Empirical analysis of audit uncertainty qualifications
Article Abstract:
A multivariate audit decision model is developed to provide assistance in the forecast of uncertainty reporting decisions. The model determines and tests an extensive range of independent customer financial factors, which include prior-period amounts and industry norms as benchmarks. These banchmarks facilitate the capture of trends and of the relative position customers within an industry. Six measures represented by five financial factors constitute the final model. These factors are financial leverage, receivables intensiveness, inventory intensiveness, short-term liquidity, and return on investment. The model illustrates the insignificant incremental explanatory power exerted by firm-specific stock returns' change in variance and the sign of the net income for the current year. The expected misclassification of costs resulting from naive strategy is substantially reduced by the final model
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1991
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Empirical evidence on the functional relation between audit planning and total audit effort
Article Abstract:
The functional relationship between the extent of audit planning and total audit effort is examined by using a modified basic audit pricing model, in consideration of the fact that audit planning has yet to be proven to result to a more effective audit. Professional audit planning would require an assessment of the inherent risk, control risk and detection risk and a selection of the best audit strategy that would place audit risk at an acceptable level, aside from giving rise to an efficient audit of the financial statements. Results show that, up to a certain point, audit planning lessens total audit effort. Additional planning would thus result in an increase in total audit hours. It was further shown that some audits require more planning because they involve more risks and are more complex than other audits.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1996
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