William J. Cenker

An assessment of the newly defined internal audit function

The new definition of internal auditing defines the function as an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. The purpose of this paper is to summarize an assessment of this new definition obtained through structured interviews from 11 internal audit directors of large publicly traded companies. The responses from the directors indicate that there are wide differences in viewpoints and objectives; but a definite shift has occurred in the overall scope of internal audit towards operational activities. While most of the interviewees are in conceptual agreement with the new internal audit definition, an underlying warning is vocalized: “Don’t throw out the franchise”. That is, the traditional role of the internal auditor should not be completely abandoned. These, along with other responses pertaining to related issues and suggestions for future research, are summarized throughout the paper.

Organizational commitment and auditors in public accounting

Purpose – The purpose of this paper is to examine organizational commitment within the context of important antecedents, correlates, and consequences for auditors in public accounting. Specifically, to explore the relationships among the constructs of experience, role ambiguity, organizational commitment (affective and continuance), job satisfaction, and turnover intentions.Design/methodology/approach – An integrated model is developed and tested using structural equation modeling techniques. A sample of 334 auditors working for international and regional public accounting firms in a major metropolitan area of the USA is used to test the model.Findings – The findings support nearly all of the hypothesized relationships. Auditors with more experience have less role ambiguity, have more affection for their organization, and are less inclined to leave their organization. Continuance commitment plays a less important role in the integrated model. However, the study lends support to the notion that the two dim...

Accounting firms cautiously maneuver in the new audit environment – a note

Purpose - This paper seeks to discuss the effect that the Sarbanes-Oxley Act (SOA) had on both the nature of the external audit function and overall audit quality. Additionally, it aims to discuss how audit firms maneuvered through the newly regulated environment, and what their strategic actions are for the future. Design/methodology/approach - This discussion is based on interviews conducted with auditors from nine public accounting firms located in Northeast Ohio, United States of America. The sample consisted of five national and four regional firms, and the interviewees included mostly partners and a few senior managers. Findings - The increased oversight and workload resulting from the SOA requirements has changed the nature of the external audit function to more compliance type work, and the environment has created much anxiety for the auditors. The new reform has significantly impacted the audit environment in terms of: scope of services; client assessment procedures; management and audit committee relationships with the external auditor; audit firm personnel management; and the long-term outlook of the profession. The details of these impacts are discussed throughout the paper. Research limitations/implications - This paper provides detailed insight as to how the SOA impacted the audit profession. Hopefully, such an understanding will benefit future research in measuring the costs and benefits of the new reform. Lastly, a future research showed further examine the effect that the SOA has had on overall audit quality. Originality/value - This paper summarizes the insightful comments obtained in structured interviews with several leading audit professionals. The sample was judged to be highly knowledgeable of the changing audit environment caused by the SOA. With an improved understanding of its impacts, regulators, practitioners, and academics can better assess the effectiveness of the SOA.

Section 404 implementation

Section 404 of the Sarbanes‐Oxley Act requires management to include in the annual report a report on the effectiveness of the companys internal control over financial reporting. This assessment must be supported by evidential matter, including documentation, regarding both the design of internal controls and the testing process. Understandably, many executives are seeking the assistance from their internal auditors in satisfying the Section 404 requirements, leaving internal auditors with the important task of ensuring that the corporations internal control system is properly documented and tested. This paper discusses how nine leading internal auditors of large publicly listed corporations are assisting their respective companies in implementing the Section 404 requirements. Further discusses some of the significant issues that these auditors are addressing and their prediction on the expected future impact of Section 404.

Accounting for other postretirement benefits and pension costs at Ohio Edison

Abstract This is a case on accounting for Other Post Retirement Employee Benefits (OPEB) (SFAS 106, 1990) and Pensions (SFAS 87, 1985). The objective of the case is to enable accounting students to bridge the gap between the two standards and in so doing achieve a better understanding of both. Students can use their knowledge of pension accounting to improve their comprehension of OPEB accounting. This case is suitable for use in Intermediate Accounting, Accounting Policy, and Financial Management courses at the undergraduate and graduate levels.