International Auditing Standards Research Articles

The Impact of International Accounting and Auditing Standards on the Quality of Financial Reporting

Objective: This study aims to measure the impact of applying international standards for financial reporting and auditing on the quality of financial reports for a sample of Iraqi joint-stock companies. Methodology: The study goal is achieved by developing a special form to examine financial reports in addition to a special form to examine the reports of auditors and the extent of compliance with the adopted international standards. To achieve the research objectives, a content analysis method was used for the financial reports of a sample consisting of 18 companies listed on the Iraq Stock Exchange distributed across 8 different sectors of activity. Results: Our findings reveal that most of these companies do not adopt international accounting standards and financial reporting, except for the banking sector. Additionally, statutory auditors do not follow international auditing standards, except for those auditing companies that apply international financial reporting standards. Conclusion: The non-compliance to International Accounting and Auditing Standardsfor the most of listed companies could affect negatively the quality and reliability of financial information provided by them.

The Impact of Transfer Pricing on the Company’s Image. Implications in Audit Work

In an economy strongly marked by globalisation, transfer pricing is at the top of the agenda of taxpayers, tax authorities and regulatory bodies, with its influence manifested primarily in the fiscal area, respectively in the correct determination and proper allocation of the corporate tax base between different jurisdictions or between companies operating within the same jurisdiction. However, transfer pricing transcends the fiscal problematic and significantly influences other aspects of a company's life, one of which is the image reflected in the annual financial statements, including cash flows or financial performance indicators, and through their analysis, the investment decisions of potential users of accounting information. Transfer pricing is, therefore, also a reference point in the audit work carried out at the level of companies part of national or multinational groups and involved in significant intra-group transactions, as compliance or noncompliance with the arm’s length principle directly influences the way in which different elements of income, expenses, results, assets, equity or liabilities are reflected or not in accordance with the true and fair view principle and thus, ultimately, the audit opinion. National and international auditing standards provide recommendations and guidance on how to deal with transfer pricing issues as part of audit engagements, reflecting a continuing concern by professional bodies to develop best practices in this area.

Summary on the Development of Accounting and Auditing Practises towards IFRS-IAS/ISA in Jordan: Historical and Theoretical Perspective

In this article, we take a look at the evolution of accounting in the Middle East [ME] region, with a focus on Jordan. We shall examine the major events in this region’s history and see how they relate to the global accounting agenda, changes in the local and international economic landscape, and other relevant developments. Pay close attention to how cultural and historical factors, in addition to worldwide accounting principles, impact the local accounting environment. The adoption of “International Financial Reporting Standards” [IFRS] by MENA nations is examined, along with the reasons and motives behind it, and the effects on the auditing and accounting professions as a whole. This marks a significant milestone in recent history. This article looks at the history of accounting and auditing in Jordan and how it has developed in relation to the International Accounting and Auditing Standards. It also discusses potential future advances in this field.

Comments of the AFAANZ Auditing and Assurance Standards Committee on Proposed International Standard on Auditing 570 (Revised) Going Concern

AbstractThe International Auditing and Assurance Standards Board (IAASB) issued for public comment Proposed International Standard on Auditing 570 (Revised) Going Concern. The Australian Auditing and Assurance Standards Board (AUASB) and New Zealand Auditing and Assurance Standards Board (NZAuASB) also called for comments. The Auditing and Assurance Standards Committee of AFAANZ prepared a submission, based on the findings reported in extant research, informing a number of the questions asked by the IAASB. This technical note presents the formal submission made to the IAASB.

THE GLOBAL INTERNAL AUDIT STANDARDS – OLD WINE IN NEW BOTTLES?

