In what ways can the effectiveness of the audit review process be undermined What measures can
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HOW THE EFFECTIVENESS OF THE AUDIT REVIEW PROCESS MAY BE UNDERMINED
Making effective, objective judgments of working paper conclusions is crucial in the role of the review process as a quality control mechanism for minimizing audit risk (Arens and Loebbecke 2000). The audit review may effectively detect and initiate correction of error , supporting views of audit adequacy. Yet its effectiveness may be undermined for ways under i) characteristics of the audit environment and ii) reviewer characteristics.
CHARACTERISTICS OF THE AUDIT ENVIRONMENT
Preparer Characteristics and Behaviour
Qualities of the preparer and possible 'stylization' of working papers may affect the reviewer's judgment. Preparers' experience and opinion formulation affected review extent (Coopers and Lybrand 1992; Asare and McDaniel 1996). Furthermore, average-skill reviewers may bias their own review extent based on knowledge of the preparer's capabilities (Tan and Jamal 2001).
Further research supports the findings by Rich et al (1997a) of strategic behaviour by preparers to influence reviewer's objective judgment for their own reputation enhancement, mainly through working papers (Yip-Ow and Tan 2000; Gibbins and Trotman 2002). This stylization at the risk of possible judgmental errors in justifications may hamper review effectiveness. Furthermore, this persuasive behaviour may have an increasingly greater impact, with more reliance placed on preparers' work with fewer details documented on working papers. (Rich et al 1997b)...