factors influencing audit quality
TRANSCRIPT
FACTORS INFLUENCING THE AUDIT QUALITY
Table of ContentsI. Executive Summary.............................................................................................................................1
II. Introduction.........................................................................................................................................2
III. Review of Literature............................................................................................................................3
IV Analysis................................................................................................................................................9
V. Recommendations.............................................................................................................................12
VI. Summary and Conclusions.................................................................................................................15
VII. References.........................................................................................................................................18
FACTORS INFLUENCING THE AUDIT QUALITY
I. Executive Summary
One of the main responsibilities accountants have is providing investors, shareholders,
and creditors with information that is useful for decision-making. The auditors’ role in this
process is to ensure proper accounting treatment and fair representation. Thus, in order to
present users with transparent financial statements, auditors have to maintain a high-quality
audit.
There are numerous issues standing in the way of a properly performed audit. Regulatory
constraints and ethical considerations are not the only problems limiting the audit, there are also
various challenges faced by the auditors in their everyday routine. This research paper discusses
auditors’ independency, personal biases, and miscommunication with the internal audit
department as factors influencing the external auditors’ ability to remain objective and perform
an effective audit.
Internal-external auditors’ communication is a very crucial portion of the audit process.
The efficiency, cost, and timeliness of an audit depend on this relationship. An internal audit
department understands a company’s operations and regulations better than the external auditor,
and should guide an external auditor through confusing areas. Also, this communication allows
an external partner to rely on the internal auditors, thus, eliminating the need for duplicate work.
At the same time, in order to rely on documents and procedures provided by the internal auditor,
external auditors must be confident in the truthfulness of the internal work papers. There are two
methods used by internal audit departments that are considered to be trustworthy – continuous
auditing and outsourcing the internal audit function.
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Continuous auditing is a dynamic technology, providing continuous data assurance and
control monitoring in real time. Configurable items could be adjusted to point out various red
flags, serving as an extra control level, and providing a timely analysis of the current situation.
The system should be implemented and maintained by a trained audit department employee.
Among other advantages, an audit becomes more efficient, and results in fee savings in the long-
run.
Outsourcing is another reliable method used by the companies to reduce the audit time
and cost. The biggest advantage of outsourcing is the independence of the internal auditor from
the company’s management, and as a result lack of management’s pressure. This means that the
results provided by outsourcing are unbiased and more objective compared to the company’s
internal audit function.
Another issue influencing the auditors’ judgment is cognitive biases. Bias influences an
auditor through psychological mechanisms, and impairs an auditor’s objectivity by providing
easier, more convenient solutions. Many de-biasing techniques are known to help auditors to
restore their objectivity and provide high-quality audit.
Lastly, the new partner rotation period requirement has been established as a part of
promoting auditors’ independency. Although the theoretical side of this requirement seems to be
working effectively, the profession’s representatives argue with the benefits of the requirement.
In order to obtain new “fresh look” and maintain the auditor independency, a new requirement
sacrifices the depth of the company specific knowledge, lowering the audit quality for 2-3 years
after each partner rotation.
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II. Introduction
Public companies and financial statements users are concerned about the quality of the
financial statements. This problem arises due to a number of factors influencing an external
auditor’s decision-making process and impaired judgment. Personal biases, independency, and
miscommunication with internal auditors bring the quality of an audit down, resulting in poor
quality financial statements. To address the issue properly, these factors should be thoroughly
stated and researched.
There is clearly a problem regarding the communication between public auditors and
companies’ internal audit committees. Due to poor internal-external auditor communication, an
audit becomes less efficient, requires more time to perform, and allows an opportunity for
mistakes. A lack of communication allows for misunderstanding, requiring greater attention to
details and additional work, which also leads to a higher audit cost and delays the issuance of the
financial statements. Personal biases as well as impaired independency directly influence the
auditors’ ability to remain objective and disregard particular preferences.
