Title

Using Evidential Reasoning Technology to Enhance the Audit Quality Assurance Inspection Process

Document Type

Article

Publication Date

2018

Keywords

audit quality assurance (AQA); PCAOB inspection; evidential reasoning; fraud risk; Satyam fraud; assurance services.

Disciplines

Accounting

Abstract

This paper considers the use of an emerging technology based on formal evidential reasoning to help audit quality assurers conduct higher-quality inspections of audit engagements. Although the ideas should be relevant to the inspection process in general, we focus on PCAOB stated objectives and procedures and, as an illustration, the inspection of Satyam Computer Services Limited. To enhance audit quality assurance (AQA), we propose and illustrate a portion of a prototype technology that uses formal evidential reasoning to help assess audit quality. The use of a formal evidential reasoning model and a structured process should provide better documented and more precise, consistent, and rigorous AQA assessments of risk, of the sufficiency and competency of audit evidence collected, and of various auditor judgments. The potential of this technology is illustrated by evaluating the Public Company Accounting Oversight Board’s (PCAOB) inspection of Satyam Computer Services Limited, in particular the assessment of the risk of financial statement misstatement due to either unintentional or intentional misstatements. The illustration suggests that the proposed technology is likely to facilitate an enhanced inspection of audit quality. By implication, we assert that use of such technology will result in other enhancements to AQA.

Publication Title

Journal of Emerging Technologies in Accounting

Volume

15

Issue

1

First Page

29

Last Page

43

ISSN

1554-1908

DOI

10.2308/jeta-52083

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