Auditing Section Research Summaries Space

A Database of Auditing Research - Building Bridges with Practice

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  • The Auditing Section
    Assurance on XBRL for Financial Reporting
    research summary posted April 13, 2012 by The Auditing Section, tagged 01.0 Standard Setting, 01.01 Changes in Reporting Formats 
    Title:
    Assurance on XBRL for Financial Reporting
    Practical Implications:

    Auditors should recognize that agreement between the rendered and source documents alone does not provide sufficient evidence that financial statements are appropriately tagged.  If issues regarding sampling and materiality cannot be sufficiently resolved, the alternative is 100 percent testing, which may be more expensive than investors, regulators, and other users are willing to pay.  Technological advances are likely to yield applications that assist auditors in determining the appropriateness of XBRL tags based semantic relationships.  As the public availability of XBRL-tagged data reaches a critical mass, auditors may leverage it to perform analytic procedures that can be relied on to create efficiencies in other aspects of an audit engagement.  Given the granular nature of the data-centric reporting environment, different levels of assurance (e.g., data-level and continuous assurance) are receiving considerable attention by academic researchers and may eventually lead to significant shifts in the assurance model, including the use of specialized audit teams and/or third-party providers.

    Citation:

    Plumlee, R. D., and M. A. Plumlee. 2008. Assurance on XBRL for Financial Reporting.  Accounting Horizons 22 (3):  353-368. 

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  • Jennifer M Mueller-Phillips
    Big Data in Accounting: An Overview.
    research summary posted September 21, 2015 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.01 Changes in Reporting Formats, 01.02 Changes in Audit Standards, 08.0 Auditing Procedures – Nature, Timing and Extent, 08.09 Impact of Technology on Audit Procedures, 09.0 Auditor Judgment 
    Title:
    Big Data in Accounting: An Overview.
    Practical Implications:

    The availability of Big Data will precipitate substantive changes in accounting education, research, and practice. In education, in particular accounting and auditing, the use of Big Data will increase the statistical and IT content in curricula, probably breaking the current set of limitations represented in the CPA exam. Research in the more traditional fields in accounting, such as capital markets research, will benefit from dimensional increases in data availability and will be conditional on improvements of the researcher’s skill sets in areas such as modeling, statistics, and text mining. Practice, in particular internal audit departments, will be the leading facilitator of accounting Big Data usage, while attempting to keep abreast or in sync with the developments in corporate data utilization in fields like marketing, supply chain, and customer services.

    Citation:

    Vasarhelyi, M. A., A. Kogan, and B. M. Tuttle. 2015. Big Data in Accounting: An Overview. Accounting Horizons 29 (2): 381-396.

  • Jennifer M Mueller-Phillips
    Consequences of Big Data and Formalization on Accounting and...
    research summary posted September 21, 2015 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.01 Changes in Reporting Formats, 01.02 Changes in Audit Standards, 10.0 Engagement Management, 10.02 Materiality and Scope Decisions 
    Title:
    Consequences of Big Data and Formalization on Accounting and Auditing Standards.
    Practical Implications:

    In light of cost reductions in data generation, storage, retrieval, and transmission, the inherent compromises within the paper paradigm are of little benefit. Users are entitled to more in-depth, granular values that they can manipulate, drilling down and up for more or less detail where needed. Financial reporting standards that govern presentation and arbitrary aggregation must likewise give way to rules regarding the limits and frequency of data transmission, as well as the quality of those data. 

    Audit standards must change as well. Error detection and risk quantification are no longer sufficient targets, but must be seen as small components of an audit of broader scope. The deep analysis of tremendous volumes of data and potentially thousands of exception reports necessitates a different paradigm of reporting and assurance. The role of auditing standards, far from being diminished in the face of increasing automation, must shift from governing sampling procedures to embracing the broader, deeper data availability and analysis of the modern era in an effort to create a better, more thorough audit.

    Citation:

    Krahel, J. P., and W. R. Titera. 2015. Consequences of Big Data and Formalization on Accounting and Auditing Standards. Accounting Horizons 29 (2): 409-422.

  • Jennifer M Mueller-Phillips
    Do Critical Audit Matter Paragraphs in the Audit Report...
    research summary posted February 16, 2015 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.01 Changes in Reporting Formats, 06.0 Risk and Risk Management, Including Fraud Risk, 06.05 Assessing Risk of Material Misstatement 
    Title:
    Do Critical Audit Matter Paragraphs in the Audit Report Change Nonprofessional Investors’ Decision to Invest?
    Practical Implications:

    This paper provides the first evidence on the effect of proposed CAM paragraphs on investor decision making, thus informing the PCAOB’s proposed standard. The results indicate that including CAM paragraphs in audit reports provides useful information for well-informed, nonprofessional investors. However, regulators should also be aware that providing the resolution to the CAM seems to mute investors’ concern about the issue raised in the CAM.

