditor Change On Initial Audit Fee Discount And Non-Audit Services

The purpose of this research is to verify whether non-audit services are provided without additional fees at the initial audit as a strategy to win an external audit contract, which could give the appearance of initial audit fee discount. From the results, non-audit services are provided at the initial audit, and the initial audit fee is discounted accordingly, only when the independent auditor is changed from a Big 4 accounting firm to a non-Big 4 accounting firm. However, there is no meaningful relevance in any other types of changes. Therefore, if the auditor is changed from a Big 4 accounting firm to a non-Big 4 accounting firm, non-audit services are provided without additional fees in order to win an external audit contract, and the publication of audit fees with a division between the audit service fee and the non-audit service fee may give the appearance of a discounted audit service fee.

Cost and price auditing: effectiveness in the procurement of defense services in Spain

Abstract Contract auditing, or cost and price auditing, has been applied in Spain as a means of determining prices in non-competitive defense contracts since 1989. Factors such as Spain's participation in international defense organizations, the characteristics of the defense market and the contractual legal framework for the procurement of defense goods and services help underscore the need for the Spanish Ministry of Defense to implement cost and price auditing. With the evolution of cost and price auditing in Spain in mind, this paper analyses the entire process, describes the audit procedures that are most commonly used today and assesses the main results achieved, in terms of financial savings. The results obtained show that cost and price auditing does indeed contribute to a more efficient use of public resources.

Auditing procurement contracts for defense material in Spain: In the footsteps of the U.S. model

In Spain contract auditing has been applied since 1988 to determine the final cost of defense procurement contracts. In this respect, the Spanish Department of Defense takes the US methodology as a reference model, and therefore it may be useful to study the degree of convergence between the two models. The main objective of this paper is to analyze the degree to which the US contract auditing model for the procurement of defense materiel has influenced the system applied in Spain. Accordingly, the comparative method is used to highlight the main features of the contract auditing models used by the Spanish and the US Departments of Defense. The results obtained show that the methodology used by Spain is not an original approach, but that there is only a low degree of convergence with the US model.

Auditing defence procurement contracts in the European context: an inter-country analysis

The contract audit is an instrument facilitating the evaluation of prices offered and costs incurred in non-competitive defence contracts. In this study we analyse the degree of harmonization of contract auditing models among four European countries by means of a comparative analysis of the characteristics of contract auditing in these countries. We identify similarities and differences among the contract auditing models applied in these countries, and conclude that they do not present a high degree of harmonization of defence contract cost evaluation. Points for practitioners This comparative study highlights the similarities and differences among the audit models for defence contracts in four European countries (the UK, France, Spain and Norway). The authors present the main characteristics of each model and systematize the features inherent to a possible common model that could be achieved by harmonizing audit practices and the rules applicable to the corresponding cost calculations. Finally, the authors recommend further progress be made in harmonizing the audit practices applied in NATO countries for defence contracts.

Understanding Contract Audits: An Experimental Approach

SUMMARY A contract audit is a buyer-initiated audit of prices and other conditions, which aims to decrease the information asymmetry between a buyer and a seller. Contract audits are frequently used in monopolistic or oligopolistic markets, as in government procurement. We draw upon three distinct literatures to develop hypotheses (transaction cost theory, the theory of planned behavior, and social preference theory) and test these hypotheses using data obtained in a laboratory experiment. Our results show that contract audits are widely used, a phenomenon that cannot be explained by traditional economic reasoning. Their demand is well explained by the theory of planned behavior, however. Our data show that contract audits decrease transaction costs by increasing the probability of successful negotiations. Audits lead to an increased share of the trade surplus for the buyer, but this increased welfare may be offset by the audit costs. They also yield lower transaction prices.