The topic of this paper is tied up to these current issues in the accounting profession, and
clearly identifies the problems auditors face in their practice. The research allows a deeper
understanding of strengths and weaknesses of the existing auditing system. The literature
consists of theoretical articles as well as practical cases. The analysis portion discusses the
literature providing more details and opposing opinions. Additionally, recommendations are
provided in order to find the solution best suited for the application in the work field.
III. Review of Literature
Internal-External Auditor Communication
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Public companies are facing pressure in presenting their financial statements due to
regulatory restraints, and improved reliability demands (Malaescu & Sutton, 2015). In order to
present timely information, free of error, and reliable for decision-making, companies should
strive for better communication with external auditors. According to Schneider (2009), a survey
of 117 auditing firms showed that 88% of their auditors rely on internal auditing to some extent.
Moreover, the Public Company Accounting Oversight Board (PCAOB) mandates an external
auditor to rely on internal audit work when appropriate, to ensure the timeliness of the audit
(Malaescu et al. 2015). An external auditor must have an understanding of the internal audit
structure, and assess its competence and objectivity, to be able to rely on results provided by the
internal audit function (Davidson, Desai & Gerard, 2013). A survey investigating the perception
of external auditors regarding the information provided by internal audit showed that the
majority of the external auditors prefer the work performed by an outsourced auditor, or through
the continuous auditing concept (Davidson et al. 2013).
Continuous Auditing
Among other challenges, companies face the need for timely risk and control identification
(Heffes, 2006). After the Sarbanes-Oxley Act (SOX) established new requirements for efficient
internal auditing and effective control over the audit, companies started to move towards an
automated system of an internal audit control (Davidson et al. 2013). In order to increase the
efficiency of internal audit, and make it possible for an external auditor to rely on it, companies
are switching to Continuous Auditing (CA) technologies (Davidson et al. 2013). CA is a concept
used by a company’s internal auditor to execute continuous audit procedures in real time
(Davidson et al. 2013). Continuous auditing is a very dynamic technology: it allows setting
certain configurable items, thus providing an extra control level (De Aquino, Da Silva, &
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Vasarhelyi, 2008). The activities performed by CA include both continuous data assurance
(CDA), and continuous control monitoring (CCM) (Malaescu et al. 2015). CDA verifies data,
transactions and process metrics, while CCM monitors system configurations and process
settings (Malaescu et al. 2015). The system should be implemented and maintained by a person
with a deep knowledge of company specifics, as well as audit and business processes for proper
control and parameter settings (Davidson et al. 2013).
Numerous research studies conducted over the past decade show the increasing percentage
of companies adopting or planning to adopt CA techniques (Davidson et al. 2013; Malaescu et
al. 2015). This growing interest could be explained by the many advantages the CA system
offers. First of all, the system is in compliance with SOX requirements regarding effective
internal controls (Malaescu et al. 2015). At the same time, it is more cost-efficient to switch from
paid employees to an automated system. It also provides management with a timely analysis in
critical situations in order to alert any misstatements (Davidson et al. 2013). Although CA
proved itself extremely useful in the numerous research and experiment cases, there are still a lot
of companies delaying the implementation (Malaescu et al. 2015).
Outsourcing
The external auditor’s reliance decision has an important influence on the timeliness and
effectiveness of the overall audit. This decision is significantly impacted by the difference
between outsourcing the internal audit results and performing them in-house (Davidson et al.
2013). It has been proven by many research studies that external auditors prefer the outsourced
internal audit work when inherent risk is high (Davidson et al. 2013; Malaescu et al. 2015). This
could also be explained by the pressures an in-house internal auditor may encounter. It is more
likely for the management to affect the in-house internal audit function, because the outsourced
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internal audit is not reporting to the company’s management, and has fewer biases regarding the
information (Davidson et al. 2013). Even though it is an extremely useful tool for public
companies, survey shows only 2% out of 300 companies actually outsource their internal audit
function (Davidson et al., 2013). This could be explained by the additional costs of maintaining
both the in-house internal audit department and outsourcing fees.
