Premium
An application of data envelopment analysis to the evaluation of audit risk: a reinterpretation
Author(s) -
Davutyan Nurhan,
Kavut Lerzan
Publication year - 2005
Publication title -
abacus
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.632
H-Index - 45
eISSN - 1467-6281
pISSN - 0001-3072
DOI - 10.1111/j.1467-6281.2005.00183.x
Subject(s) - data envelopment analysis , audit , reinterpretation , multinational corporation , exposition (narrative) , risk analysis (engineering) , internal audit , actuarial science , computer science , risk management , accounting , econometrics , business , economics , finance , statistics , mathematics , physics , literature , acoustics , art
This paper, which reinterprets previous work by Bradbury and Rouse (2002), addresses the risk quantification issue at an intuitive level. The insights provided by such quantification are discussed. Risk factors are associated with the risk‐return concept. This allows measuring whether risks taken on are appropriately rewarded. The paper gives a non‐technical exposition of DEA and outlines possible applications to accounting and finance. Using data for a large multinational, it shows how DEA analysis can be combined with internal audit procedures. It explains how the results obtained can be used to improve risk management.