Total Audit Research Articles

Causal Pathways of Flood Related River Drowning Deaths in Australia

Introduction: Globally, flooding is the most common of all natural disasters and drowning is the leading cause of death during floods. In Australia, rivers are the most common location of drowning and experience flooding on a regular basis. Methods: A cross-sectional, total population audit of all known unintentional river flood related fatal drownings in Australia between 1-July-2002 and 30-June-2012 was conducted to identify trends and causal factors. Results: There were 129 (16.8%) deaths involving river flooding, representing a crude drowning rate of 0.06 per 100,000 people per annum. Half (55.8%) were due to slow onset flooding, 27.1% flash flooding and the type of flooding was unknown in 17.1% of cases. Those at an increased risk were males, children, driving (non-aquatic transport) and victims who were swept away (p<0.01). When compared to drownings in major cities, people in remote and very remote locations were 79.6 and 229.1 times respectively more likely to drown in river floods. Common causal factors for falls into flooded rivers included being alone and a blood alcohol content ≥0.05% (for adults). Non-aquatic transport incident victims were commonly the drivers of four wheel drive vehicles and were alone in the car, whilst attempting to reach their own home or a friend’s. Discussion: Flood related river drownings are preventable. Strategies for prevention must target causal factors such as being alone, influence of alcohol, type/size of vehicle, and intended destination. Strategies to be explored and evaluated include effective signage, early warning systems, alternate routes and public awareness for drivers.

Abnormal audit fees and future restatements: evidence from Tehran Stock Exchange

The aim of this paper is to provide empirical evidence for the impact of abnormal audit fees on future restatements. We examine whether firms that restate their financial statements have higher levels of total audit fees than their counterparts. In this regard, the authors test their hypothesis by performing panel data analysis on a sample of 936 firm-year observations from companies listed on the Tehran Stock Exchange during 2009-2014. We find that there is a negative relationship between the two; specifically, abnormal audit fees are lower in the periods leading up to the occurrence or announcement of the restatement (i.e., the next fiscal year).

The Hidden Tragedy of Rivers: A Decade of Unintentional Fatal Drowning in Australia.

Objective(s)Describe unintentional drowning deaths in rivers, creeks and streams (rivers) in Australia and identify risk factors to inform prevention.Design & SettingThis study is a cross-sectional, total population audit of all unintentional fatal drownings in Australian rivers between 1-July-2002 and 30-June-2012 using Australian coronial data. A modified Bonferroni test has been applied, deeming statistical significance p<0.03 and p<0.04 respectively.ResultsRivers (n = 770; 26.6%) were the leading location among the 2,892 people who died from unintentional fatal drowning. This is a rate of 0.37/100,000 people / annum. Within river drowning deaths common groups include; males (80.4%), adults (85.3%), adults who have consumed alcohol (25.5%), people who fell in (21.3%), people involved in non-aquatic transport incidents (18.2%) and locals (74.0%). Children were 1.75 times more likely than adults (p<0.04) to drown in rivers as a result of a fall and adults 1.50 times more likely to drown in rivers as a result of watercraft incidents when compared to children. When compared to males, females were 2.27 and 4.45 times respectively more likely to drown in rivers as a result of incidents involving non-aquatic transport (p<0.04) and being swept away by floodwaters (p<0.04). Males were 2.66 and 4.27 times respectively more likely to drown in rivers as a result of watercraft incidents (p<0.04) and as a result of jumping in (p<0.04) when compared to females.Conclusion(s)While rivers are the leading location for drowning in Australia, little is understood about the risks. This study has identified key groups (males, adults, locals) and activities. While males were more likely to drown, the risk profile for females differed.