Auditor’s Personal Bias
Audit is a process of obtaining and assessing the relevant evidence as the basis for a quality
audit opinion (Parker & Fogarty, 2012). The opinion relies completely on external auditor’s
judgment and analytical procedures, since auditing does not consist of strong cause-effect chains
(Parker et al. 2012). This includes forming an expectation about the company’s balances and the
degree to which it is similar to the actual numbers (Pike, Curtis & Chui, 2013). The analytical
procedures performed by the auditor when setting the expectations involve obtaining knowledge
about the client, industry and overall economics (Pike et al. 2013). This procedure is frequently
destined to fail due to availability of the company’s unaudited balances at the early expectation
formation stage. It is psychologically proven that humans tend to integrate readily available
information into decision-making processes, regardless of the relevancy degree of that
information (Pike et al. 2013; Parker et al. 2012). No matter how professional and experienced
the auditor is, personal expectations and cognitive biases could affect the audit opinion, when
obtained evidence does not sufficiently support the activity.
Cognitive Biases
Psychologist Daniel Kahneman (1972) defined the term “cognitive bias” describing the
human tendency to make systematical mistakes in judgment when concluding a decision (Knapp
& Knapp, 2012). This means that cognitive biases constantly influence individuals in everyday
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decisions, and when it comes to an external auditor this effect is crucial in multiple ways. For
instance, an auditor might subconsciously reject the stronger relevant evidence under the
impression of a personal assumption about the management assertion (Knapp et al. 2012). This is
a cognitive dissonance mechanism that prevents new information from being evaluated as it is
(Parker et al. 2012). Another bias problem is the auditor’s tendency to predict the possibility of a
certain event based on general previous experience rather than relying on company
circumstances (Knapp et al. 2012). The other common issue is the desire to simplify and
expedite the decision-making process through a familiar alternative solution (Knapp et al. 2012).
This means that in high-stress situations, when making an important decision under a great
pressure, the auditor will more likely to pick the easier solution used before, even if the situation
is not quite the same. The same mechanism works when deciding between letting the little
mistake go, or proceeding with routine punishment procedures – if there is not much harm, a
number of people will let it go instead of drawing attention to the matter. Lastly, an auditor
becomes a victim of his own previously made decision, and is unable to admit that the decision is
wrong, despite the strong evidence gathered (Knapp et al. 2012). This happens because of the
conflict of pre-existing beliefs with the new challenging information, creating a stressful
environment for a person (Parker et al. 2012).
Auditor Independency
The PCAOB (2012) findings state that the lack of independency in the audit process is one
of the main problems leading to accounting scandals and audit failures (Church, Jenkins,
McCracken, Roush, & Stanley, 2015). The actual independence is the key to the auditor’s ability
to overcome personal biases, and provide objective judgment and transparent reports (Church et
al., 2015). The importance of an auditor’s independency has been further emphasized by the vast
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amount of policies mandated by the PCAOB and the Securities and Exchange Committee (SEC)
(Church et al., 2015). The main independency issues impairing auditors’ judgment are
considered to be developed from the auditors’ relationships with the client, and the desire to
support the company’s preferences (Church et al., 2015). Client preferences have great impact
on an auditor’s objectivity, and the pressure of these preferences may lead to inappropriate
accounting treatment (Krishna, Seetharaman, & Saravanan, 2010). A number of studies report
that auditors are more likely to support the method preferred by the client if they are aware of
that preference prior to the evidence evaluation process (Church et al., 2015; Krishna et al.,
2010). Most of the PCAOB’s concerns regarding the audit quality arise from the shortcomings of
auditor’s independency and professional skepticism (Church et al., 2015).
