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Title: The impact of non-audit services and audit process standardisation on independent audit judgement and fraud recognition
Author: Kosmala Maclullich, Katarzyna
Awarding Body: University of Edinburgh
Current Institution: University of Edinburgh
Date of Award: 2001
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The study addresses issues of audit independence, in particular behavioural and ethical aspects of individual judgement and decision-making in external auditing. The study examines how the auditor's sensitivity to the possibility of fraud, to management representations, and to management services opportunities impacts upon individual audit judgement embedded in a structured audit environment. A phenomenon of management services opportunism is perceived as a form of power exertion by the client over the auditor's judgement and his/her recognition of material fraud. Further, auditing is perceived as hermeneutic practice, that is, the auditor on the job strives to understand and interpret evidence of client's operations embedded in the wider context of social institutions and structural conditions. By doing so, he/she produces assurance to the public that these interpretations are trustworthy. This relates to an 'immanent' ability in auditing, to the notion of operational independence (Power, 1997), that is, the auditor's freedom and capacity to understand and interpret the 'economic text' narrated in the client's financial statements. However, the profession and consequently audit firms propagate a symbol for the 'ideal of service' objectified by the abstraction of the professional standards and guidance and executed in conformity to routines of operational approaches. As a result, the structured methodologies of 'risk-based' auditing mediate independent judgement in particular in its operational sense. The study seeks to unveil whether the auditor is capable of transcending the structure of the audit process and client's influence so as to enable independent judgement and fraud recognition. The study consists of questionnaires incorporating a real-life construct case study (i.e. given the characteristics of the client the subjects were asked to compose audit planning memorandum, assess the risk and estimate the budget of hours for audit testing) and interviews. Qualitative and quantitative methods are employed: narrative analysis and statistical testing. What emerges is evidence that auditors respond to the (changing) circumstances of the client's environment in two different ways consistent with their attitudes to structure: transcending and non-transcending. The former being less constrained by the structured audit approach, represent a 'big-picture' perspective. For these auditors the threat of loss of independence may be associated with the judgement restrictions with regards to amount of work assigned for audit testing.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available