The Effect of Auditor’s Industry Specialization on the Quality of Financial Reporting of the Listed Companies in Tehran Stock Exchange

&lt;p&gt;This study examines the effect of auditor’s industry specialization on quality of financial reporting of the listed companies in Tehran Stock Exchange during the period of 7 years from 2008 to 2014. It is expected that industry specialist auditors will show more competence and auditing quality in discovering opportunistic behavior in executives and most probably they will report financial statements to maintain their reputation; in other words, it is expected that auditors specialized in industry will have an effective role in corporate governance and improving the quality of financial reporting. In this research, the accurate of predicting future cash flows operations through components of the operation profit was served as a measure for the quality of financial reporting and patters of the market share based on the total audited properties of the company and total auditor income was used as auditor expertise characteristics in that audited unit's industry were used. A total number of 119 companies were selected as samples and using logit regression model, the results were analyzed. The findings suggest that auditor's expertise in the industry, has a direct impact on the quality of corporate financial reporting. In this regard, testing the research's hypotheses showed that the auditor expertise in the industry (on the basis of market share pattern based on auditor's total revenue) has no significant effect on the quality of financial reporting. However, if the auditor expertise in the industry (on the basis of market share pattern based on the sum of the audited assets) was to be measured, it will leave a significant effect on the quality of financial reports. Therefore, it is concluded that the factor of the auditor's expertise in the industry is sensitive in relation with the type of indices used to assess it. &lt;/p&gt;

Auditor Pricing of Excess Cash Holdings

We examine auditor business risk by analyzing the relation between excess cash holdings and auditor pricing behavior. Prior research links excess cash holdings to risks associated with manager opportunism and external monitoring. Our analyses provide evidence of a positive relationship between excess cash and audit fees. The economic magnitude of the increase in total audit fees due to an increase in excess cash holdings is approximately 5% greater for firms in the top quartile of excess cash holdings versus those in the bottom quartile. We also find that the strength of shareholder rights reduces the positive relationship between excess cash and audit fees, and excess cash holdings are assigned lower audit fees among firms that follow an investment-intensive strategy than those that tend to hold on to their cash. Our article contributes to the literature by examining auditor pricing of excess cash holdings, including factors that affect auditors’ risk perceptions, and ultimately provides unique insights into how auditors view agency conflicts indicated by excess cash holdings.

Evidence of Organizational Learning and Organizational Forgetting from Financial Statement Audits

SUMMARYThis paper examines the association between audit firm tenure and audit production efficiency. The analyses are based on proprietary audit production data provided by a large international accounting firm. The results document evidence of learning over time. Specifically, repeatedly servicing a client increases production efficiency by reducing the total audit hours expended in an audit engagement. Learning rates vary across different ranks of labor and learning is more pronounced among higher personnel ranks, with lower ranks experiencing little learning. Further, learning rates are not constant over time; there is little incremental learning beyond the initial productivity gains consistent with the concept of the learning curve. Finally, the results show some evidence of productivity losses as audit hours increase for very long tenures consistent with the notion of organizational forgetting.JEL Classifications: M41; M42

Competition in the Audit Market: Policy Implications

ABSTRACTThe audit market's unique combination of features—its role in capital market transparency, mandated demand, and concentrated supply—means it receives considerable attention from policy makers. We explore the effects of two market scenarios that have been the focus of policy discussions: mandatory audit firm rotation and further supply concentration due to the exit of a “Big 4” audit firm. To do so, we first estimate publicly traded firms' demand for auditing services, allowing the services provided by each of the Big 4 to be differentiated products. We then use those estimates to calculate how each scenario would affect client firms' consumer surplus. We estimate that, for U.S. publicly trade firms, mandatory audit firm rotation would induce consumer surplus losses of approximately $2.7 billion if rotation were required after 10 years and $4.7–5.0 billion if after only four years. We find similarly that exit by one of the Big 4 would reduce client firms' surplus by $1.4–1.8 billion. These estimates reflect only the value of firms' lost options to hire the exiting audit firm; they do not include likely fee increases resulting from less competition among audit firms. The latter could result in audit fee increases between $0.75–1.3 billion per year for mandatory rotation and $0.47–0.58 billion per year for the disappearance of a Big 4 audit firm. Such losses are substantial; by comparison, total audit fees for public firms were $11 billion in 2010.