In this paper the authors suggest that the Global Internal Audit Standards (the IIA’s Standards) issued in January 2024 resemble the placing of old wine in new bottles, insofar as they represent a missed opportunity to truly transform rules-driven Standards into principles-based Standards. This co-authored essay provides two perspectives on the revised Standards: although written independently, and originating from different premises, they both arrive at similar conclusions in favor of principles-based Standards. The authors suggest that the prescriptiveness of the IIA’s Standards continues to petrify individual judgment and critical reasoning, narrowing intellectual and moral horizons in modern internal auditing. By following rules, the focus of internal auditors is misguided toward form over substance, encouraging a checklist-based mind-set that diminishes moral agency. The authors therefore advocate principles-based Standards because they tend to encourage the internal auditor to apply abstract concepts to concrete examples. The authors see unexploited potential inherent in the encouragement of individual judgment, especially when entering the pioneering zone of the pragmatic implementation of the IIA’s Standards – a zone characterized by complexity, chaos, ambiguity, and trade-offs, in which internal auditors are compelled to address WHAT IF types of question. Although the two authors converge in their overall conclusion, they offer alternative reasons for their views, and differing (though perhaps not entirely irreconcilable) suggestions for the future. Lenz draws our attention, in our VUCA and BANI world, and in the age of artificial intelligence, to rethink what it means to be human, and to rethink the skills that make internal auditors strong, influential, and effective. He presents the Trust Triangle that places authenticity as an anchor term to the discourse. Effective internal auditors must have strong human skills: he therefore suggests a model with five competence blocks of the most important skills of the effective internal auditor. There is no need for humans who behave like robots. The refined leitmotif of “The Gardener of Governance: Our nature is Nurture” is suggested as purposeful for internal auditing. O’Regan proposes a future focus on the rigorous application of traditional logic to internal auditing. He suggests that such an emphasis on logic might offset the socially-constructed, slippery, and ever-changing knowledge base of internal auditing, thereby facilitating the development of principles-based standard-setting.

Innovation in Audit and Assurance: A Global Study of Disruptive Technologies

ABSTRACT The study at hand develops the Audit and Assurance Value Chain as a structured framework with four categories: accessing information and data, verifying information, protecting information, and assessing internal controls. After development of the Audit and Assurance Value Chain, it was utilized to categorize emerging technologies derived out of investigations of more than 100 technology innovator companies and interviews with 23 organizations comprising audit and assurance practitioners, regulators, associations, and national standard-setters. The study is based on global data coverage to identify emerging technologies that have not been connected to audit and assurance services before, bringing new insights to the field. Additionally, it emphasizes the importance of the International Auditing and Assurance Standards Board convening power and influence in promoting the adoption of emerging technologies. JEL Classification: M40; M41; M42; O30; O32; O33.

Comments on Exposure Draft for Proposed ISSA 5000, sustainability assurance engagements by the Auditing and Assurance Standards Committee of AFAANZ

AbstractThe Exposure Draft for Proposed International Standard on Sustainability Assurance (ISSA) 5000 has been issued by the International Auditing and Assurance Standards Board (IAASB) because there is increasing demand by stakeholders for assurance of sustainability information. Our recommendations include: (i) a more flexible approach to ethics and quality management instead of the requirements for standards that are at least as demanding as the accounting profession's standards; (ii) more differentiation between the requirements for limited as opposed to reasonable assurance and (iii) more cautious use of the term materiality and clearer definitions of the different materiality concepts to avoid potential confusion.

The entrepreneurship of accounting work and its role in reducing information asymmetry: Evidence from insurance companies

The primary aim of this research is to provide a comprehensive understanding of the role played by entrepreneurial accounting practices in mitigating information disparities, as perceived by employees within the realm of Jordanian financial intermediaries. This role is encapsulated in various components, including accounting systems and policies, international financial reporting standards, international external auditing standards, international internal auditing standards, as well as professional and ethical conduct guidelines. In pursuit of our research objectives, we adopted two distinct methodological approaches. Firstly, a descriptive analytical approach was employed, involving the development of a structured questionnaire to gather primary data pertaining to the assessment of independent variables associated with entrepreneurial accounting practices. The second approach encompassed an applied perspective, seeking to gauge the impact of entrepreneurial accounting practices on reducing information asymmetry. This was achieved by examining the financial statements of insurance companies listed on the Amman Stock Exchange for the period spanning 2016 to 2022, thereby constituting our dependent variable. Rigorous statistical techniques were employed to meticulously analyze the collected data, with the validation of our hypotheses achieved through a comprehensive multiple regression analysis. The findings of this study distinctly underscore the pivotal role played by entrepreneurial accounting practices in ameliorating information asymmetry issues within the corporate economic landscape. A robust and statistically significant correlation emerged between our dependent variable, namely the reduction of information asymmetry, and both the independent variables associated with entrepreneurial accounting practices and their inherent characteristics. This study's significant recommendation extends beyond the mere technical dimensions of accounting, encompassing a call for a holistic reevaluation of the accounting profession. Addressing the enduring phenomenon of information asymmetry among stakeholders is not merely a concern confined to the technical aspects of accounting. Rather, it represents a profound professional and ethical crisis that permeates the entire accounting ecosystem. This crisis emanates from the very foundations and legal frameworks of the profession, extends through accounting standards, and encompasses professional conduct and ethics. Ultimately, it concludes with the supervision and oversight of the quality of professional performance, an obligation shared by accountants, certified auditors, and management alike.