Partner Rotation
Partner rotation was one of the steps towards high-quality financial information – it
maintains auditor independency requirements. A five year rotation period and five year cooling-
off period substituted the previous seven and two years, respectively (Litt, Sharma, Simpson, &
Tanyi, 2014; Daugherty, Dickins, Hatfield, & Higgs, 2012). The change was initiated by Section
302 of the SOX Act, with the purpose of ensuring external auditor independency, and preventing
fraudulent activities (Litt et al., 2014). The main objectives were to reduce the period of
engagement with an auditor in order to achieve actual independence, and obtain a “fresh look”
on the company by the new partner (Daugherty et al., 2012). Although it sounds like an effective
way to enhance the audit quality, this new partner rotation requirement received strong
disapproval from practicing professionals and company executives. In 2008, The Advisory
Committee on the Auditing Profession (ACAP) heard testimony about the unfavorable impact of
required partner rotation on audit quality and partners’ quality of life (Daugherty et al., 2012).
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Many auditors expressed an opinion that a new partner does not possess sufficient knowledge
about the company and its operations, which means the quality of audit is lowered during the
first two or three years (Litt et al., 2014). Audit firms and an association of leading corporate
Chief Executive Officers (CEO) have been concerned about the loss of engagement with the
partners due to the complexity and volume of operations, and the nature of transactions large
companies deal with (Litt et al., 2014). Also, reduced time for partner rotation and an extended
cooling-off period create a problem for large corporations in certain industries where a limited
number of auditors have appropriate knowledge and experience to perform an audit (Litt et al.,
2014).
As mentioned before, the partner rotation requirement does not just harm the company-
auditor communication, but it also affects the quality of partners’ life. Some of the auditors
interviewed by Daugherty, Dickins, Hatfield, and Higgs (2012) named the quality of life as their
“primary concern” – frequent partner rotation means an increased amount of relocations for the
auditor. It may have an influence on auditors’ careers as they try to minimize the chances of
relocation. This means training for more and broader industries rather than perfecting one in
depth, which eventually results in less specific expertise and low audit quality (Daugherty et al.,
2012). Relocation itself brings a lot of inconvenience to the auditors’ lives: family situations and
commute might negatively affect the auditors, impairing their personal judgment and job
satisfaction (Daugherty et al., 2012). This may result in poor client service and lower audit
quality as well. Shortened periods for partner rotation and a prolonged cooling-off period
requirement lowers the audit quality, and consequently reduces the quality of the financial
statements, thus harming the investors’ interests (Litt et al., 2014).
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IV. Analysis
Communication
Although an auditor’s knowledge and experience play a big role in the profession,
communication skills are the key to a successful relationship with the client. Communication is
not only the way to provide feedback to the client, but also a way of establishing an appropriate
work environment. Krishna (2010) provides a list of the most frequent and serious barriers
standing in the way of improved communication and clear understanding between the external
auditor and client company. At the top of the list were omission of information and lack of trust,
which disrupt the professional relationship, bringing additional difficulties into the audit process
(Krishna et al., 2010). Building a strong communication with the internal audit department helps
to avoid unnecessary audit procedures, since internal auditors have a better understanding of
company operations, transactions, and regulations (Schneider, 2009). In order to rely on internal
audit function, outside auditor should be confident in the material provided to him. Continuous
auditing and outsourced internal auditing are accepted by the auditors as reliable sources of valid
information.
Even though the CA system has been available since 1970, certain obstacles postponed
the mass adoption (Heffes, 2006). Slow transaction processing performance, security and control
issues, implementation and maintenance costs, information overload, as well as the lack of
professionals in the field were the main reasons slowing CA adoption down at the time
(Davidson et al., 2013). With technology development and more information available these
obstacles can be removed. According to PricewaterhouseCoopers (PwC), more than 80% of 400
companies surveyed in 2006 stated that they either had CA implemented or planning on
developing the concept in the near future (Heffes, 2006). This means that most of the public
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companies understand the benefits provided by the CA and strategically move towards stronger
internal controls.
Biases
Unbiased, objective auditor judgment is one of the most critical elements of an audit. Not
only is it required by the auditing regulations, but it also shows the degree of professionalism the
auditor has. Despite that, it is psychologically proven that auditors cannot resist certain cognitive
biases arising from personal issues and relationships with clients (Pike et al., 2013).
