Audit Review

Audit review

1、difference between big and small audit firms

2、auditing tenure: What would be the arguments for and against?

3、providing non-auditing services: What would be the argument for and against?

4、agency theory: Information asymmetry, separation of owners and management

The management might have the same incentives as the owners, risk of this, work of this. So we try to align managers’ interest by paying them bonus and options, but that creates incentives for earnings management, also debt confidence, loan conditions. So the monitoring device is auditing. So agency theory can explain demand for auditing, also can explain the demand for big audit firms, their high quality. So firms with higher agency cost might more likely demand the services from big audit firm.

5、roles and responsibility of external and internal auditors

In the US, which could extend to here, the new laws regarding managements have been assigned for correctness and responsible for internal control as auditors, also auditing committee.

6、what do we know about audit quality by Francis

The role of accounting in financial crisis by Kothari

Talked about the global crisis, what caused it, guilty parties helped cause it.

Look at this paper in combination with slides that the perfect storm. That perfect storm talked about the earlier financial crisis around the turn of millennium, like just after the 2000 when we have the Enron case. So I want you to read that, I also want you to read the Kothari one.

7、forensic accounting

Read Chapter 12 about revenue fraud

8、internal control power point (the perfect fraud storm?)

9、the most popular regression model-the Audit Fee Pricing Model

Previous questions about this are what is the dependent variable? What is control variable? We also learn the supply side and demand side of audit fee pricing.

10、during the course, think about you own research in the auditing area. Please tell about this.

Eg. What is the...