Investigate whether it impacted the signicance of mi

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Unformatted text preview: SUASIVENESS 10 (5) *EXTENT 8 e (6) Dependent Variable Independent Variables and Expected Signs DIFF (H3) Intercept MI RMM REVENUE ? TENURE PYERR PUBLIC INDUSTRY ? PERSUASIVENESS ? TIMING ? EXTENT ? 4.917 0.493 4.332 0.001 0.540 0.399 0.523 0.246 0.046 0.400 2.277 0.161 3.277 0.109 1.721 0.345 DIFF (H3) 37.471 0.176 9.891 0.015 3.420 0.204 1.087 0.122 0.784 0.094 14.456 0.091 10.655 0.086 5.395 0.519 3.843 0.482 0.448 0.084 125.7 0.074 Dependent variable DIFF equals 1 when the auditor discovered an audit difference during the evidential process and 0 otherwise. All other variables are defined in Table 3. Statistical significance (p-values) for parameter estimates are for one-tailed tests with directional expectations and two-tailed tests where there is no directional expectation. investigate whether it impacted the significance of MI. As expected MI is negatively cor– 0.66, p .001). When fraud risk is added to our models, it related with fraud risk (r does not have a significant effect on our inferences concerning MI. Fraud risk itself is not significant in any of the models. SAS No. 99 was not in effect during the audits we examine. Future research should revisit the impact on fraud risk assessments on audit planning postSAS No. 99. Auditing: A Journal of Practice & Theory, November 2005 The Impact of Management Integrity on Audit Planning and Evidence 65 SUMMARY AND CONCLUSIONS In light of recent management-induced business failures (e.g., Enron) and the SarbanesOxley-related Section 404 requirement that auditors certify internal controls, the importance of recognizing and considering the integrity of client management has taken on renewed importance. This study examines the influence of the auditor’s assessment of management integrity on preliminary risk assessments and the allocation of audit effort. Our results suggest that clients with higher assessed levels of integrity have lower preliminary risk assessments, but prior-year error better explains risk and planning assessments than the management integrity assessmen...
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