Audit Hours and Unit Audit Price of Industry Specialist Auditors: Evidence from Korea

AbstractHigher audit fees associated with auditor industry specialization could represent higher unit price charged by industry specialist auditors (ISAs) or the provision of a greater quantity of audit services. This study exploits a field setting in Korea, where the disclosure of audit hours is required in company annual reports, and finds that ISAs charge significantly higher total audit fees but also expend significantly greater audit hours than non‐ISAs. When audit fees and hours are considered together, the unit audit price of ISAs is significantly lower than that of non‐ISAs. This indicates that higher total audit fees associated with ISAs are likely to be attributable to greater audit hours associated with ISAs. However, greater audit hours for ISAs may suggest higher audit quality or may simply indicate that the additional audit work performed by ISAs is conducted by relatively cheaper junior auditors. Our work provides an alternative explanation for the higher total audit fees documented in the previous studies.

Audit Firm Tenure, Non‐Audit Services, and Internal Assessments of Audit Quality

ABSTRACTWe use data from internal assessments of audit quality in a Big 4 firm to investigate the impact of audit firm tenure and auditor‐provided non‐audit services (NAS) on audit quality. We find that first‐year audits receive lower assessments of audit quality and that quality improves shortly thereafter and then declines as tenure becomes very long. Partitioning our sample between SEC registrants and private clients, we find that the decline in audit quality in the long tenure range is attributable to audits of private clients. For audits of SEC registrants, the probability of a high quality audit reaches its maximum with very long tenure. We also find that audit fees are discounted for first‐year audits but auditor effort is higher than in subsequent years. We find no association, on average, between total NAS fees and audit quality in the full sample but observe that total NAS fees are positively associated with quality for SEC registrants and negatively associated with quality for privately held clients. Our findings are important for regulatory policies related to audit firm tenure and auditor‐provided NAS.

Audit Committee Financial Expertise: Antidote for Financial Reporting Quality in Nigeria?

Audit committee financial expertise is vital to the quality of financial reporting. This study empirically investigates the impact of audit committee financial expertise on the quality of financial reporting. The financial reporting quality was measured by reliability (total accrual quality) and relevance (audit report lag). Fifteen money deposit banks were selected and data was collected for the period (2003-2012). Analyses were carried out using Correlation, Ordinary Least Square and Panel Lest Square. The study found, after controlling for firm size, audit type, age of firm, audit committee meeting and audit committee size, that, audit committee financial expertise showed a negative coefficient for total accrual quality and audit report lag. This means financial expertise has a positive significant impact on financial reporting quality in Nigeria. The study, therefore, recommends that more attention should be given to the financial expertise of directors being recommended to the audit committee. DOI: 10.5901/mjss.2015.v6n1p136

Estimation of manpower requirement for field research: a sample survey approach

A marketing research organisation employed a large number of field research officers (FRO) for collection of data from the field. A questionnaire-based sample survey approach was used for estimating the optimal number of FROs required for a given workload. The important design inputs for the main country-wide sample survey were obtained through a pilot survey. The data obtained from the main survey were used to obtain accurate estimates of the three components of total audit time: 1) actual audit time; 2) travel time; 3) extra time. These estimates along with the estimate of optimum workload were then used to determine the total number of FROs required. Regression models were also developed for predicting the number of FROs required for a given future workload.

