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Are audit programs responsive to audit risk

  • Author / Creator
    Luo, Le
  • Professional standards require the auditor to change the nature, extent, and timing of testing and/or use more skilled labor as the risk of misstatements increases. This study investigates whether auditors adjust audit programs (detection) and/or the thresholds to record and require correction of detected misstatements in response to increases in audit risk and client size. Prior research from several countries indicates that audit programs are too static and are not risk adjusted (Mock and Wright 1993; Quadackers et al. 1996; Mock and Wright 1999). In addition, a key concern is that economic dependence on the client may cause the audit firm to refrain from recording and requiring correction of detected misstatements for larger clients. Archival records from 10 Chinese audit firms are examined to assess audit procedures, audit labor and the audit posting thresholds used. Results of the study indicate that when audit risk or client size increases, the audit firm does not change its audit procedures or use more skilled labor, nor does it detect audit differences in different types of accounts. The audit firm detects a larger number of audit differences for larger clients. The audit firm also uses lower thresholds to record and require correction of detected misstatements in response to increases in audit risk and client size.

  • Subjects / Keywords
  • Graduation date
    2011-06
  • Type of Item
    Thesis
  • Degree
    Doctor of Philosophy
  • DOI
    https://doi.org/10.7939/R3TW3D
  • License
    This thesis is made available by the University of Alberta Libraries with permission of the copyright owner solely for non-commercial purposes. This thesis, or any portion thereof, may not otherwise be copied or reproduced without the written consent of the copyright owner, except to the extent permitted by Canadian copyright law.
  • Language
    English
  • Institution
    University of Alberta
  • Degree level
    Doctoral
  • Department
    • School of Business
  • Supervisor / co-supervisor and their department(s)
    • Jamal, Karim (Accounting and Management Information Systems)
  • Examining committee members and their departments
    • Zhang, Peng (Mathematical and Statistical Sciences)
    • Boritz, Efrim (School of Accounting and Finance, University of Waterloo)
    • Deephouse, David (Strategic Management and Organization)
    • Gao, Yanmin (Accounting and Management Information Systems)
    • Maier, Michael (Accounting and Management Information Systems)