    For more information on this study, please contact Professor Brant Christensen.

    Citation:

    Christensen, B. E., S. M. Glover, and C. J. Wolfe. 2014. Do Critical Audit Matter Paragraphs in the Audit Report Change Nonprofessional Investors' Decision to Invest? Auditing: A Journal of Practice & Theory 33 (4): 71-93.

  • Jennifer M Mueller-Phillips
    Does Recent Academic Research Support Changes to Audit...
    research summary posted July 18, 2016 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.01 Changes in Reporting Formats, 01.02 Changes in Audit Standards 
    Title:
    Does Recent Academic Research Support Changes to Audit Reporting Standards?
    Practical Implications:

    This study reviews academic literature to not only offer insights into how well recent audit reporting initiatives gives users the information they need to understand the audit, but also suggest future research that academics can perform to help standard setters improve the auditor’s report.  The authors argue that (1) disclosure of the audit partner’s name does close the information gap, (2) disclosures related to auditor independence and tenure only partially closes the information gap, and (3) auditor commentary on going concerns does not close the information gap; however, not enough is known about how well either (4) disclosure of critical or key audit matters or (5) assurance on other information in the audit report closes the information gap.  These insights may be of interest to stakeholders in the standard setting process who wish to evaluate the success of currently enacted audit reporting initiatives and the potential costs and benefits of proposed audit reporting initiatives.

    Citation:

    Bédard, J., P. Coram, R. Espahbodi, and T.J. Mock. 2016. Does Recent Academic Research Support Changes to Audit Reporting Standards?. Accounting Horizons 30 (2): 255-275.

  • Jennifer M Mueller-Phillips
    Investors’, Auditors’, and Lenders’ Understanding of the M...
    research summary posted October 15, 2013 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.01 Changes in Reporting Formats, 06.0 Risk and Risk Management, Including Fraud Risk 
    Title:
    Investors’, Auditors’, and Lenders’ Understanding of the Message Conveyed by the Standard Audit Report on the Financial Statements
    Practical Implications:

    Because of the inappropriate expectations some users have of audit reports, standards setters may consider reevaluating the scope paragraph of the audit report to specifically assert that the audit report does not provide assurance in certain areas. Alternatively, the PCAOB could expand the scope of responsibility of the auditor to include these additional items.

    For more information on this study, please contact Stephen Kwaku Asare at the University of Florida (kwaku@ufl.edu).
     

    Citation:

    Asare, S. K., and A. M. Wright. 2012. Investors', Auditors', and Lenders' Understanding of the Message Conveyed by the Standard Audit Report on the Financial Statements. Accounting Horizons 26 (2): 193-217.

  • Jennifer M Mueller-Phillips
    Perceptions and Misperceptions Regarding the Unqualified...
    research summary posted June 22, 2013 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.01 Changes in Reporting Formats, 12.0 Accountants’ Reports and Reporting, 12.05 Changes in Reporting Formats 
    Title:
    Perceptions and Misperceptions Regarding the Unqualified Auditor’s Report by Financial Statement Preparers, Users, and Auditors
    Practical Implications:

    The audit reporting model has been an item on the recent PCAOB agendas.  The findings of this study show there are still large gaps that exist between the intended communication of the audit report as stipulated in auditing standards and the perceptions by users, preparers, and auditors.  This study provides evidence to be used in the current debate about updating the current auditor’s report to provide more meaningful information.

    Citation:

    Gray, G.L., J.L. Turner, P.J. Coram, and T.J. Mock. 2011. Perceptions and misperceptions regarding the unqualified auditor’s report by financial statement preparers, users, and auditors. Accounting Horizons 25 (4): 659-684.

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  • Jennifer M Mueller-Phillips
    Seeking legitimacy for new assurance forms: The case of...
    research summary posted October 10, 2013 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.01 Changes in Reporting Formats, 15.0 International Matters, 15.05 Sustainability Services 
    Title:
    Seeking legitimacy for new assurance forms: The case of assurance on sustainability reporting
    Practical Implications:

    Corporate sustainability reporting is a growing area due to increased political and social focus on corporations’ actions.  With the development of this reporting area comes the development of the associated assurance service.  Without legitimate assurance, these sustainability reports lack reliability and credibility.  Prior research has not thoroughly examined how audit firms acquire and obtain legitimacy when developing a new area of their professional practice.  This study shows the different strategies employed by audit firms to secure legitimacy with key internal and external stakeholders as it relates to sustainability reporting.   

    For more information on this study, please contact Brendan O’Dwyer.
     

    Citation:

    O’Dwyer, B., D. Owen, and J. Unerman. 2011. Seeking legitimacy for new assurance forms: The case of assurance on sustainability reporting. Accounting, Organizations and Society 36: 31-52.

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