Budgeting Audit Time: Effects of Procedure Frame and Perceived Procedure Verifiability

34 Pages Posted: 24 May 2012 Last revised: 30 Oct 2018

See all articles by Eldar Maksymov

Eldar Maksymov

Arizona State University (ASU) - School of Accountancy

Mark W. Nelson

Cornell University - Samuel Curtis Johnson Graduate School of Management

William R. Kinney, Jr.

University of Texas at Austin - Department of Accounting

Date Written: January 31, 2017

Abstract

Auditors must ensure that their audit plans budget sufficient time for key audit procedures. Research has shown that insufficient audit time budgets can be detrimental to audit quality. We examine whether framing audit procedures negatively (e.g., assess whether management’s assumptions are not appropriate) increases time budgets, particularly for procedures in which the auditor perceives that performance quality is less verifiable, and thus most at risk of being performed with low quality. We report the results of an experiment in which 50 experienced audit managers budget time for an audit program that tests a Level-3 fair-value estimate, which prior research and PCAOB inspections indicate is a challenging audit area vulnerable to allegations of low audit quality. The results support our predictions, and suggest that re-framing audit procedures negatively would increase audit time budgets, an Audit Quality Indicator, particularly for less-verifiable procedures.

Keywords: fair value auditing, audit planning, procedure frame, procedure verifiability

Suggested Citation

Maksymov, Eldar M. and Nelson, Mark W. and Kinney, William, Budgeting Audit Time: Effects of Procedure Frame and Perceived Procedure Verifiability (January 31, 2017). Behavioral Research in Accounting, Vol. 30, No. 1, 2018. Available at SSRN: https://ssrn.com/abstract=2066160 or http://dx.doi.org/10.2139/ssrn.2066160

Eldar M. Maksymov

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

Mark W. Nelson (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

448 Sage Hall
Ithaca, NY 14853
United States
607-255-6323 (Phone)
607-254-4590 (Fax)

William Kinney

University of Texas at Austin - Department of Accounting ( email )

Austin, TX 78712
United States
512-471-3632 (Phone)
512-471-3904 (Fax)

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