Financial statement comparability and audit efficiency: evidence from South Korea

In this study, we examine the effect of financial statement comparability on audit hours, which we use as a proxy for audit efficiency. We examine the hours worked by auditors in completing 2322 audits in Korea between 2006 and 2010. Audit efficiency can be determined by the total audit effort required to achieve a successful audit. Using a sample consisting of firms maintaining a certain level of audit quality, we investigate whether financial statement comparability reduces audit hours. We find that comparability is negatively associated with audit hours. In addition, we find that the effect of comparability on audit hours is attenuated for firms that are ‘highly followed’ by financial analysts. This study contributes to the literature by proposing a possible way to improve audit efficiency from a unique perspective. While prior studies show that a client’s inherent risk and control risk lower audit efficiency, the results of this study show that comparability between financial statements facilitates audit efficiency. Improvements in audit efficiency reduce the opportunity costs associated with audit effort and thereby enable auditors to spend more time and effort focusing on high-risk engagements. Comparability is one of four qualitative characteristics of accounting information included in accounting conceptual frameworks. Despite the importance of comparability, there is very little research on its benefits. This study makes a unique contribution by measuring audit effort using a large database of audit hours worked by auditors in Korean firms.

P-6 * CUT-OFF SCORE OF THE ALCOHOL USE DISORDERS IDENTIFICATION TEST-CONSUMPTION AND ITS APPLICATION TO DETECT HAZARDOUS DRINKING IN KOREAN MALE POPULATION

Background. The aim of this study was to define optimal cut points of Alcohol Use Disorders Identification Test-Consumption (AUDIT-C) to detect hazardous drinking in the Korean general male population. Methods. This study had recruited subjects among male individuals who were invited to a health check and had excluded those who had any past and present history of alcohol or substance use disorder. Among them, 221 subjects completed the AUDIT and questionnaires about their alcohol consumption. Results. The optimal cut-off point of AUDIT-C was found to be > 6 to detect a hazard drinker based on > 9 of total AUDIT scores. The optimal cut-off point was observed to be > 5 for AUDIT-C to detect a hazard drinker defined as > 14 standard drinks per week or > 4 standard drinks per occasion. According to AUDIT cut-off > 9 and AUDIT-C cut-off > 6 for a hazard drinker, 32.3% subjects were positive for both the AUDIT and AUDIT-C, 9.2% were positive for AUDIT-C only, and 3.7% were positive for AUDIT only. The subjects with AUDIT-positive and AUDIT-C-negative had significantly higher alcohol-related problem score in AUDIT than others. They all had insight in their alcohol-related problem and showed their willing to reduce alcohol drinking. However, the males with AUDIT-negative and AUDIT-C-positive showed lack of insight and willing to reduce alcohol drinking. Conclusions. Our study found the optimal cut points to be 5 or 6 for AUDIT-C to detect a hazard drinker in the Korean male population. Clinicians should apply both AUDIT total score and AUDIT-C score to differentiate individual's characteristics in alcohol-related problem.

Do Accounting Firm Consulting Revenues Affect Audit Quality? Evidence from the Pre- and Post-SOX Eras

The Big 4 accounting firms have experienced a steady increase in the proportion of their revenues generated by providing consulting services post-SOX, primarily to nonaudit clients. Regulators have expressed concerns about the potential implications of this increase for audit quality. In contrast, the accounting firms assert that the expertise developed by their consulting professionals helps them to provide better quality audits. We examine the relation between the proportion of accounting firm consulting revenue to total revenue and audit quality, measured using financial statement misstatements. Our results suggest that, on average, higher consulting revenues are not associated with impaired audit quality. However, higher consulting revenues are associated with reduced audit quality among clients with lower litigation risk. These results support the argument that a cultural shift associated with the provision of more consulting services, even to nonaudit clients, can adversely affect audit quality in some circumstances (e.g., when litigation risk-related incentives for high audit quality are weaker). In addition, although the effect of higher consulting revenues only impacts audit quality among low litigation risk clients, results of earnings response coefficient tests suggest that investors perceive a deterioration in audit quality when a higher proportion of accounting firm revenue is generated from consulting services regardless of the client’s level of litigation risk. These results suggest that regulator and investor concerns about the provision of consulting services (at least at the levels we observe) may be warranted, but only among clients where opposing incentives to provide high audit quality are weaker.

