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Exploring the role of country and client type on the auditor's client risk assessments and audit planning decisions

Exploring the role of country and client type on the auditor's client risk assessments and audit... Purpose – The purpose of this paper is to examine whether country (Australia or Japan) and client type (public sector or private sector) impact the auditor's client risk assessments, subsequent audit planning decisions (planned audit hours) and audit planning responsiveness to client risk assessments. Design/methodology/approach – The study is based on previously developed audit planning models and uses working paper‐sourced data of planned auditor effort and nine client risk assessments. The study samples are taken from public and private sector audit engagements of two major audit firms in Australia and Japan, respectively. Findings – Evidence is found that country and client type do have an impact on the auditor's client risk assessments and planned total audit hours, but they do not moderate audit planning responsiveness to client risk assessments. Research limitations/implications – The test variable is confounded by the country and client type characteristics inherent in the study's samples. If the differences are caused by country, this suggests that audit planning decisions vary across countries, even when the same auditing standards are adopted. However, if they are caused by client type, this suggests that the same audit approach (i.e. the audit risk model) is applied differently depending on client characteristics. Practical implications – These findings are useful to international standard setters, audit practice quality control and training, and audit research. Originality/value – No prior study has examined the role of country and client type on the auditor's client risk assessments and audit planning decisions. Further, no prior study has examined whether the relationship between the auditor's client risk assessments and audit planning decisions is moderated by country and client type. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Auditing Journal Emerald Publishing

Exploring the role of country and client type on the auditor's client risk assessments and audit planning decisions

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References (74)

Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
0268-6902
DOI
10.1108/02686901111151305
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to examine whether country (Australia or Japan) and client type (public sector or private sector) impact the auditor's client risk assessments, subsequent audit planning decisions (planned audit hours) and audit planning responsiveness to client risk assessments. Design/methodology/approach – The study is based on previously developed audit planning models and uses working paper‐sourced data of planned auditor effort and nine client risk assessments. The study samples are taken from public and private sector audit engagements of two major audit firms in Australia and Japan, respectively. Findings – Evidence is found that country and client type do have an impact on the auditor's client risk assessments and planned total audit hours, but they do not moderate audit planning responsiveness to client risk assessments. Research limitations/implications – The test variable is confounded by the country and client type characteristics inherent in the study's samples. If the differences are caused by country, this suggests that audit planning decisions vary across countries, even when the same auditing standards are adopted. However, if they are caused by client type, this suggests that the same audit approach (i.e. the audit risk model) is applied differently depending on client characteristics. Practical implications – These findings are useful to international standard setters, audit practice quality control and training, and audit research. Originality/value – No prior study has examined the role of country and client type on the auditor's client risk assessments and audit planning decisions. Further, no prior study has examined whether the relationship between the auditor's client risk assessments and audit planning decisions is moderated by country and client type.

Journal

Managerial Auditing Journal – Emerald Publishing

Published: Jul 26, 2011

Keywords: Audit risk model; Audit planning; Client risk assessments; Country and client‐type; Australia; Japan; Public sector; Private sector

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