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The purpose of the study is to examine how awareness of the prior year fraud detection testing strategy impacts auditor judgments at differing levels of engagement risk.

A 2 × 2 between-subject experiment was conducted using 64 practicing auditors as participants. The independent variables are manipulated at two levels – awareness of prior-year testing strategy (aware versus unaware) and engagement risk (high versus low). The dependent measures are identified risk factors, targeted areas of auditors’ risk assessments, proposed audit procedures and the desire to consult with a forensic specialist.

Although continuing auditors anchor on prior-year audit strategies, new auditors (who are unaware of prior-year testing strategies) focus on generally known high-risk areas and firm standard procedures while planning the audit.

This paper contributes to the ongoing debate regarding how auditor tenure impacts auditors’ decision-making at a time when the profession and US regulators are focused on enhancing audit quality. The findings further suggest that auditors should take steps to enhance their judgments and avoid potential biases, particularly when planning continuing engagements.

Although the extant literature document anchoring by continuing auditors, this paper is the first to examine successor auditors’ fraud testing strategies. The findings suggest auditors on high-risk engagements who are unaware of the prior-year testing strategy may process information at a deeper level, as they are more likely to seek consultation with a forensic specialist rather than relying on simple heuristics.

The purpose of this paper paper is to study effective measures in dealing with the phenomenon of insurance claims’ fraud. In fact, fraud is one of the major industry concerns. It occurs in all classes of insurance and accounts for a substantial portion of indemnity payments each year.

This paper develops a model framework based on a costly state verification setting in which – while policyholders observe the amount of loss privately – the insurance company can decide to audit incoming claims at some cost. The aim is to derive optimal auditing strategies from the insurance company’s perspective while maintaining contract attractiveness to policyholders willing to adhere to the insurance relationship. The possibility for each stakeholder to adapt its behavioral strategy over the course of several periods is taken into account. Using a numerical approach based on Monte Carlo simulations, the impact of different parameterizations on the optimal auditing range by means of a sensitivity analysis is illustrated and analyzed.

The central outcome of the model is an auditing range which selects those claims which should be subject to verification.

This paper comes to the conclusion that, given some constant cost per audit, it is optimal to verify the accuracy of claims from the mid-value segment. Furthermore, it can be shown that while the option to adapt one’s strategy might be favorable from the insurance company perspective, it has a negative impact on the policyholders’ position. This disproves the common belief that adapting the defrauding strategy with the help of signals from service providers would be advantageous.

This paper extends the stand of literature on costly state verification and gives indications for optimal auditing strategies in industry practice.

The purpose of this paper is to summarize a simulation study that analyzed the performance of Bayesian audit strategies in a novel fashion – dynamically and with varying sample sizes depending on the extent of an auditor's prior information.

The prior information for the Bayesian strategies arises from a set of control tests that are evaluated making use of reliability theory. The entire audit strategy is simulated under systematically different control reliabilities and related amounts of total misstatements in an accounting population.

The major finding is that robust Bayesian audit strategies that have recently been developed in auditing research are more sensitive to non‐sampling errors than existing strategies of audit practice.

The authors find that there are differential effects of sampling error vs non‐sampling error on the Bayesian strategies and that controls testing does not need to be extensive to get full internal control reliance.

The paper adds to existing research by examining the performance of various Bayesian audit strategies under more realistic audit conditions of sampling and non‐sampling uncertainty.

The need to develop manufacturing strategies which are consistent with and supportive of overall business strategies is now widely accepted. A manufacturing audit approach which has been found useful in the process of manufacturing strategy formulation is described. Within manufacturing strategy, the need for a manufacturing audit is identified and the current approaches to audit are reviewed. These existing approaches do not provide an adequate audit process for use in strategy formulation. A structured audit approach based on established frameworks is developed and preliminary results of its use are presented. The approach has been successfully used in several companies; however, there is need for further work in looking at the social aspects of the process.

This study aims to explore the effect of negotiating audit differences on auditors’ internal control deficiency (ICD) severity assessments, an ensuing, non-negotiated judgment, in an integrated audit.

The experiment manipulates the client’s concession timing strategy as either immediate or gradual, holding the outcome constant. A total of 34 auditors (primarily managers) resolve an audit difference with the client.

The client’s concession timing strategy during the negotiation of an audit difference spills over to affect auditors’ severity assessment of a related ICD. Auditors judged the ICD severity to be higher (lower) in the immediate (gradual) condition. Client retention risk inferences mediate this effect.

