Business risks strategies and processes obtained

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Chapter 9 / Exercise 5
Electronic Commerce
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of business risks, strategies, and processes obtained through the use of more holistic audit approaches in conducting APs (Trotman and Wright 2006). This research is a descriptive study of AP practices and how they have changed in response to the audit environment. The interviews that were conducted were primarily structured in nature. Future research using other methods (e.g., unstructured interviews, field studies, experiments) is needed to corroborate and extend the findings. Further, a study grounded in a larger theoretical framework would be valuable and extend our under- standing of the use of APs. For example, we find that while auditors are unwilling to rely on APs for areas of high risk, they are more likely to rely on APs to reduce audit hours than has been reported in prior 694 Contemporary Accounting Research CAR Vol. 27 No. 2 (Summer 2010)
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Electronic Commerce
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Chapter 9 / Exercise 5
Electronic Commerce
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research. However, auditors are still more hesitant to reduce hours than to increase hours based on the results of APs. Perhaps future research could rely on psychological theories of risk, such as expected utility theory (e.g., Ellsberg 1961); prospect theory (e.g., Kahneman and Tversky 1979); and or security potential aspiration theory (e.g., Lopes and Oden 1999), to examine why this is so. Could it be the case that more precise, and defensible, expectations could result in more efficient and effective APs that, in turn, would result in greater reliance on the part of auditors (RI 16)? Further, with respect to social theory of change, Cullinan and Sutton (2002) suggest that the AICPA approved a series of Statements on Auditing Standards in 1988 to better meet expectations of users of financial state- ments. Included in these standards was the acceptance of APs as substantive tests. Although this was a source of concern for the Chief Accountant of the SEC (Turner 1998, 10), it set the stage for the development of the top- down, risk-based audit approaches that we argue may be enablers of change. The claim that the AICPA adopted standards to better meet users’ expectations seems at odds with the Chief Accountant’s concern that the profession had sacrificed effectiveness for efficiency. This inconsistency raises questions about how such changes came to be viewed as acceptable. Perhaps future research could take advantage of models such as the neo- institutional model of change offered by Hinings et al. 2004 to examine how such changes become possible and then accepted by an entire field such as the accounting profession (RI 17). Analytical Procedure Practices 695 CAR Vol. 27 No. 2 (Summer 2010)
Appendix Relevant interview questions

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