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Unformatted text preview: ation to be difﬁcult. More importantly, the model
will fail to account for the ordinal nature of the dependent variable (Greene 1997). Nonetheless inferences based
on a multinomial logit results are the same as the inferences based on our OLS approach.
We thank William Waller and Mark Zimbelman for suggesting the combination approach. Prior research asked
survey respondents to rate risk on a seven-point scale even though the ﬁrm they surveyed used the same
classiﬁcation scheme as our ﬁrm (Mock and Wright 1993, 1999). Our results do not change if we multiply our
IR and CR coding rather than the ranking used above. Our ranking scheme makes no distributional assumptions
other than increases in the qualitative measures of risk increase the quantitative measures. A multiplicative
approach assumes that risk increases dramatically as the qualitative risk increases. Auditing: A Journal of Practice & Theory, November 2005 56 Kizirian, Mayhew, and Sneathen Low CR Low
Medium High 1
5 The test variable, management integrity (MI), is assessed and documented as ‘‘strong,’’
‘‘moderate,’’ or ‘‘weak.’’ This assessment is coded 2 for strong, 1 for moderate, and 0 for
weak.11 The data-granting ﬁrm’s management integrity assessment is made prior to the
assessment of control risk and inherent risk. The assessment attempts to capture management’s integrity and control consciousness. Auditors arrive at a management integrity measure by investigating factors related to management’s attitude toward reporting, controls,
and the external audit, as well as their reputation in the business community. The datagranting ﬁrm’s guidance states ‘‘the reputation, character, and integrity of senior management and the tone set for the overall control environment provides us with an indication of
whether they are responsible and reputable, and whether meaningful representations and
full disclosure can be reasonably expected during the engagement...
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This note was uploaded on 11/11/2010 for the course MIS BMBM31101 taught by Professor Ms.sara during the Spring '10 term at Asian Institute of Management.
- Spring '10