Description
TitleThree essays on unorthodox audit evidence
Date Created2016
Other Date2016-05 (degree)
Extent1 online resource (viii, 148 p. : ill.)
DescriptionA recent survey of audit practitioners (Trompeter and Wright 2010) indicates that most auditors use business risk audit (BRA) approaches that require a comprehensive understanding of the client’s industry and strategy and highlight the importance of gathering audit evidence from a wide variety of sources. However, the significance of nonfinancial information as audit evidence and the ways to measure and weight nontraditional or nonfinancial audit evidence remain uncertain. In response to these issues, the goal of this dissertation is to examine if nontraditional audit evidence can deliver relevant and reliable information to auditors and to suggest ways to measure and weight it. The first essay investigates the value of the optimistic tone of management qualitative disclosures in 10-K and 8-K filings, including press releases, on initial audit fees and changes in audit fees, based on prior studies about the significance of the optimistic tone of management qualitative disclosures in predicting a firm’s future performance and identifying management fraudulent behaviors. The empirical results show that the optimistic tone of qualitative information from 10-K and 8-K reports is negatively associated with successive audit fees. In addition, the association between the optimistic tone and audit fees is changed for firms that receive going concern opinions, indicating that auditors respond differently to the optimism of management when they audit high-risk clients. The second essay describes that substantive analytical procedures (SAPs) have the potential to provide a high level of assurance for revenue accounts and can be especially useful in examining revenue accounts since nontraditional audit evidence is often needed as an independent benchmark to verify revenue accounts and the population of underlying transactions tends to be extremely large. However, audit firms tend to focus more on tests of details, such as audit sampling in substantive tests of details, in recent years in order to avoid possible negative outcomes from PCAOB inspections caused by moderate or weak SAPs. An examination of the existing literature suggests that audit sampling in substantive tests of details and SAPs are often complementary, even if SAPs do not offer high assurance. In some situations, either one could be more effective. Therefore, this paper argues that the auditor must consciously examine the factors affecting the effectiveness and efficiency of substantive tests before selecting the appropriate procedures to improve audit quality. The third essay examines how weather variables play an important role in improving the effectiveness of SAPs for revenue accounts. Prior studies in economics, marketing, and finance show the influence of weather on sales. Specifically, unfavorable weather conditions are likely to hinder customers’ store visits, thereby decreasing sales. Thus, the models proposed in this study are tested by using daily and weekly aggregated sales revenue accounts from a multi-location retail firm with homogeneous operations in the US. Since the influence of weather on sales varies depending on seasons and regions, appropriate ways to integrate the weather variables in the proposed models are suggested. The empirical results indicate that weather variables have less value in forecasting store-level sales accounts than selected peer stores sharing similar macroeconomic characteristics, but provide incremental values in improving error detection.
NotePh.D.
NoteIncludes bibliographical references
Noteby Kyunghee Yoon
Genretheses, ETD doctoral
Languageeng
CollectionGraduate School - Newark Electronic Theses and Dissertations
Organization NameRutgers, The State University of New Jersey
RightsThe author owns the copyright to this work.