A COMPREHENSIVE ANALYSIS OF THE IMPACT OF GLOBALIZATION ON AUDITING STANDARDS

This article examines the profound impact of globalization on auditing standards, unraveling the complexities faced by auditors in an increasingly interconnected global economy. As businesses extend their operations across borders, auditors grapple with diverse regulatory frameworks, cultural nuances, and evolving business practices. The literature review reveals a compelling narrative, highlighting the imperative for harmonized auditing standards in the face of globalization. The International Auditing and Assurance Standards Board (IAASB) plays a pivotal role in formulating and updating standards to align with the intricacies of a borderless economy. Technological advancements, particularly in data analytics and artificial intelligence, are transforming audit methodologies, enhancing efficiency, and addressing global financial challenges. Challenges emerge in adapting to local variations, requiring auditors to strike a delicate balance between standardization and cultural adaptability. Collaboration and communication among auditors, regulators, and standard-setting bodies emerge as critical elements for success in this dynamic global auditing landscape.

Evaluating the Use of International Standards for Assurance Engagements by Nonaccounting Practitioners

SUMMARY When last revising the International Standard for Assurance Engagements (ISAE) 3000, the International Auditing and Assurance Standards Board (IAASB) determined that it is in the “public interest” for all competent practitioners (including nonaccounting practitioners) to use the ISAEs. The IAASB imposed conditions on such use, that an engagement’s underpinning ethics and quality control frameworks should be disclosed in the assurance report. Although this explicit determination may encourage wider use of ISAEs by nonaccounting practitioners, the conditions imposed may also act as a deterrent. Using a pre-post design on 2,282 international assurance engagements undertaken by nonaccounting practitioners, we identify increased use of ISAEs and greater disclosure of underpinning ethics and quality control frameworks, although some breaches remain. We further find that switches to ISAEs by nonaccounting practitioners have resulted in enhanced transparency of assurance procedures and independence in the assurance report and an increased share of the assurance services market.

IMPLEMENTATION OF INTERNAL AUDIT FOLLOW-UP OF THE INDONESIAN GOVERNMENT INTERNAL AUDIT STANDARDS VERSION AT INSPECTORATE I OF CHIEF INSPECTORATE OF THE SECRETARIAT GENERAL OF THE HOUSE OF REPRESENTATIVES OF THE REPUBLIC OF INDONESIA

This research aims to determine the implementation of the follow-up internal audit recommendations of the Indonesian Government Internal Audit Standards version at Inspectorate I. Based on Attribution Theory by Fritz Heider (1958), human behavior is deviant and tends to benefit itself due to internal and external factors, so supervision and control are needed to achieve good, clear, and clean governance. This research uses a qualitative approach with data collection methods through interviews and documentation studies. This research concludes that Inspectorate I has implemented some of the follow-up internal audit recommendations according to the Indonesian Government's Internal Audit Standards version. The constraints found in mandatory assignments that have not been captured in the Annual Audit Internal Activities Program, absence of monitoring activities, lack of leadership commitment in completing audit internal recommendations, and lack of awareness from clients to complete audit internal recommendations. Therefore, it is necessary to share the mandatory assignments to Inspectorate II through the authority of The Chief Inspectorate, programming audit internal recommendations monitoring 2 (two) times a year, implement audit communication optimally, and cascade the follow-up of auditor internal recommendations to the clients/units Key Performance Indicators.

Non-financial information assurance: a review of the literature and directions for future research

