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Financial Statement Transparency and Auditor Responsibility: Enron and Andersen
Author(s) -
Wu Ben Koon Hong,
Roebuck Peter,
Summers Suzanne
Publication year - 2002
Publication title -
international journal of auditing
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.583
H-Index - 21
eISSN - 1099-1123
pISSN - 1090-6738
DOI - 10.1111/j.1099-1123.2002.tb00019.x
Subject(s) - business , audit risk , business risks , accounting , audit , inherent risk (accounting) , financial risk management , factor analysis of information risk , joint audit , it risk management , audit plan , risk management , actuarial science , internal audit , risk analysis (engineering) , finance , risk management information systems , engineering , management information systems , information system , electrical engineering
‘Business risk’ is a concept that has emerged from the recent development in new audit methodologies. This paper investigates auditor perceptions of business risk factors in the planning stage of an audit. Auditors were asked to classify risk factors as to whether the factors are primarily business risk or inherent risk. We also examine how auditors modify their audit strategies based upon the categorisation of risks, and the impact on their ability to detect risk of fraud from the consideration of those risk factors. Results indicate that auditors perceive business risk as a distinct risk factor. There is however some overlapping of business risk and inherent risk factors, and some risk factors previously considered as inherent risk now appear to be included as business risk. Results indicate a weak articulation between business risk and audit strategy. To the extent that auditors do adjust audit strategy for business risk, auditors increase analytical procedures rather than detailed substantive testing. Auditors did not view business risk factors as impacting their ability to detect risk of fraud.