Kurt Pany

Auditing with technology: Using generalized audit software in the classroom

Abstract Over the past decade, improvements in generalized audit software have created a situation in which auditing “through” the computer may be both more effective and more efficient than in the past. This paper describes a series of assignments that allow an instructor to bring a meaningful application of generalized audit software to the undergraduate auditing classroom. The assignments we have developed are meant to supplement traditional audit coursework by providing students an experience of applying audit procedures electronically.

Findings on the Effects of Audit Firm Rotation on the Audit Process under Varying Strengths of Corporate Governance

Abstract While performing an annual audit of a clients financial statements, an audit firms staff identified what seems to be a material misstatement. Two discussions with the client have led to an impasse in that the client refuses to record what the auditor regards as a necessary adjustment. Our experimental study analyzes whether the likelihood of public accountants modifying their audit report for this departure from generally accepted accounting principles is affected by whether audit firm rotation is about to occur (no rotation v. rotation) under each of the two levels of corporate governance (weak v. strong). Our subjects include 105 CPA firm employees and partners who have an average experience level slightly less than 14 years. Results suggest that auditors in the rotation condition are more likely to modify their audit report as contrasted to those in a situation in which a continuing relationship is expected.

An analysis of the relationship between accounting restatements and quantitative benchmarks of audit planning materiality

Purpose - The purpose of this paper is to investigate the relationship between the amounts obtained using professionally accepted quantitative benchmarks of audit planning materiality and the size of accounting misstatements corrected by financial statements restatements. Design/methodology/approach - The paper uses a sample of 136 companies (237 company years) that have restated such financial statements and compare the amounts of the restatements with planning materiality benchmarks (rules of thumb) established to aid auditors in arriving at audit planning levels. Findings - It was found that, depending on the method of analysis selected and the materiality benchmark followed, as high as approximately 62 per cent of the restatements involve income levels less than the planning materiality level. Research limitations/implications - The results lead to questions as to the appropriate relationship between the scope of audit procedures, which is in part determined by these quantitative materiality benchmarks, and subsequent financial statement restatements. Originality/value - The issue addressed in this study is important because if audit planning levels for materiality are in excess of the amounts subsequently restated due to accounting misstatements, this might serve as an explanation for a number of recent restatements. Furthermore, it might suggest the need to consider decreasing acceptable materiality planning levels, thus resulting in a recalibration of the audit process.