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Audit management, need for closure and detection of misstatements

Audit management, need for closure and detection of misstatements The purpose of this paper is to study whether diverting auditors to erroneous accounts leads to higher effectiveness and detection of errors. Also, this paper investigates the effect of the need for cognitive closure of auditors on audit effectiveness and detection of errors in the presence of audit management.Design/methodology/approachThe authors used a financial statement containing a diverting statement and several errors for measuring audit management and used a survey to measure auditors’ need for closure. Research sample consisted of 79 independent auditors having above three years of audit experience. The set of financial statement and questionnaire (measuring the need for closure of auditors) was given to auditors and they had enough time to fill them.FindingsResults show that diverting auditors to accounts containing error does not lead to higher effectiveness and detection of errors. Also, auditors need for closure character does not affect their effectiveness and detection of errors in the financial statements.Practical implicationsDiverting auditors to erroneous accounts leads to higher detection of earning management. With this regard, the results increase the awareness of auditors that diverting auditors away from important errors to easy-to-detect erroneous accounts leads to their belief of achieving the audit objectives by detecting phony errors and misstatements. In other words, the results alert auditors of managers’ techniques of audit management.Originality/valueThis study contributes to the literature on audit management and need for cognitive closure of auditors in Iran’s audit environment and introduces these concepts to this environment. The paper will be of value to Association of Iranian Certified Public accountants to include stricter measure in appraisal of audit firms’ quality and educate its participants about audit management and mediating effect of the need for closure of auditors on the detection of errors and misstatements in financial statements. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting in Emerging Economies Emerald Publishing

Audit management, need for closure and detection of misstatements

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2042-1168
DOI
10.1108/jaee-08-2018-0092
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to study whether diverting auditors to erroneous accounts leads to higher effectiveness and detection of errors. Also, this paper investigates the effect of the need for cognitive closure of auditors on audit effectiveness and detection of errors in the presence of audit management.Design/methodology/approachThe authors used a financial statement containing a diverting statement and several errors for measuring audit management and used a survey to measure auditors’ need for closure. Research sample consisted of 79 independent auditors having above three years of audit experience. The set of financial statement and questionnaire (measuring the need for closure of auditors) was given to auditors and they had enough time to fill them.FindingsResults show that diverting auditors to accounts containing error does not lead to higher effectiveness and detection of errors. Also, auditors need for closure character does not affect their effectiveness and detection of errors in the financial statements.Practical implicationsDiverting auditors to erroneous accounts leads to higher detection of earning management. With this regard, the results increase the awareness of auditors that diverting auditors away from important errors to easy-to-detect erroneous accounts leads to their belief of achieving the audit objectives by detecting phony errors and misstatements. In other words, the results alert auditors of managers’ techniques of audit management.Originality/valueThis study contributes to the literature on audit management and need for cognitive closure of auditors in Iran’s audit environment and introduces these concepts to this environment. The paper will be of value to Association of Iranian Certified Public accountants to include stricter measure in appraisal of audit firms’ quality and educate its participants about audit management and mediating effect of the need for closure of auditors on the detection of errors and misstatements in financial statements.

Journal

Journal of Accounting in Emerging EconomiesEmerald Publishing

Published: Apr 23, 2019

Keywords: Iran; Audit management; Detection of errors; Misstatement in financial statements

References