James L. Bierstaker

The impact of information technology on the audit process: an assessment of the state of the art and implications for the future

In the future, paperless audits will become commonplace as audit clients increasingly shift to paperless systems and audit software is developed that allows auditors to complete most procedures on‐line. To audit on‐line systems, auditors will have to incorporate on‐line audit software as their primary audit tool and gather evidence electronically. Assesses the current impact of technology on the audit process, and discusses the future implications of technological trends for the auditing profession. More specifically, provides a summary of how information technology has impacted audit planning, testing, and documentation.

Accountants' perceptions regarding fraud detection and prevention methods

Purpose – The purpose of this study is to examine the extent to which accountants, internal auditors, and certified fraud examiners use fraud prevention and detection methods, and their perceptions regarding the effectiveness of these methods.Design/methodology/approach – A survey was administered to 86 accountants, internal auditors and certified fraud examiners.Findings – The results indicate that firewalls, virus and password protection, and internal control review and improvement are quite commonly used to combat fraud. However, discovery sampling, data mining, forensic accountants, and digital analysis software are not often used, despite receiving high ratings of effectiveness. In particular, organizational use of forensic accountants and digital analysis were the least often used of any anti‐fraud method but had the highest mean effectiveness ratings. The lack of use of these highly effective methods may be driven by lack of firm resources.Practical implications – Organizations should consider the ...

An Investigation of Factors Influencing the Use of Computer-Related Audit Procedures

ABSTRACT: We provide data on the extent to which computer‐related audit procedures are used and whether two factors, control risk assessment and audit firm size, influence computer‐related audit pr...

The effects of fee pressure and partner pressure on audit planning decisions

Abstract Significant concerns have been voiced about the negative impact of competition on audit quality. Recent research suggests that auditors may reduce budgeted hours in response to fee pressure despite an increase in client risk ( Houston, 1999 ). However, only one prior study Gramling, (1999) has considered the role of the auditors superiors, who may encourage subordinates to increase audit efficiency, particularly in cases where audit revenues have been reduced McNair, (1991) . Gramling focused on reliance on internal auditors rather than a generic program planning decision. Further, there is little empirical evidence on the program planning strategies pursued by auditors with respect to the nature of tests, and no prior evidence regarding staffing assignments in response to these pressures. In developing program plans auditors are accountable to multiple sources such as an immediate superior (e.g. a manager), the partner, the firm and, in a broader sense, to the public. Often these sources provide conflicting forces, which have been referred to by Gibbins and Newton (1994) as “complex accountability”. To investigate these issues, eighty-three auditors completed a case based on an actual audit client in which they were asked to perform program planning for the revenue cycle. Fee pressure and partner pressure were manipulated (present or absent) in a between-subjects design. There were three main findings. First, corroborating prior studies, auditors reduced total budgeted hours in response to fee pressure. Second, auditors reduced planned tests in response to partner pressure to improve audit efficiency. Third, there is evidence to suggest that in response to multiple competitive pressures auditors are more likely to reduce budgeted hours of more experienced staff. Specifically, auditors subject to both fee pressure and partner pressure may focus on reducing second year staff hours because greater efficiency gains (i.e. cost reductions) come from eliminating hours assigned to this more experienced personnel than first year staff. These results suggest that both fee pressure and partner pressure motivate auditors to improve audit efficiency. Moreover, fee pressure may be perceived by auditors, based on previous experience, as an implicit suggestion to improve audit efficiency. These findings suggest firms must be cautious in communicating audit fees to staff, and that the audit partner plays a key role in communicating ways to manage competitive pressures.

The use of performance measures as an integral part of an entity's strategic plan

Purpose – The objective of this paper is to gain an understanding of the multiple ways companies are using performance measures throughout the organization in the areas of strategic planning, monitoring operations, and evaluation of employees work and satisfaction with the company and suppliers.Design/methodology/approach – A survey was developed and distributed to internal auditors to gather information on how their companies used performance measures.Findings – The results suggest that most companies tend to have an internal focus when using performance measures and place less value on benchmarking with competitors and suppliers.Originality/value – Based on the results of the survey, performance measures are used throughout the organization for numerous reasons from the determination of whether strategic goals are being met to evaluation of suppliers.

The effect of format and experience on internal control evaluation

Purpose - The purpose of this paper is to investigate whether the use of a questionnaire or a narrative documentation format will impact an auditors performance in identifying internal control design weaknesses. Design/methodology/approach - A field experiment approach with a sample of 73 auditors of varying experience. Findings - It is found that auditors who completed an internal control questionnaire (ICQ) correctly identified more internal control design weaknesses than auditors who prepared a narrative. Internal control evaluation experience moderated this effect. The results imply that the questionnaire documentation format stimulates an auditors existing internal control knowledge, thereby enhancing performance when identifying internal control design weaknesses. Practical implications - These findings suggest that there are important benefits to auditors that may be lost if they choose not to use questionnaires for internal control evaluation. These findings have important implications for practitioners and standard setters, who appear to be gravitating away from the use of standardized ICQs. Originality/value - The results of this study may assist organizations that are considering what form their internal control documentation should take in response to the Sarbanes-Oxley Act of 2002.

Presentation format, relevant experience and task performance

On every engagement, auditors are required to obtain a sufficient understanding of the internal control structure to plan the audit and determine the nature, timing and extent of audit tests. The evaluation of control weaknesses is important for error and fraud detection and for the avoidance of audit failure. To document their understanding of client internal control systems, auditors have relied upon two common formats – internal control narratives and flowcharts. The choice of format is important because it can affect the use and interpretation of information. The purpose of this study is to examine if documentation format affects performance. Results suggest that, while documentation format did not affect performance, internal auditing experience was important, regardless of the documentation format used.

The Effects of the 150-Credit-Hour Requirement for the Certified Public Accountant (CPA) Exam on the Career Intentions of Women and Minorities

In most states, students who sit for the certified public accountant (CPA) examination are now required to have 150 credit hours of college education. In this article, the authors examined the effects of this requirement on the career intentions of women and minorities. The authors collected data from 600 accounting students and the results suggested that the 150-credit-hour requirement might deter some women from pursuing the CPA, but would not be a deterrent for minorities.

Auditor recall and evaluation of internal control information: does task‐specific knowledge mitigate part‐list interference?

Part‐list interference occurs when reading a few items from a previously viewed list interferes with recall of the remaining items. The purpose of this study is to examine if the review of an incomplete flowchart, following the review of a complete narrative, interferes with auditors’ recall and evaluation of internal control information. The potential interaction between auditors’ internal control knowledge and the extent of part‐list interference is also investigated. The results indicate there was a significant interaction between knowledge and part‐list interference, suggesting that interference related to an incomplete flowchart occurred primarily with less knowledgeable auditors. Therefore, higher levels of knowledge may reduce interference when recall cues are organized schematically, as found in flowcharts.

The Effect of Partner Preferences on the Development of Risk-Adjusted Program Plans

Abstract Professional standards require auditors to tailor audit testing to the level of assessed risks. The purpose of this experimental study is to explore the impact of a partner preference on the extent to which program plans are risk-adjusted. Partner preferences for either efficiency or a “balanced” approach (consideration of both effectiveness and efficiency) were manipulated. Sixty-one auditors completed a case where they were asked to perform program planning for the revenue cycle. The results show that there was a significant interaction between auditors’ risk assessments and partner preferences. When there was an incentive for efficiency as prompted by the partner, even though auditors recognized higher risks compared to the prior year, they did not correspondingly alter audit program plans. In contrast, a balanced partner preference led to higher risk assessments and a greater number of tests and hours than for the efficiency condition.