PurposeThis study aims to review the literature on non-financial information (NFI) assurance including external assurance of sustainability reports (SRA) and integrated reports (IRA). The objectives are as follows: provide an overview of academic research; understand the nature of NFI assurance engagements by organising the literature around the five key elements of an assurance engagement; develop a framework for understanding NFI assurance; and provide directions for future research.Design/methodology/approachThe study undertakes a structured literature review of 179 articles published from 1999 to 2023.FindingsThe review identified 324 researchers located in 35 different countries who published 179 articles on SRA and IRA. The researchers, their locations, journals, methods, theories and themes are examined. The literature is structured around the definition of an assurance engagement including a tripartite arrangement, subject matter, a suitable criterion, sufficient appropriate evidence and a written assurance report. A framework for understanding NFI assurance is offered. Avenues for future research, structured around the five elements of an assurance engagement, are presented.Practical implicationsResearchers will benefit from an overview of the literature and guidance on areas for future research. Lecturers can use the findings to develop content for their auditing courses. Reporting managers will benefit from a better understanding of this new form of assurance. Regulators can use this study’s insights to better inform the development of laws and corporate governance codes mandating NFI assurance. Standard setters can use these findings to guide the emergence of the new assurance standards. Assurance practitioners may use this research to inform practice.Social implicationsThe findings may prove useful in addressing capture, which deters NFI assurance from enhancing disclosure credibility and fulfilling its transparency and accountability role. This is to the detriment of the wider society.Originality/valueThe consolidation of the literature around the five key elements of an assurance engagement is unique. The framework devised offers useful insights into the dynamics of assurance generally and NFI assurance more specifically. The study is timely given the new European Union regulations on NFI reporting and assurance and the work of the International Audit and Assurance Standards Board in developing a specialist NFI assurance standard.

Effect of Audit Regulations and Litigation on Auditors’ Liabilities: A Subjective Approach

In this review, we take a theoretical look at how audit regulation and litigation have changed the liability landscape for auditors. In order to increase transparency and trust in financial reporting, auditing is a crucial public service. The auditing industry has received a lot of attention, some of it unfavourable, as a result of scandals like Enron and WorldCom in the United States or Parmalat in Europe or Cadbury Nigeria PLC. People all throughout the world have spoken out to demand better audit quality. Due to this, adjustments have been taken to increase audit openness and auditor accountability. However, there is still a need for enhancements to be made. This leads to inquiries into the different requests and concerns, and the extent to which they may be fulfilled (auditors' responsibility). Auditors are put in a difficult position since they are expected to please both shareholders and other interested parties. When it comes to the auditor's responsibilities, each stakeholder group has different priorities and requirements. Several ideas have been developed since the field's inception that attempt to pin down audit's precise purposes. Findings of the study has revealed that regulations and litigations have significant positive and adverse effect on auditors’ liability and the expectations of the stakeholders as a result of audit expectation gap. The conclusion here is that, audit regulations and litigation have a significant relationship with auditors’ liability. Irrespective of the outcome of audit litigations as a result of auditors’ negligence to duty, there is an impact on the affected organizations. Therefore, auditors should carefully practice in accordance with national and international auditing standards in order to sustain the good reputation of the organizations.

Институциональные основы аудита

The article presents an overview of the development of the system of institutional regulation of auditing activities in Russia. A comparison was made of previously adopted Russian auditing standards and international auditing standards that are currently in force in the Russian Federation. At the same time, the question was raised about the advisability of introducing international auditing standards in the Russian Federation and abolishing Russian auditing standards, which were already developed taking into account international auditing standards, but in Russian and adapted to Russian accounting and auditing practice. The article presents the dynamics of the number of legal entities and individuals eligible to carry out audit activities in Russia and the dynamics of their income for the period from 2018 to 2022. Based on the eight principles of institutional design formulated by E. Ostrom at the end of the 20th century, the authors propose the basic principles necessary for determining the institutional framework for audit, the observance of which will ensure the development of audit activities and maintaining a high level of audit services quality.

Audit evidence, technology, and judgement: A review of the literature in response to ED‐500

AbstractIn October 2022, the International Auditing and Assurance Standards Board (IAASB) issued Exposure Draft 500 (ED‐500). This is focused on revising and integrating the standard auditors use when evaluating audit evidence during an external audit. This study contributes to the ongoing discourse as the IAASB evaluates feedback to ED‐500 and executes its standard‐setting agenda. We review academic literature published in the past 10 years to synthesize extant knowledge specifically on the use of technology and the application of professional skepticism during audit evidence evaluation. Our review offers factors the IAASB should consider when seeking to modernize and future‐proof its standards, suggesting improvements to the proposed ED‐500. We also identify fruitful avenues for future academic research.

