[The purpose of this paper is to assess via simulation the effectiveness of various analytical review procedures when used in combination with a partitioned approach to dollar unit sampling for tests of account details. Seven analytical review procedures based on regression analysis were applied to two sets of simulated accounting data which were seeded with different patterns of known overstatement errors. Audit sample sizes for dollar unit sampling and achieved audit detection risk were then computed based on the analytical review outcomes. There were three major findings in this study. First, regression based analytical review increased audit effectiveness relative to an audit strategy that did not use analytical review. Second, the use of monthly data greatly increased the effectiveness of analytical review. Finally, regression based analytical review models were very efficient in detecting potentially material misstatements.]

The purpose of this paper is to assess via simulation the effectiveness of various analytical review procedures when used in combination with a partitioned approach to dollar unit sampling for tests of account details. Seven analytical review procedures based on regression analysis were applied to two sets of simulated accounting data which were seeded with different patterns of known overstatement errors. Audit sample sizes for dollar unit sampling and achieved audit detection risk were then computed based on the analytical review outcomes. There were three major findings in this study. First, regression based analytical review increased audit effectiveness relative to an audit strategy that did not use analytical review. Second, the use of monthly data greatly increased the effectiveness of analytical review. Finally, regression based analytical review models were very efficient in detecting potentially material misstatements.

We evaluate whether, and under what circumstances, corporate tax aggressiveness influences audit pricing. Using a compound measure of two long-run effective tax rates, we find that tax-aggressive firms pay higher fees for external audit services after controlling for factors related to earnings management. The fee premium increases with management’s uncertainty about the sustainability of tax positions if audited by tax authorities (i.e., disclosed tax reserves). Further, the provision of auditor-provided tax services may create knowledge spillovers that alleviate the fee premium for tax aggressiveness, unless tax uncertainty is high. Finally, an accounting firm’s industry expertise in auditing is associated with higher audit fees independent of tax aggressiveness, whereas industry expertise in taxation leads to a fee premium only for tax-aggressive clients. Overall, the evidence implies firms’ aggressive tax behavior, tax services provider, and auditor expertise interact to influence the pricing of audit engagements.

[This study investigates the impact of student internships on subsequent academic performance. The post-internship course performance of students with internship experience was compared to that of a group of noninterns (matched on grade-point average and hours of coursework completed prior to the internship). Average performance across all courses did not differ significantly between the two groups. Analysis of performance in particular subject areas and courses suggests a tendency for interns to focus their efforts on courses most closely related to their chosen career. However, only in auditing coursework (where substantive knowledge gained from their internship experience should be most applicable) was the performance of interns significantly better than that of the noninterns.]

This study investigates the impact of student internships on subsequent academic performance. The post-internship course performance of students with internship experience was compared to that of a group of noninterns (matched on grade-point average and hours of coursework completed prior to the internship). Average performance across all courses did not differ significantly between the two groups. Analysis of performance in particular subject areas and courses suggests a tendency for interns to focus their efforts on courses most closely related to their chosen career. However, only in auditing coursework (where substantive knowledge gained from their internship experience should be most applicable) was the performance of interns significantly better than that of the noninterns.

Internal control systems, Auditing, Accounting errors, Reliability model

Reviews the book `Analytical Review Procedures and Processes in Auditing,' by Stanley F. Biggs, Theodore J. Mock and Paul R. Watkins.

Reviews the book "Governmental and Nonprofit Accounting: A Book of Readings," by Leonard Eugene Berry and Gordon B. Harwood.

We examine the empirical relationship between auditors' resource allocations and selected engagement characteristics. Our measure of resources is hours of grades of labor (partner, manager, etc.) “charged” to audit activities (planning, internal control evaluation, etc.). Engagement characteristics examined are client size, industry affiliation, client complexity, risk, auditor provision of management advisory services to the auditee, and degree of control reliance. The data were obtained from publicly available sources and a survey developed and administered by an international public accounting firm. We find the cross‐sectional variation in the labor charged to various audit activities can be explained by engagement characteristics found to be important in prior studies on audit fees, total labor inputs, and the mix of labor inputs. Measures of client size, industry, complexity, risk, and services provided are associated with changes in the allocation of labor among audit activities. We find no substitution of internal control review/testing for substantive testing on reliance audits. Task assignments vary by rank. Measures of client size, complexity, risk, and services provided are associated with activity‐specific changes in the labor mix.