The two types of the cognitive bias that affect an auditor the most are “anchoring” and
“confirmation” (Church et al., 2015; Knapp et al., 2012). It is believed that information
voluntarily provided by the client before the initial engagement stages influences the auditors’
objectivity, and unconsciously makes them approve the client’s choice of accounting methods
and confirm the financial statements clarity. (Church et al., 2015; Knapp et al., 2012). After a
certain level of familiarity with the company is achieved, these biases arise and have a stronger
impact on auditors, further impairing their independency (Church et al., 2015). For instance, the
auditors of “Just for Feet Inc.” were criticized by the SEC because of “anchoring” bias (Knapp et
al., 2012). The external auditors failed to persuade the company to adjust the allowances for
obsolete inventory (Knapp et al., 2012). Although they initially proposed an increase in the
allowance, later they settled with the numbers provided by the client even though the allowance
account was clearly understated (Knapp et al., 2012). This might be extremely dangerous due to
client’s ability to intentionally affect the auditor and present to the public the financials suitable
for a company.
Independency
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Auditors’ independency is a cornerstone of the audit profession and the foundation for the
public’s trust (Krishna et al., 2010). It is extremely hard to define an auditor’s independency, so
authoritative bodies often provide the examples of improper behavior, guiding the auditors
through do’s and do not’s (Church et al., 2015). Auditor independency remains one of the
biggest concerns the PCAOB has about auditing (Daugherty et al., 2012).
Peytcheva and Gillett (2011) expressed an opinion that auditors can be influenced by the
superior’s or predecessor partner’s opinion regarding the conflicting situation, and as a result
provide bias conclusions in their reports. This means that an auditor with less experience might
rely on the predecessor’s opinion, relying on the expertise the previous partner has. It goes
against the PCAOB’s “fresh look” concept and impairs the objectivity to the maximum extent.
Although communication between the predecessor partner and current auditor is crucial for
certain stages of the auditing process, it is important to understand that there is a thin line
between taking other’s opinion into considerations and blindly following them.
Church (2015) emphasizes that the length of the auditor-client relationship directly
influences the auditors; they tend to identify themselves with the client and are more likely to
accept the explanations given by the client, thus impairing the objectivity. The effects of this
impaired judgment magnify over time and the trust the auditors have for the client becomes
stronger, weakening their level of professional skepticism. Even though client preference plays a
great role in shaping auditors’ opinion, auditors should understand that they will be held
accountable for the decision in the future (Krishna et al., 2010).
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V. Recommendations
Over the past decades, many things have been done to improve auditing standards and
procedures. Although authoritative bodies keep the regulatory portion up-to-date, the practical
side of the audit must also be controlled. Following recommendations could be helpful in
maintaining a consistent level of audit quality by joining the efforts of audit companies and
regulatory boards.
To ensure a proper degree of communication without impairing the auditor’s judgment, all
of the internal audit department activity should be provided to the auditor. The auditor should
have unrestricted access to records, assets, and personnel, as well as the necessary explanations
needed for the uninterrupted audit process (Krishna et al., 2010).
One of the biggest problems standing in the way of continuous auditing implementation is
the lack of information about the technology (Malaescu et al. 2015). Since the PCAOB is
supporting the partner’s reliance on the internal audit department work, the continuous auditing
practice should be reviewed and approved by authorities (Davidson et al. 2013). A separate web
page on the PCAOB official website, or having external auditors hand out brochures to the
companies’ internal audit department would be a great start to provide further information and
get more companies involved. A similar document is shared by the American Institute of
Certified Public Accountants (AICPA), but it is more like an interesting topic rather than
necessary tool (AICPA.org, 2012). Eventually, the continuous auditing could be proposed as a
requirement for public companies.