Understanding Contract Audits: An Experimental Approach

Contract audits aimed at reducing information asymmetry and transaction costs are frequently used in imperfect markets such as defense procurement. This contradicts predictions from standard economic theory. We conduct a laboratory experiment to investigate this paradox. Our laboratory setup allows us to investigate the conditions under which individuals decide to initiate a contract audit and to carefully assess its economic value. Our theoretical approach draws upon two distinct literatures. The theory of planned behaviour explains why organizations may engage in contract auditing even when markets are imperfect. Social preference theory explains why traders may adjust prices when a contract audit indicates that the original price yields an inequitable distribution of the surplus. Our results indeed show that audits lead to an increased share of the surplus for the buyer, but this increased welfare is completely offset by the audit costs. To further investigate motivations to initiate contract audits, we measure our subjects' attitudes towards contract auditing and their level of perceived behavioral control; and we manipulate subjective norms about having contract audits done. These treatments show that a positive attitude toward contract auditing, enhanced perceived behavioral control, and pressure to perform a contract audit all lead to more contract audits.

Medicaid Audits To Expand in 2011

You have accessThe ASHA LeaderPolicy Analysis1 Dec 2010Medicaid Audits To Expand in 2011 Mark Kander and Laurie Alban HavensMA, CCC-SLP Mark Kander Google Scholar More articles by this author and Laurie Alban Havens Google Scholar More articles by this author , MA, CCC-SLP https://doi.org/10.1044/leader.PA2.15152010.3 SectionsAbout ToolsAdd to favorites ShareFacebookTwitterLinked In The use of recovery audit contractors (RACs) to review claims, a Medicare program in effect since 2006, will be extended to state Medicaid programs beginning in April 2011. The expansion of the program emerged from the Patient Protection and Affordable Care Act (PPACA), the national health care reform legislation passed earlier this year. Recovery Audit Contractors Audits performed by RACs were mandated by the Tax Relief and Health Care Act of 2006 to identify improper Medicare payments. RACs have been free to examine all Medicare provider settings, including private practices. Hospitals, however, have been the main focus because the Centers for Medicare and Medicaid Services (CMS) has determined that hospitals have been lax in establishing edits to identify faulty claims and have not trained practitioners adequately in coding. Medicaid claims are already subject to Medicaid integrity contract (MIC) audits, which examine integrity issues and overpayments; Medicaid RACs will not replace any existing integrity or audit initiatives or programs. The RAC audits will supplement the integrity programs already in place, and will look at both overpayments and underpayments. There are other differences between the RAC and the MIC programs—the lead time for submitting documentation is longer for the RAC than the MIC, and funding for the MIC is not based on a percentage of any overpayments uncovered, as it is for the RAC program. States must submit to CMS by Dec. 31 amendments to their state plans that establish RAC programs. Full program implementation begins April 1, 2011, subject to extensions and exceptions. Audit Process RAC auditors may review automated claims data or request medical records from the provider and conduct medical reviews (directed by a physician medical director with certified coders and, in some cases, nurses and therapists). If an overpayment is discovered, providers will be expected to reimburse the Medicaid program. Otherwise, future payments will be withheld from the provider. The RAC would receive a fee equal to a designated percentage of the overpayment (established by the contract between the state and RAC). Proposed regulations allow states to determine whether RACs are paid a designated percentage or under another fee structure for identifying underpayments. Each state Medicaid agency will determine its own appeal process for providers who disagree with a RAC decision. Preparing for RAC Audits Audiologists and speech-language pathologists should review their state Medicaid policy manuals to make sure they are familiar with scope of coverage, documentation, and coding rules. Members also should review ASHA’s coding resources and guidelines for assistance in preparing claims. Medicare guidelines may also be helpful because Medicaid programs often adopt many of the Medicare rules. Author Notes Mark Kander, director of health care regulatory analysis, can be reached at [email protected]. Laurie Alban Havens, MA, CCC-SLP, private health plans and Medicaid advocate, can be reached at [email protected]. Advertising Disclaimer | Advertise With Us Advertising Disclaimer | Advertise With Us Additional Resources FiguresSourcesRelatedDetails Volume 15Issue 15December 2010 Get Permissions Add to your Mendeley library History Published in print: Dec 1, 2010 Metrics Downloaded 58 times Topicsasha-topicsleader_do_tagleader-topicsasha-article-typesCopyright & Permissions© 2010 American Speech-Language-Hearing AssociationLoading ...