Finding determinants of audit delay by pooled OLS regression analysis

The aim of this paper is to investigate determinants of audit delay. Audit delay is measured as the length of time (i.e. the number of calendar days) from the fiscal year-end to the audit report date. It is important to understand factors that inufluence audit delay since it directly afects the timeliness of financial reporting. The research is conducted on a sample of Croatian listed companies, covering the period of four years (from 2008 to 2011). We use pooled OLS regression analysis, modelling audit delay as a function of the following explanatory variables: audit firm type, audit opinion, profitability, leverage, inventory and receivables to total assets, absolute value of total accruals, company size and audit committee existence. Our results indicate that audit committee existence, protability and leverage are statistically signicant determinants of audit delay in Croatia. Key words: audit delay, timeliness of corporate reporting, listed companies

Effectiveness of a brief intervention for alcohol consumption among Brazilian women in a household setting

At-risk alcohol use is increasing among women and it has been linked to important harm to their health. However, the effectiveness of brief intervention (BI) among women is unclear. Research on the most effective components of those interventions in the female population is necessary, especially in low and middle income countries. The aim of this study was to evaluate the impact of a BI, carried out among women in a household community setting, on their alcohol consumption. Participants were enrolled through a household survey, using a probabilistic sample of 905 adult women in the city of Juiz de Fora, Brazil. The 61 (6.7%) women who screened positive for at-risk drinking (AUDIT score ≥ 8) were randomly allocated to one of two groups: the Intervention Group (n=32), which received one single session of BI carried out in the household setting after screening, or the Control Group (n=29) which did not receive BI. After three months, 46 (75.4%) participants completed the follow-up interview (23 in each group). All participants received an informative leaflet, and the Intervention Group received a 15-40 minute BI, which provided information on the adverse consequences of alcohol and strategies to help moderate consumption. Participants of both groups decreased their alcohol consumption after three months. The intervention group decreased the mean AUDIT score from 12.4 to 9.4, while the control group reduced from 10.6 to 7.5. Preliminary analyzes using general linear modelling indicate that there was no difference between the Intervention Group and the Control Group in relation to the main outcome (total AUDIT score). Although no difference was found between groups, the results of this study are not conclusive and may reflect the small sample size of the trial. More studies are needed to better estimate the effectiveness of BI among women in a household setting.

Competition in the Audit Market: Policy Implications

The audit market's unique combination of features - its role in capital market transparency, mandated demand, and concentrated supply - means it receives considerable attention from policymakers. We explore the effects of two market scenarios that have been the focus of policy discussions: mandatory audit firm rotation and further supply concentration due to the exit of a audit firm. To do so, we first estimate publicly traded firms' demand for auditing services, allowing the services provided by each of the Big 4 to be differentiated products. We then use those estimates to calculate how each scenario would affect client firms consumer surplus. We estimate that, conservatively, mandatory audit firm rotation would induce consumer surplus losses of approximately $2.7 billion if rotation were required after ten years and $4.7-5.0 billion if after only four years. We find similarly that exit by one of the Big 4 would reduce client firms' surplus by $1.4-1.8 billion. These estimates reflect only the value of firms' lost options to hire the exiting audit firm; they do not include likely fee increases resulting from less competition among audit firms. The latter could result in audit fee increases between $0.75-1.3 billion per year for mandatory rotation and $0.47-0.58 billion per year for the disappearance of a Big 4 audit firm. Such losses are substantial; by comparison, total audit fees for public firms were $11 billion in 2010.

