Abstract
A series of simulation experiments has been carried out in order to compare the effectiveness and efficiency of three different approaches for determining audit risk in complex audit situations. The first approach uses probability theory and the audit risk model to combine two different items of audit evidence from analytical procedures and tests of details. The second approach is based on the belief function framework and uses the Dempster-Shafer rule for combining the two items of evidence. In the third approach, information from analytical procedures is neglected and audit risk is simply determined by tests of details. The results indicate that the belief based audit is always more efficient than a simple one and can be less efficient than the traditional approach. With respect to audit effectiveness, the belief based approach turns out to be best. Furthermore, the results show that the belief based audit is more robust when there are small failures in interpreting information provided by analytical procedures.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
AICPA (1973) Statement on Auditing Procedures No. 54: The Auditor’s Study and Evaluation of Internal Control. Journal of Accountancy. 135, March, 56–71
AICPA (1981) Statement on Auditing Standards No. 39: Audit Sampling. Journal of Accountancy. 152, August, 106–110
AICPA (1984) Statement on Auditing Standards No. 47: Audit Risk and Materiality in Conducting an Audit. Journal of Accountancy. 157, February, 143–146
Arens A. A., Loebbecke J. K. (1996) Auditing an Integrated Approach. 7 th edition. Englewood Cliffs
Chen, Y., Leitch R. A. (1998) The Error Detection of Structural Analytical Procedures: A Simulation Study. Auditing: A Journal of Practice and Theory. 17, 36–70
CICA (1980) The Extent of Audit Testing. A Research Study, Toronto
Dutta S.K. (1991) Evidence Aggregation for Planning and Evaluation of Audit: A Theoretical Study. University of Kansas
Elliott R. K., Rogers J. R. (1972) Relating Statistical Sampling to Audit Objectives. Journal of Accountancy. 134, July, 46–55
Grimlund R. A., Felix W. L. (1987) Simulation Evidence and Analysis of Alternative Methods of Evaluation Dollar-Unit Samples. Accounting Review. 62, 455–479
Houghton C. W., Fogarty J. A. (1991) Inherent Risk. Auditing: A Journal of Practice and Theory. 10, 1–21
Knechel R. W. (1988) The Effectiveness of Statistical Analytical Review as a Substantive Audit proCedure: A Simulation Analysis. Accounting Review. 63, 74–95
Lapin L. L. (1987) Statistics for Modern Business Decisions. 4th edition. San Diego
Mandl G., Jung M. (1997) Effizienz und Effektivität statistischer Stichproben-verfahren. Betriebswirtschaftliche Forschung and Praxis. 229–243
Neter J., Loebbecke J. K. (1975) Behavior of Major Statistical Estimators in Sampling Accounting Populations. New York
Reneau J. H. (1978) CAV Bounds in Dollar-Unit Sampling: Some Simulation Results. Accounting Review. 53, 669–680
Shafer G. (1976) A Mathematical Theory of Evidence. Princeton
Shafer G., Srivatava R. (1990) The Bayesian and Belief-Function Formalisms: A General Perspective for Auditing. Auditing: A Journal of Practice and Theory. 9, Supplement, 110–137
Srivastava R. P. (1993) Belief Functions and Audit Decisions. The Auditors Report. 17, 8–12
Srivastava R. P. (1997) The Belief Functions Approach to Aggregating Audit ional Jounal of Intelligent Systems. 10, 329–356
Srivastava R. P. (1997) Audit Decisions Using Belief Functions: A Review. Control and Cybernetics. 26, 135–160
Srivastava R.. P., Dutta S. K., Johns R. W. (1996) An Expert System Approach to Audit Planning and Evaluation in the Belief-Function Framework. Intelligent Systems in Accounting, Finance and Management. 5, 165–185
Srivastava R. P., Shafer G. R. (1992) Belief-Function Formulas for Audit Risk. Accounting Review. 67, 249–283
Srivastava R. P., Shafer G. R. (1994) Integrating Statistical and Nonstatistical Audit Evidence Using Belief Functions: A Case of Variable Sampling. International Jounal of Intelligent Systems. 9, 519–539
Stringer K. W., Stewart T. R. (1996) Statistical Techniques for Analytical Review in Auditing. rd edition. New York
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2002 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Jung, M.K.P., Fink, H.E. (2002). The Effectiveness and Efficiency of Belief Based Audit Procedures. In: Srivastava, R.P., Mock, T.J. (eds) Belief Functions in Business Decisions. Studies in Fuzziness and Soft Computing, vol 88. Physica, Heidelberg. https://doi.org/10.1007/978-3-7908-1798-0_5
Download citation
DOI: https://doi.org/10.1007/978-3-7908-1798-0_5
Publisher Name: Physica, Heidelberg
Print ISBN: 978-3-7908-2503-9
Online ISBN: 978-3-7908-1798-0
eBook Packages: Springer Book Archive