The Effect of Alternative Business Model Representation Techniques on Business and Audit Risk Assessment

49 Pages Posted: 6 Dec 2014

See all articles by J. Efrim Boritz

J. Efrim Boritz

University of Waterloo - School of Accounting and Finance

Kun Huo

University of Western Ontario - Richard Ivey School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: 2013

Abstract

We investigate the effects of business model representation techniques, specifically format and presence of causal linkages, on business risk and audit risk assessment. We conduct an experiment involving auditing students with previous audit work experience as participants and business model information based on an existing public company. Participants given business model representation in either diagrammatical or tabular format make more accurate risk assessments than those given the same information in a free-form narrative format. Contrary to our prediction, overall performance in diagram and table conditions does not differ statistically. The inclusion of causal linkages in the business model representation has mixed effects on risk assessment accuracy. We also investigate whether task-specific experience moderates the effects of representation techniques on risk assessment. We find an interaction effect of task-specific experience with causal linkages; specifically, linkage effects are limited to the subsample of participants with no risk documentation experience.

Keywords: Business Model, Business Model Representation, Business Risk Assessment, Audit Risk Assessment, Representation Format, Diagrams vs. Tables vs. Free-form Narrative

Suggested Citation

Boritz, Efrim and Huo, Kun, The Effect of Alternative Business Model Representation Techniques on Business and Audit Risk Assessment (2013). Canadian Academic Accounting Association (CAAA) Annual Conference, June 2013. Available at SSRN: https://ssrn.com/abstract=2534088 or http://dx.doi.org/10.2139/ssrn.2534088

Efrim Boritz (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada
519-888-4567 (Phone)
519-888-7562 (Fax)

Kun Huo

University of Western Ontario - Richard Ivey School of Business ( email )

1151 Richmond Street North
London, Ontario N6A 3K7
Canada

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