Moreover, to monitor the implementation process, an employee with the basic
understanding of auditing standards should be trained before working with continuous auditing
concept. It might require additional costs for the company to train the personnel, but the switch
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to an automated monitoring system and the savings in audit fees will bring the company more
benefits in the long-run. An employee of an internal audit department who has a broad
understanding of company operations and business processes could be easily trained to
implement and maintain the system for the company needs. Certified training sessions provided
by experienced professionals will help to expand the borders and get more interested people
involved.
Compared to continuous auditing, outsourcing is also a great auditing tool proven to be
approved by the external audit companies. Although it might be costly for the company to pay
the outside auditor to maintain the workpapers, it provides a benefit of convenient audit timing
and fees. Public companies will spend less time on the actual audit if the external auditors can
rely on the work provided by an outsourced auditor. Thus, every large public company should
plan for additional outside auditor fees, until continuous auditing adoption.
Cognitive biases are another issue that can impair an auditor’s decision-making process.
To control the problem, an auditor needs to first realize and acknowledge the issue. So one of the
first things every auditor should do is double-check their work and analyze the decisions made.
Was the auditor influenced by personal issues when making a decision? Is there a better way of
resolving the issue? Thinking about the reality of bias could make an auditor more aware of this
issue, allowing them to recognize and prevent the bias problem in its roots. Another interesting
solution is the use of structured decision aids. For example – checklists describing the most
common ways fraudulent activities occur might be very helpful in providing steps to be aware of
bias and fraud. Auditors may also consider converting one large task into fewer smaller ones for
a comprehensive overview, as well as taking personal notes when brainstorming an audit
problem (Knapp et al., 2012). There is also an exercise an auditor can practice to sharpen their
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de-biasing skills – when presented with an issue they are hesitant about the auditor should come
up with as many reasons and alternative explanations as possible. This exercise allows thinking
outside of the situation, and noticing little details the auditor would otherwise not pay attention
to. Lastly, a brief tutorial explaining the nature of bias and the impact it has in a decision-making
context would be helpful in minimizing the bias effect on auditors’ judgment (Knapp et al.,
2012). All of these allow an auditor to take a step back and review the process and the outcomes
in stressful situations, helping to eliminate improper treatment and judgment. Although
establishing a complete control over biases is impossible, auditors have many tools and activities
to realize their weaknesses, and work to suppress them.
Unfortunately, there is not much we can do with the authoritative decision regarding the
partner rotation and cooling-off period. The new requirements are set and have to be consistently
complied with. This means that auditors have to start helping each other to get acquainted with
the companies or industries they are not fully knowledgeable in. For instance, an old audit
partner of a client can summarize the most important details observed while working with the
company, so the new audit partner will know where to start and what to be aware of. An
objectively composed one or two page summary could be extremely helpful for the new partner
and would not take much of an old auditor’s time. This will help a new partner to maintain some
level of quality during the first year of an audit without compromising the “fresh look”
advantages. On the other hand, it is extremely important to understand one of the limitations for
this kind of communication: a new partner’s judgment might be impaired by the old auditor’s
views, creating additional biases (Peytcheva & Gillett, 2011). The predecessor must emphasize
only the critical points in company operations and controls, without including a personal opinion
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and influencing the new partner’s objectivity. Additional supervisions and reviews could also be
helpful in holding the auditor accountable for the process and decisions made during an audit.
VI. Summary and Conclusions
The accounting scandal following the fall of Enron, with Arthur Andersen’s involvement,
brought the reputation of the profession and the public trust in the auditors down. In order to
restore public’s confidence in the effectiveness of an audit and reposition the role of an auditor,
the quality of an audit should be maintained at a high level over the years (Krishna et al., 2010).
To achieve a high-quality audit, publicly traded companies and authoritative bodies need to work
together on problem areas. Resolutions to the problems that have been discussed earlier might be
the first step towards transparent financial statement presentation.
