The Effect of Data Reliability on the Influence of Unaudited Values in Audit Analytical Procedures

12 Pages Posted: 19 Dec 2010

See all articles by Jim Heintz

Jim Heintz

University of Kansas

Gwendolen B. White

affiliation not provided to SSRN

Jean C. Bedard

Bentley University - Department of Accountancy

Date Written: August 29, 2003

Abstract

Prior research has found that unaudited values influence auditors' analytical procedures judgments, including estimates of account balances and investigation decisions. When unaudited values influence account investigations, audit effectiveness could be impaired. Prior studies have not examined whether the extent of influence of unaudited values is reduced when there are indications that client?supplied values may be unreliable, as suggested by psychological theory. Using a between?subjects design, this study examines whether factors affecting reliability of unaudited values (significant accounting system changes or prior material audit adjustments) affect the influence of unaudited values in analytical procedures, and whether the impact of possible reliability problems differs by prior data trend (increasing or decreasing). Participating auditors estimated the actual value of the gross profit percentage, and provided bounds beyond which they would investigate the unaudited value. Results show that unaudited values influenced auditor judgments, except when there was an indication that the data may be unreliable and the unaudited gross profit percentage was increasing from the prior year. When these two conditions combined, the auditors were more conservative in their use of the client?supplied information.

Keywords: analytical procedures, anchoring, audit efficiency and effectiveness, audit planning, judgment heuristics

Suggested Citation

Heintz, James and White, Gwendolen B. and Bedard, Jean C., The Effect of Data Reliability on the Influence of Unaudited Values in Audit Analytical Procedures (August 29, 2003). International Journal of Auditing, Vol. 3, Issue 2, pp. 135-146, 2003. Available at SSRN: https://ssrn.com/abstract=1727155 or http://dx.doi.org/10.1111/1099-1123.00054

James Heintz

University of Kansas ( email )

1415
Lawrence, KS 66045
1-785-864-4568 (Phone)
1-785-864-5328 (Fax)

Gwendolen B. White

affiliation not provided to SSRN

No Address Available

Jean C. Bedard

Bentley University - Department of Accountancy ( email )

175 Forest Street
Waltham, MA 02452
United States
781-891-2410 (Phone)
781-891-2896 (Fax)

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