Management Integrity on Audit Planning and Evidence
Review on the Impact of Management Integrity on Audit Planning and Evidence
Objective
This research is done to assess the correlation between management integrity and RMM, audit planning and misstatement detection, which leads to analysis of the impact of management integrity information on audit conduct.
Motivation
Some cases of failures such as Enron and Sarbanes-Oxley have led public in general requiring auditors to be more careful in conducting their audit tasks, especially in terms of audited companies’ internal controls. The basic of these internal controls is built by its management integrity. By knowing the management integrity, it is expected that auditors will be more aware in planning their audit which will affect the quality of their audit results as management integrity may affect the credibility of the source and evidence.
Prior Studies
The underpinning theory suggests that there is a link between risk assessment and the way auditors planning their tasks. Previous literature which mostly based on questionnaire shows that auditors rely more on prior year error in their overall risk assessment than on a specific evaluation of management integrity. It failed to provide good evidence regarding the correlation between risk evaluation and audit related judgments.
Hypothesis
• Management integrity has negative correlation to risk of material misstatement (RMM), which will affect the audit planning and source of evidence. • Management integrity has negative correlation to persuasiveness, timing, and extent (PTE). • There is a significant negative correlation between management integrity and the detection of material misstatements.
Method
From 78 random samples, only 60 clients provided management integrity assessment. The authors did the research based on audit working papers in field setting, within focus on the transactions related to revenue such as cash, account receivables, and sales. The researchers used data coding
Objective
This research is done to assess the correlation between management integrity and RMM, audit planning and misstatement detection, which leads to analysis of the impact of management integrity information on audit conduct.
Motivation
Some cases of failures such as Enron and Sarbanes-Oxley have led public in general requiring auditors to be more careful in conducting their audit tasks, especially in terms of audited companies’ internal controls. The basic of these internal controls is built by its management integrity. By knowing the management integrity, it is expected that auditors will be more aware in planning their audit which will affect the quality of their audit results as management integrity may affect the credibility of the source and evidence.
Prior Studies
The underpinning theory suggests that there is a link between risk assessment and the way auditors planning their tasks. Previous literature which mostly based on questionnaire shows that auditors rely more on prior year error in their overall risk assessment than on a specific evaluation of management integrity. It failed to provide good evidence regarding the correlation between risk evaluation and audit related judgments.
Hypothesis
• Management integrity has negative correlation to risk of material misstatement (RMM), which will affect the audit planning and source of evidence. • Management integrity has negative correlation to persuasiveness, timing, and extent (PTE). • There is a significant negative correlation between management integrity and the detection of material misstatements.
Method
From 78 random samples, only 60 clients provided management integrity assessment. The authors did the research based on audit working papers in field setting, within focus on the transactions related to revenue such as cash, account receivables, and sales. The researchers used data coding
References: Kizirian, G., Mayhew, B., Sneathen, L. 2005. The Impact of Management Integrity on Audit Planning and Evidence. Auditing: A Journal of Practice & Theory. Vol. 24, No. 2, pp. 49-67. Leung, P., Coram, P., Cooper, B. 2007. Modern auditing & assurance services. 3rd ed. Queenland: John Wiley & Sons Australia, Ltd. Kadlec, D 2002, ‘Who’s accountable?’, Time, 13 January. Retrieved September 16, 2007 from http://www.time.com/time/ magazine/article/0,9171,1101020121-193580,00.html.