This preview shows page 1. Sign up to view the full content.
Unformatted text preview: iable is measured in the same manner as in Mock and Wright (1999).
It captures the portion of total audit hours allocated to the revenue portion of the audit.14
We expect the portion of total audit time allocated to revenue to increase as the risk of the
revenue cycle increases. When EXTENT is a dependent variable, we expect the coefﬁcient
on MI to be negative, indicating the audit requires less evidential effort in the presence of
strong management integrity.
To test H3, we employ logistic regressions in the following form:
DIFFi 0i MIi 1 RMMi 2 PYERRi 5 DIFFi 0i MIi 1 RMMi 2 PYERRi
TIMING or 9 13 14 PUBLICi 6 5 REVENUEi 3 10 INDUSTRYi REVENUEi 3 PUBLICi 6 7 7 TENUREi 4 (5) TENUREi 4 INDUSTRYi PERSUASIVENESS ei; ei. EXTENTi 8 (6) Unlike our other dependent variables, the timing variable is not based on the revenue cycle alone. Management
integrity also effects engagement and account level assertions and risks, so we expect an association between
the MI assessment and timing regardless of whether timing captures account speciﬁc or engagement level
assertions or risks. Note also that the data set does not include any cases where the auditor changed the proximity
of the year-end engagement relative to the client’s ﬁscal year-end.
We also scaled revenue hours by total revenue and alternatively by the log of total revenue. These alternative
measures give a more direct test of the change in the revenue account relative to the average effort exerted
across all audits of the revenue cycle in our sample. Inferences based on these alternative measures do not differ
from the reported results for EXTENT. Auditing: A Journal of Practice & Theory, November 2005 The Impact of Management Integrity on Audit Planning and Evidence 59 The dependent variable DIFF is an indicator variable where 1 indicates that the auditor
discovered an audit difference during the audit. The DIFF measure is for revenue cycle
audit differences only. These audit differences represent potential misstatements that should
be adjusted or investigated further, not nec...
View Full Document
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