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4 TENUREi INDUSTRYi REVENUEi PUBLICi 6 3 3 PUBLICi RMMi REVENUEi 2 (3) TENUREi 4 INDUSTRYi 7 ei; ei. (4) Prior literature has looked at speciﬁc audit tests, and used the total number of tests to
measure the nature of audit procedures (e.g., Mock and Wright 1999). This study uses a
metric for nature that focuses on characteristics deﬁned in SAS No. 31 (AICPA 1980) and
by the Public Oversight Board’s Panel on Audit Effectiveness. When referring to the nature
of audit evidence, SAS No. 31 states that evidence collected from independent sources is
more reliable than information collected directly from the client. The Panel on Audit Effectiveness speciﬁcally uses the term ‘‘persuasive’’ when referring to the nature of audit
evidence. We depart from prior research because we believe authoritative guidance suggests
nature should reﬂect the independence and persuasiveness of evidence. We label our nature
We measure PERSUASIVENESS by categorizing audit procedures listed in the revenue
cycle of the audit program using a three-point scale (outside evidence 3, outside/inside
2, and inside
1). ‘‘Outside’’ evidence is obtained, inspected, or observed completely
independent of management. This is considered to be the most persuasive form of evidence.
12 Because client characteristics may simultaneously affect each dependent variable, the residuals from these three
regressions may also be correlated, implying that Seemingly Unrelated Regression (SUR) should be utilized to
improve the efﬁciency of the coefﬁcient estimation. However, the SUR estimator reduces to OLS when the
independent variables are identical for all equations (Amemiya 1985, 187). Auditing: A Journal of Practice & Theory, November 2005 58 Kizirian, Mayhew, and Sneathen An example of outside evidence is a cash conﬁrmation sent directly from a bank to the
auditor. ‘‘Outside/inside’’ evidence originated from a third party outside of the inﬂuence
of management but has the potential...
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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