|Previous||1 of 2||Next|
Discussant's Response to "An Investigation of Adaptability in Evidential Planning" Norman R. Walker Price Waterhouse LLP Whether audit plans reflect differences in risk characteristics between industries as well as changes in risk over time for specific enterprises is a subject of interest to practitioners in the accounting and auditing profession. If audit plans do not reflect such differences in risk, serious questions arise as to both the effectiveness and efficiency of the audits performed pursuant to the plans. While the research questions addressed by the authors of the paper are of interest, several factors diminish the usefulness of the results of the research and the paper generally from a practitioner's perspective. First, the industry selections of merchandising and manufacturing are awfully broad. The former, which presumably is synonymous with retailing, would include everything from food to appliances to clothes to drugs to autos to recorded entertainment to building products to toys to jewelry to PC's and so on. Similarly, manufacturing could include production of many of the products referred to above (drugs, autos, toys, clothes) as well as steel, airplanes, mainframe computers, pulp and paper and so on. The risk characteristics for the more narrowly defined industries may differ substantially. However, when aggregated under the general headings of merchandising and manufacturing, such differences may be blurred and insight for the practitioner lost. Frankly, a more direct approach to the research might have been to select individual audits in more narrowly defined industries which are known to have distinctive risks for comparison of the audit plans. While the approach taken has statistical validity, the potential for more enlightening results may have been sacrificed. Similarly, the research approach to the question of whether audit plans for specific enterprises reflect changes in risk over time is not the most direct, i.e., what is the likelihood that dramatic changes in risk will have occurred in the sample of enterprises during the two years for which an audit plan is being evaluated? It would seem more appropriate to identify enterprises where inherent risk has obviously changed over some appropriate period and then evaluate the audit plans for the same period to determine whether and how responsive they were to the changes in risk. This is acknowledged on page 21. With respect to both the question of industry definition and changes in risk over time, the research approach employed may have been driven by the relative availability of and access to audit plans and personnel and the need or requirement for a sufficient sample size to meet academic publication expectations. Either way, the practitioner's interest in the issues is not well served. A second area where the research could be crisper is with respect to the use of operating cycles for the comparisons. Risk factors typically impact financial statement components and the individual financial statement assertions within those components but rarely do they impact all the assertions and financial statement components involved in the broad concept of an operating cycle (e.g., purchasing, accounts 92
Discussant's response to "An Investigation of adaptability in evidential planning"
Walker, Norman R.
Srivastava, Rajendra P., ed.
Auditing -- Decision making
Auditing Symposium XII: Proceedings of the 1994 Deloitte & Touche/University of Kansas Symposium on Auditing Problems, pp. 092-093
|Source||Published by: University of Kansas, School of Business|
|Rights||Contents have not been copyrighted|
|Format||PDF page image with corrected OCR scanned at 400 dpi|
|Collection||Deloitte Digital Collection|
|Digital Publisher||University of Mississippi Library. Accounting Collection|
|Identifier||Auditing Symposium XII 1994-p92-93|