The lack of communication between an internal audit function and an external auditor
directly influences the quality of an audit. The auditor should have substantial knowledge about
the company to perform an audit, and the internal audit department should assist during the audit
process. At the same time, the auditors cannot just rely on workpapers provided by the company;
they have to check the truthfulness of the documents provided. Knowing this, companies prefer
the use of continuous auditing technology, or outsourcing the internal audit function. Both
methods proved themselves reliable to the external auditors, despite of additional costs for the
company. In order to save money in the long-run, many companies are interested in
implementing continuous auditing. Due to a reliable source of continuous test controls and
monitoring, the overall audit costs and time are decreased, while the effectiveness of an audit is
increased. If the authoritative bodies provide the masses with more information about CA,
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including all of its benefits and the ways of implementing it, more and more companies will start
the switch to the CA technology, making the audit process easier, quicker, and more efficient.
Another issue influencing the audit quality is the auditors’ cognitive state. It is
psychologically proven that auditors suffer from cognitive biases impairing their judgment and
questioning their objectivity. These cognitive biases are working on an unconscious level,
making it harder to identify and control them. The auditors should be attentive to details when
making an important decision to recognize the bias influence and to restore their objectivity.
There are also certain de-biasing techniques that could be used when training the auditors to help
them to be aware of the biases.
One of the biggest problems in the auditing profession is an auditor’s independency.
There are numerous rules and constraints defining independency itself, and examples of the
impaired auditor’s judgment resulting in fraud and scandals. Not only intentional regulation
bypass can result in inappropriate treatment. Many of the auditors identify themselves with the
company they work with for a very long time, and as a result they tend to lose their
independency in the process. The length of the auditor-client relationship and the specifics of
these relationships are the main indicators of the auditor’s independency. The longer the auditors
work with the company the more impaired their objectivity is. Considering all of these issues, the
PCAOB and the SEC changed the initial partner rotation period requirements. Although the new
requirement gave up the depth of specific company knowledge to gain a stable independency,
many practicing auditors disagree with it. The frequency of the partner rotations leads to a high
number of relocations, and puts the quality of auditors’ lives in jeopardy. As a result, the
auditors, unsatisfied with their lives, lose interest in the job or lose expertise by training for more
industries. All of these are directly tied to the audit quality and financial statement transparency.
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Standard-setting bodies need to work jointly with practicing auditors in order to achieve the
shared goal, and provide public with high-quality financial statements.
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VII. References
American Institute of the Certified Public Accountants (AICPA) (2012). The current state of
continuous auditing and continuous monitoring. Retrieved on June 6, 2015 from:
http://www.aicpa.org/interestareas/frc/assuranceadvisoryservices/downloadabledocument
s/whitepaper_current-state-continuous-auditing-monitoring.pdf
Church, B. K., Jenkins, J. G., McCracken, S. A., Roush, P. B., & Stanley, J. D. (2015). Auditor
independence in fact: Research, regulatory, and practice implications drawn from
experimental and archival research. Accounting Horizons, 29(1), 217-238.
doi:10.2308/acch-50966
Daugherty, B. E., Dickins, D., Hatfield, R. C., & Higgs, J. L. (2012). An examination of partner
perceptions of partner rotation: Direct and indirect consequences to audit
Davidson, B. I., Desai, N. K., & Gerard, G. J. (2013). The effect of continuous auditing on the
relationship between internal audit sourcing and the external auditor's reliance on the
internal audit function. Journal of Information Systems, 27(1), 41-59. doi:10.2308/isys-
50430
De Aquino, C. M., Da Silva, W. L., & Vasarhelyi, M. A. (2008). Moving toward continuous
auditing. Internal Auditor, 65(4), 27-29.
Heffes, E. M. (2006). Theory to practice: Continuous auditing gains. Financial Executive, 22(7),
17-18.
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Knapp, M. C., & Knapp, C. A. (2012). Cognitive biases in audit engagements. CPA
Journal, 82(6), 40
Krishna Moorthy, M., Seetharaman, A., & Saravanan, A. S. (2010). The realities of auditor's
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