Specifics of the Implementation of PPP Standards: Analysis of the State Audit on the Example of Foreign Practice

The necessity to develop a state policy in the field of rational use of regional assets is due to the need to overcome the consequences of the economic crisis in the context of the introduction and development of effective application of international auditing standards in our country. This makes it possible to understand the requirements of the standards better, as well as accelerate their implementation into domestic audit practice. The study identifies the principles and strategic goals of public policy. In order to work successfully with the private sector, public authorities need to understand the fundamental principles and goals underlying PPPs clearly. Under PPP agreements, private sector contractors become long-term service providers rather than just initial developers of assets, combining the responsibilities of designing, creating, operating and possibly financing assets to provide services needed by the public sector. The article concludes that all the considered models of public policy development generally follow a common algorithm for making political decisions: interests - priorities - risks - goals - resources - decisions. Models define universal characteristics that are characteristic of policy-making processes. In conclusion, it is noted that in the process of developing and implementing state policy in the field of rational use of regional assets, it is necessary to take into account that its main role should not be in the distribution of income between regions but in creating conditions for involving regional assets in production processes through their rational use, in order to increase the economic activity of regions and the quality of life of their population.

Evaluating the Crucial Role of External Auditors in Mitigating Corruption Risk

The justification for the ongoing survey is to review the commitment of outside examiners equivalent to corporate defilement and highlight the repercussions for outer review controllers. The current review is based on an in-depth analysis of the International and American Auditing Standards for fraud and illegal acts and a critical review of earlier academic literature. Outside inspectors commit to evaluating defilement gambles, yet outer review controllers did not unquestionably portray their occupation. The ongoing survey was first to make sense of the commitment of outside reviewers regarding corporate debasement and to uncover knowledge of current cutoff points in the review guidelines related to this area. The back-and-forth movement furthermore presents a proposition to review controllers, outside inspectors, review firms, and examiners in such dubious regions.

Factors Affecting Audit Quality: Evidence from Jordan

This study aims to recognize the factors that affecting the quality of audit from the perception of external auditors in Jordan, namely (professional competence and auditor qualification, auditor availability and independence, auditor professional experience, auditor aware of the importance of audit quality, audit fees), by analyzing the study variables and showing their impact on the audit quality and making recommendations on raising the level of performance of the profession. To achieve the objectives of the study and test its hypotheses a questionnaire will be designed after reference to previous studies, International Auditing Standards, and legal accounting regulatory Law No. 73 of 2003. Keywords: audit quality, professionalism, availability, professional experience, audit fees.

Towards International Standard on Auditing of Financial Statements of Less Complex Entities: A Comparison with the International Standards of Auditing

Bağımsız denetim faaliyetinin kapsamı ülkemizde 6102 sayılı Türk Ticaret Kanunu’nun yürürlüğe girmesi sonrasında genişletilmiş ve bağımsız denetimde uluslararası standartlar benimsenmiştir. Kanunun uygulamaya girmesinden sonra ise farklı tarihlerde denetime tabi olma şartı değiştirilerek daha fazla işletme bağımsız denetime tabi olmuştur. Bu genişleme ile denetime tabi olan işletmelerin büyüklükleri arasındaki fark artmıştır. Ayrıca hali hazırda Uluslararası Denetim Standartları’na yönelik geçmişten beri var olan karmaşıklık eleştirileri, standartlarda çeşitli değişikliklerin yapılmasını sağlamış olmakla birlikte daha az karmaşık işletmeler için de ayrı bir standart seti hazırlanması gündeme gelmiştir. Uluslararası Denetim ve Güvence Standartları Kurulu (IAASB) tarafından bu yaklaşımla “Daha Az Karmaşık İşletmelerin Mali Tablolarının Denetimi için Uluslararası Standart (ISA for LCE)” hazırlanarak taslak set kamuoyu görüşüne sunulmuştur. Bu araştırmada standardın hazırlanma süreci, temel özellikleri ve Uluslararası Denetim Standartları ile karşılaştırılması (taslak üzerinden) ele alınmıştır. Daha az karmaşık işletmeler için hazırlanan standart setinin daha kısa ve anlaşılır ifadelerden oluştuğu, eylem odaklı olarak denetçiye somut adımlar öngördüğü ve bazı alanlarda denetçiye daha az sorumluluk yüklediği tespit edilmiştir

The Quality Management System – A New Approach to The Continuous Improvement of The Quality of Audit Missions

Regulatory norms are periodically renewed. In this regard, International Standards on Auditing (ISA), including quality standards, are no exception as they continue to generate increased interest in the current context. Therefore, the International Auditing and Assurance Standards Board (IAASB) has published a set of new and revised standards on their website, to be implemented starting from December 15, 2022.