RISK REDUCTION AND THE AUDIT REVIEW PROCESS (MATERIAL MISSTATEMENTS).

摘要

This dissertation examined risk reduction in the audit review process and whether review hierarchy, industry specialization, and processing mode reduce the risk of material misstatement. Auditors are motivated to reduce the risk of material misstatements because (1) they are subject to legal liability from clients and users, and to sanctions from the Security Exchange Commission (SEC), and American Institute of Certified Public Accountants (AICPA), (2) they want to maintain their reputation, and (3) clients can change auditors. Isolating the factors that can increase the effectiveness of the audit review process will assist public accounting firms in identifying ways to improve the review process.; The results show that general audit experience significantly affected the amount of risk reduced. The amount of risk reduced when managers reviewed the work of seniors was larger than the amount of risk reduced when managers or seniors worked individually.; Specialized industry knowledge was found to have a significant effect on risk reduction. Auditors who worked in their specialization significantly reduced more risk than auditors who worked out of their specialization. This effect also extends to teams where a manager reviewed the work of a senior, however, teams working out of their specialization are not significantly better than managers working individually in or out of their specialization.; With respect to who detects which error type in the review hierarchy, the results show that audit seniors detected mechanical errors better than audit managers while audit managers detected more conceptual errors than the seniors. The results also revealed a significant interaction effect of general audit experience, specialized knowledge, and processing mode on risk reduction. As the level of auditor increases, more risk is reduced by auditors who worked in their specialization than auditors who worked out of their specialization, whether as individuals or as teams.; The perception of risk before and after the review was significant. In general, auditors (in review teams, as managers or seniors) perceive a lower risk of material misstatement in the work papers prepared by a subordinate after the review of the work than before the review. However, auditors (managers and seniors) working individually perceived a greater reduction in risk than a team consisting of both a manager and a senior. (Abstract shortened by UMI.).