Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Dynamic analysis of Bayesian audit strategies with tests of controls and reliability modeling

Dynamic analysis of Bayesian audit strategies with tests of controls and reliability modeling Purpose – The purpose of this paper is to summarize a simulation study that analyzed the performance of Bayesian audit strategies in a novel fashion – dynamically and with varying sample sizes depending on the extent of an auditor's prior information. Design/methodology/approach – The prior information for the Bayesian strategies arises from a set of control tests that are evaluated making use of reliability theory. The entire audit strategy is simulated under systematically different control reliabilities and related amounts of total misstatements in an accounting population. Findings – The major finding is that robust Bayesian audit strategies that have recently been developed in auditing research are more sensitive to non‐sampling errors than existing strategies of audit practice. Practical implications – The authors find that there are differential effects of sampling error vs non‐sampling error on the Bayesian strategies and that controls testing does not need to be extensive to get full internal control reliance. Originality/value – The paper adds to existing research by examining the performance of various Bayesian audit strategies under more realistic audit conditions of sampling and non‐sampling uncertainty. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Grey Systems Theory and Application Emerald Publishing

Dynamic analysis of Bayesian audit strategies with tests of controls and reliability modeling

Download PDF
12 pages

Loading next page...
 
/lp/emerald-publishing/dynamic-analysis-of-bayesian-audit-strategies-with-tests-of-controls-tPR067UO7C

References (11)

Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
2043-9377
DOI
10.1108/20439371111181224
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to summarize a simulation study that analyzed the performance of Bayesian audit strategies in a novel fashion – dynamically and with varying sample sizes depending on the extent of an auditor's prior information. Design/methodology/approach – The prior information for the Bayesian strategies arises from a set of control tests that are evaluated making use of reliability theory. The entire audit strategy is simulated under systematically different control reliabilities and related amounts of total misstatements in an accounting population. Findings – The major finding is that robust Bayesian audit strategies that have recently been developed in auditing research are more sensitive to non‐sampling errors than existing strategies of audit practice. Practical implications – The authors find that there are differential effects of sampling error vs non‐sampling error on the Bayesian strategies and that controls testing does not need to be extensive to get full internal control reliance. Originality/value – The paper adds to existing research by examining the performance of various Bayesian audit strategies under more realistic audit conditions of sampling and non‐sampling uncertainty.

Journal

Grey Systems Theory and Application – Emerald Publishing

Published: Oct 20, 2011

Keywords: Internal control; Reliability; Modelling; Auditing; Audit strategy; Robust Bayesian

There are no references for this article.