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The persuasiveness of audit procedures employed

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Unformatted text preview: the auditor plans the persuasiveness, timing, and extent of audit procedures to achieve the necessary DR. The audit risk model theoretically guides the selection of audit procedures, producing an effective and efficient, riskfocused evidential plan that assists auditors in the opinion formulation process. The persuasiveness of audit procedures employed relates to the persuasiveness of the evidence required (AICPA 2000). A client with a high RMM requires the collection of more persuasive evidence and more direct observation than a client with a low assessed RMM. The timing of evidence collection reflects the auditor’s reliance on the client’s internal control structure, such that evidence gathered prior to year-end is expected to reasonably reflect year-end results and processes. The auditor uses more pre-year-end procedures when the client has strong internal controls. Finally, the connection between RMM and the extent of testing is direct. As RMM increases, the auditor needs to collect more evidence to reduce DR, to reach a specified level of AR. Source Credibility Management integrity also impacts the auditor’s assessment of source credibility for management-provided evidence. The source credibility literature focuses on auditor judgments based on the reliability of evidence provided. Theories on aggregating evidence provide various statistical and behavioral belief adjustment models to determine how given evidence should be aggregated based on its reliability (see Krishnamoorthy et al. [1999)] for a discussion of these models). Hirst (1994) looks at how the reliability of evidence impacts judgment. The consistent theme from this stream of research is that less reliable information should be weighted less in the auditor’s judgment process than information that is more reliable. Experiments appear to back up this contention. The auditor must consider the credibility of evidence supplied by management and adjust the audit plan accordingly (Beaulieu 2001, 1994). If management is deemed less credible (i.e., low integr...
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