Managerial Auditing Journal

Roger Hussey; Sarah Woolfe

1998 Managerial Auditing Journal

doi: 10.1108/02686909810236226

The interim report was introduced by the Stock Exchange in 1964 and, despite its importance, remains lightly regulated. Despite the lack of regulatory pressures there have been significant changes in practice and one has been the appearance of the auditors’ review report. Compares various features of the interim reports of 138 companies for 1992 and 1997. Demonstrates the changes which have taken place over that period and seeks to explain the variables which are most closely associated with the presence of an auditors’ review report. Finds that it is the larger companies which are most likely to publish an auditors’ review report. There is also evidence that the presence of auditor involvement is not associated with delay in the issue of interim reports, but is associated with the voluntary disclosure of additional information. Suggests that the practice of publishing an auditors’ review report is likely to increase and that it is appropriate for the Auditing Practices Board to issue relevant guidance on the subject.

Gregory Shailer; Margo Wade; Roger Willett; Kim Len Yap

1998 Managerial Auditing Journal

doi: 10.1108/02686909810370551

This paper examines the perceptions of senior auditors in large firms in Sydney, Kuala Lumpur and Auckland concerning the nature and assessment of the inherent risk in risk based auditing. The geographic dispersion of participants from internationally linked firms does not appear to result in any cultural and geographic effects. Assessment of inherent risk appears predominantly qualitative and is not necessarily linked to the comprehensive aggregation of risks typically presented in audit risk models. There is some blurring of control risk factors with inherent risk and one‐third of participants assess inherent and control risk jointly. Risk factors appear to be grouped in importance in a manner that suggests different attitudes to management, system‐oriented, environmental and oversight risks. The identification of four possible factors (internal risk, external risk, system risk and oversight threats) may provide a basis for further investigation of how auditors assess inherent risk. There is an apparent division between “internally” and “externally” sourced risk.

Zabihollah Rezaee; Alan Reinstein

1998 Managerial Auditing Journal

doi: 10.1108/02686909810236271

As businesses increasingly use electronic data processing (EDP) techniques to process their accounting systems, auditors must gather critical information more efficiently. Such tools and techniques as electronic data interchange, the Internet and other modern technological subjects signal the end of the traditional audit. Technology has made inputting information for transactions and events more simple ‐ and evaluating the related controls and results more critical. Accumulating sufficient evidence needed to construct an informed decision means understanding where to look for that evidence, what control procedures to consider and how to evaluate those procedures. The purpose of this article is to draw attention to these issues and the recently issued SAS No. 80, which offers auditors guidance to accumulate sufficient evidence to audit their computerized clients. We also address some issues auditors may face in evaluating the security control in their clients’ businesses.

Jill M. D’Aquila

1998 Managerial Auditing Journal

doi: 10.1108/02686909810236334

The accounting profession’s strong focus on internal control and fraudulent financial reporting has led to new standards relating to internal control and fraudulent financial reporting. The control environment and specifically, management integrity, is an important component. The purpose of this article is to determine if the control environment forces ‐ the tone at the top, codes of conduct, and short‐term targets ‐ are related to financial reporting decisions. The results are based on a survey mailed to 400 CPAs who prepare financial reports. The findings indicate there is some reason for concern about fraudulent financial reporting. In addition, a tone at the top in an organization that fosters ethical decisions is of overriding importance to reliable financial reporting. Codes of conduct and pressure for short‐term performance, alone, had no significant effect on financial reporting decisions. The findings emphasize the importance of learning about an organization’s tone at the top during an audit.

Roger K. Doost

1998 Managerial Auditing Journal

doi: 10.1108/02686909810236343

There has been a public outcry in recent years for better accountability of resources consumed for higher education. Legislators in various states have responded with performance criteria and mandates for accountability. It is hoped that through such measures, universities will become better custodians of public funds leading to better and more efficient utilization of limited resources. The criteria developed is diverse and touches upon a variety of issues. However, their effectiveness in providing change is not yet tested. Through an in‐depth review of the university accounting system, we propose here that the missing link is financial accountability in the traditional responsibility accounting/managerial accounting approach for assessing performance and seeking improvement.