2007 however offshoring knowledge work is generally

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Fraud Examination
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Chapter 12 / Exercise C1
Fraud Examination
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2007). However, offshoring knowledge work is generally riskier than offshoring manufacturing processes. Similarly, there is a perception of a fairly high risk for audit failures occurring through the offshoring of outsourced audit work, and the question becomes how the public, and more specifically jurors, will perceive these failures and the related effect on the profession. Prior research has examined juror decision-making and the impact of various firm and environmental factors on judgments. For instance, Brandon and Mueller (2006) investigated the impact of the client’s importance on jurors’ decisions; Lowe et al. (2002) studied the impact of decision aid use by auditors on jurors’ decisions; and Kadous (2000, 2001) studied the impact of audit quality and severity of the consequences on jurors’ decisions. Prior studies have also determined that the damages awarded by jurors are dependent on the harm to the plaintiff and the wealth of the defendant, where a higher degree of harm and higher wealth of the defendant lead to higher damage awards ( Sunstein et al. 1998; Kadous 2000; Robbennolt 2002) . We expand upon this research by examining how engagement-related factors embodied by outsourcing relationships and the offshoring of those outsourcing relationships affect jurors’ perceptions and impact damage awards. The singular right afforded the accounting profession to conduct public company audits is based on a public and regulatory belief that auditing is a complex process and that auditors have specialized knowledge that is verified through certification, experience, and licensing. The public trusts that the auditor will use that knowledge and perform audits with appropriate due care— planning audits carefully and strictly supervising subordinates. This is the point where many skeptics raise concerns over the viability of outsourcing, particularly when the work is offshored. These concerns include the auditor’s ability to adequately perform their professional responsibility when the proximity of the work moves further away through various outsourcing arrangements, the auditor’s ability to adequately monitor outsourcing providers work, and the auditor’s ability to provide appropriate levels of supervision ( Blackman et al. 2004; Mintz 2004; Shamis et al. 2005 ). The auditors’ ability to demonstrate due care may be taken away when the work is so far removed from their observation and control ( Mintz 2004; Robertson et al. 2005 ). The risk is that outsourcing, Examination of the Legal Liability Associated with Outsourcing and Offshoring Audit Procedures 101 Auditing: A Journal of Practice & Theory May 2013
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Fraud Examination
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Chapter 12 / Exercise C1
Fraud Examination
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Expert Verified
and arguably even more so offshoring, may influence the public’s, and more specifically jurors’, view of accounting as a profession serving the public interest versus a business focused on minimizing costs and maximizing profits ( Robertson et al. 2005; Shamis et al. 2005; Brody et al.

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