Discussion of assessing audit risk from errors and irregularities

Article Abstract:

Toshiyuki Shibano's (1990) research into the assessment of audit risk from errors and irregularities used a three part model for identifying audit risk based on generally accepted auditing standards. Shibano's research does not deal with the decisions by auditors over location, timing, or sample size even though these factors may influence the outcome of an audit. Some results, including the independence of auditors' preferences and equilibrium audit technology, will be affected by the determination of sample size and sequential sampling. Analysis can be affected where auditors control more than one aspect of the audit design. However, it is not clear that any extensions would change the conclusions of Shibano's research.

Shibano, Toshiyuki

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Assessing audit risk from errors and irregularities

Article Abstract:

The assessment of audit risk, the probability of not detecting a material misstatement in an audit, in an environment characterized by strategic interaction between auditors and auditees and imperfect audit technology was researched. The research derived separate assessments for strategic audit risk, which arose from intentional misstatements, and non-strategic audit risk, which arose from unintentional misstatements. The three subcategories of audit risk, control risk, detection risk, and inherent risk, are related to the incentives for the auditors and auditees, the auditors' beliefs, and the distribution of audit evidence for both strategic and non-strategic audits.

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Frequency judgments in an auditing-related task

Article Abstract:

Research examines frequency judgments and their effects in the decision-making process. Factors that may influence frequency judgment accuracy in an auditing task include whether the frequency knowledge is acquired directly or indirectly, its encoding in memory, and the subject's expertise with auditing stimuli. Results indicate that for auditors and students, frequency judgments based on indirect experience were the least accurate and those based on direct experience were the most accurate.

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