Frequency of Non–Cancer-Related Pain in Patients With Cancer

TO THEEDITOR: In 2012, theJournal published an article of ours evaluating opioid prescriptions for elderly patients with cancer who reported pain. 1 Pain scores were captured as part of a provincial initiative to screen patients with cancer for symptoms at every visit to the cancer center. 2,3 The study found that 45% of patients with a pain severity score of 4 to 10 out of a possible 10 did not receive opioid analgesics. Possible explanations that have been raised for this observation include non– cancer-related pain and patient refusal to accept opioids. In that same year, the provincial cancer agency undertook a province-wide chart audit to evaluate the documentation at the time of the high pain score, including questions about pain etiology and interventions. Eleven cancer centers audited approximately 25 charts from each patient who reported a pain score of at least 4, for a total audit of 299 charts. Of these, 8% clearly documented that the pain was not related to cancer. An additional 5% of patients indicated that the pain was chronic, and 2% indicated that the pain was being managed in the community. It is uncertain if these 7% had cancer-related pain. The estimate would then be that 8% to 15% of the audited cohort with pain scores of 4 to 10 had non– cancer-related pain. Only two patients had documentation that they declined opioids. In the original study, 9,826 patients had pain scores of 4 to 10. Applying the observations above, 786 to 1,474 patients had pain unrelated to cancer. If none of these patients received opioids and they are removed from the denominator, then the proportion of untreated cancer-related pain improves to 35% to 40%, suggesting that pain is still undertreated in a significant proportion of patients with cancer. The observations from the audit are limited because the criteria for chart selection may not have been applied uniformly at each center, and chart abstractors were not centrally trained. There may also be ambiguity in medical charts around the possible reasons for lack of opioid treatment. However, the data resulting from the audit suggest that non– cancer-related pain does not appear to make up a significant proportion of the pain being described by patients with cancer. Additional work is required to better understand reasons for undertreatment of pain in Ontario to facilitate possible interventions to improve patient care.

Does Audit Committee Constraint Discretionary Accruals in MESDAQ Listed Companies?

The role and responsibility of the audit committee toward credible financial reporting are still much the same, but the issue of selecting appropriate people with the right mind is often challenged. The usual tripartite, namely independence, diligence, and knowledge of the audit committee is further refined in the recently revised Malaysian Code of Corporate Governance 2007. The study examines the determinants of discretionary accruals in MESDAQ companies. The central issues are the key aspects of the audit committee, namely independence, expertise, and diligence including the issue of former senior auditors and audit alumni on the audit committee and its effect on discretionary accruals. Based on OLS regression on cross-sectional data of 2007, the results suggest that audit committees with a higher proportion of financial expertise (former senior auditor or former CFO) and more diligent audit committees are significant for the said purpose. As such, it is argued that an audit committee with a higher proportion of financial experts would lead to credible financial reporting. However, audit committees with the former senior auditor and audit alumni are associated with larger discretionary accruals. In addition, the total independent audit committee is positively associated with larger discretionary accruals which lead to possible limited access to pertinent financial information compared to the audit committee with an insider.

Evaluation of Inpatient Multidisciplinary Palliative Care Unit on Terminally Ill Cancer Patients from Providers' Perspectives: A Propensity Score Analysis

The effectiveness of inpatient palliative care units, a complex intervention, is challenging to evaluate due to methodological and practical difficulties. We conducted a study to evaluate providers' perceived effectiveness of one such unit. A non-concurrent, prospective, controlled study using the Audit Scale for good death services as an indicator of process of care and the Good Death Scale as the outcome of provider assessment of quality of dying was conducted. Eighty of 212 terminally ill cancer patients were matched from a tertiary medical center in Taiwan. Patients in the unit served as the intervention group and patients in the oncology ward served as controls. Multiple logistic regression was applied to estimate the propensity of choosing the unit for each patient, and linear regression analysis was conducted to identify predictive factors for mean change scores of the Good Death Scale. Male gender (P < 0.001, 95% confidence interval = 0.73-2.43) was associated with better quality of dying while having hepatocellular carcinoma (P < 0.004, 95% confidence interval = -2.22 to -0.44) was associated with worse quality. For those in the unit, higher total Audit Scale scores were positively related to the outcome of quality of dying. The unit (P < 0.001, 95% confidence interval = 8.67-12.97) and higher Good Death Scale at admission (P < 0.001, 95% confidence interval = 0.44-1.13) were predictors of Audit Scale scores. Admission to a palliative care unit was associated with higher provider assessments of quality of dying for terminally ill cancer patients. These units should be considered as options for hospitals looking for ways to improve the quality of dying for patients.