class7 - 26:010:680 Current Topics in Accounting Research...

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26:010:680 Current Topics in Accounting Research Dr. Peter R. Gillett Associate Professor Department of Accounting and Information Systems Rutgers Business School–Newark and New Brunswick
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Current Topics in Accounting Research March 2, 2011 Dr. Peter R. Gillett 2 OVERVIEW ADAPT Homework 4 Valuation Networks * Lauritzen & Spiegelhalter * Aalborg * Shenoy-Shafer * Gillett Homework 5
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Current Topics in Accounting Research March 2, 2011 Dr. Peter R. Gillett 3 ADAPT Describes a project to create an expert system for audit program(me) tailoring Goals * To ensure that sufficient audit evidence is planned * To ensure that excessive audit evidence is not planned * To produce an optimal audit approach
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Current Topics in Accounting Research March 2, 2011 Dr. Peter R. Gillett 4 ADAPT The principal design philosophies incorporated in ADAPT are: * the user retains ultimate control of the process * the software is capable both of generating programmes, and of assessing the effectiveness of programmes determined by the auditor * two techniques are used in audit programme generation heuristic rules may include appropriate audit procedures to the extent that both the user and heuristics leave the programme indeterminate, a mathematical evaluation based on the assurance that is derivable from various procedures is used to plan the audit programme * this combination of techniques is designed to provide a means by which relevant auditor expertise in the designing of audit programmes may be combined with detailed knowledge of the client to ensure that the audit programme produced is relevant, effective and efficient to ensure that ADAPT can nevertheless operate with a relatively small number of heuristic rules, requiring only limited effort in supplying responses to questions to generate an efficient and cost-effective audit programme by taking into account the structure of audit evidence, and the relationships between related assertions * ADAPT was implemented initially with a small number of heuristic rules; more were added as necessary during pilot testing, particularly in response to issues arising during validation of the programmes produced by the system * built-in expertise is used in conjunction with the auditor's own knowledge
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Current Topics in Accounting Research March 2, 2011 Dr. Peter R. Gillett 5 ADAPT The Assertion Hierarchy OR F1 F2 F3 F4 etc. A1 A2 A3 A4 etc. CR IR DR CR DR CR DR P1 P2 P3 etc.
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Current Topics in Accounting Research March 2, 2011 Dr. Peter R. Gillett 6 ADAPT Derivable Assurance, Evidential Power and Scope * Evidential Power = Relevance * Reliability * Maximum Derivable Assurance (MDA)= Evidential Power * Scope * Maximum Derivable Assurance (MDA)= Relevance * Reliability * Scope * Evidential Value = MDA for all relevant assertions * Diversity and Diversity Factors (b = 1 - (30 + 2*min(p, 5) - f*(13-f)) 2 /1568 )
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Current Topics in Accounting Research March 2, 2011 Dr. Peter R. Gillett 7 ADAPT Aggregation Rules * Direct Assurance DA = AsC b (X 1 , X 2 , . .. X n ) = 1 - (1-X 1 )*[(1-X 2 ). . .(1-X n )] b where the
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This note was uploaded on 03/08/2012 for the course ACCT 680 taught by Professor Peterr.gillett during the Spring '11 term at Rutgers.

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class7 - 26:010:680 Current Topics in Accounting Research...

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