The effect on auditors’ ICD severity assessments may not ultimately affect the audit report. Participants did not control their negotiation strategy, allowing the client’s negotiation strategy and the outcome to be held constant; it is possible that interactive effects between the client and auditor’s strategy might affect the study’s implications.

Features of the auditor–client negotiation process may influence auditors’ downstream, post-negotiation judgments and may therefore help to explain empirical evidence and Public Company Accounting Oversight Board inspection findings that show auditors often fail to identify an internal control material weakness after identifying a financial statement misstatement.

This paper expands current negotiation research by exploring the impact of inferences made based on counterparty concession strategy for downstream, non-negotiated judgments and current integrated audit research by identifying client retention perceptions as a driving factor of lower ICD severity assessments.

This paper aims to investigate how professionals such as accountants, auditors, senior civil servants and academics perceive the use of audit sampling strategies adopted by professionals to increase detection rates of frauds and corruption within the public sector in Africa. It also examines the respondents’ perceived values regarding the reasons for committing frauds, types of fraud and corruption, as well as the aspects of audit sampling strategies to tackle frauds.

This research uses non-parametric statistics and logistic regression to analyse the respondents’ opinions regarding the state of frauds and corruption in Africa (particularly in Tunisia and non-Tunisia countries), the common factors behind people committing frauds, including the types of frauds and corruption and the respondents’ opinions on the use of audit sampling strategies (non-random and random) to examine the instances of frauds and corruption.

The findings indicate that most respondents prefer to use non-probabilistic audit sampling rather than more robust sampling strategies such as random sampling and systematic random sampling to detect frauds and corruption. In addition, although there are some minor statistical differences between the countries in terms of the respondents’ perceived values on skimming fraud and on the use of audit random sampling to tackle rampant corruption in Africa, the overall findings indicate that opinions do not significantly differ between the respondents from Tunisia and other countries in terms of the types of fraud, the reasons for committing fraud and the auditing sampling strategies used to investigate the frauds.

This research serves as an analytical exploratory study to instigate further audit sampling research to combat rampant fraud and corruption in the public sector in Africa.

There are few or non-existent studies investigating the application of audit sampling strategies in Africa countries, particularly to examine the application of audit random sampling and audit non-random sampling strategies to detect fraudulent activities and corruption. Correspondingly, this research carries strategic implications for accountants and auditors to successfully detect fraudulent activities and corruption in Africa.

As a result of the significant influence of actuaries on policy liabilities and the related earnings in the financial statements of a listed South African long‐term insurer, auditors encounter a number of key issues and considerations relating to the incorporation of actuarial expertise in the audit process. Guidance for auditors to address these issues and considerations is discussed in this study. The guidance was developed as a significant element of a wider research project, the objective of which was the development of a best practice framework for the formulation of overall audit strategies for insurance contracts and the related earnings of listed South African long‐term insurers.

Describes the strategy to be used for internal audit engagements, including: the selection of the audit′s objective; developing the basic plan to achieve the objective; consideration of such aspects as risk and materiality; anticipation of potential technical problems; alternative methods of resolving the problems; integration with other audit projects; optimum timing of the audit elements; and potential interpersonal problems and their resolution.

This study examines whether and how a client's business strategy can affect the relationship between auditor characteristics and financial reporting quality.

In this study, auditor industry specialization and tenure were used as proxies for auditor characteristics. The client business strategy was measured using the resource allocation index method. Finally, discretionary accruals are used to assess financial reporting quality. This study includes 1,450 firm-year observations and 145 companies listed on the Tehran Stock Exchange (TSE) over a ten-year period from 2011 to 2020. The research hypotheses were analyzed using a multivariate regression model and panel data.

The results show that auditor industry specialization increases financial reporting quality. This relationship improves when the client's business strategy deviates from the industry–normal strategy. The research findings state that auditor tenure has a positive association with financial reporting quality, and this relationship is strengthened when the company's business strategy deviates from the normal industry strategy.

The findings of this study provide important evidence for investors, firm management, and auditing firms. Investors must consider the auditor characteristics when selecting companies listed on the TSE. Managers of Iranian companies are advised to consider the auditor's characteristics when choosing an audit firm to increase financial reporting quality. Audit firms should evaluate their business strategies in audit planning to increase the quality of financial reporting.

To the best of the authors’ knowledge, this is the first empirical study to examine the relationship between auditor characteristics and the financial reporting quality in the emerging capital market by considering the clients' business strategy.