Auditing
6314M0406Y
Table of Contents
Week 1 ..................................................................................................................................................... 4
Lecture 1: Introduction to Auditing & Assurance ................................................................................ 4
Introduction to Auditing & Assurance ............................................................................................. 4
Financial Statement Audits .............................................................................................................. 4
Lennox and Pittman (TAR, 2011) – Voluntary Audits versus Mandatory Audits ............................. 6
Lennox, C. S., & Pittman, J. A. (2011). Voluntary audits versus mandatory audits. The Accounting
Review, 86(5), 1655-1678 .................................................................................................................... 8
Week 2 ................................................................................................................................................... 10
Lecture 2: Client Acceptance & Audit Planning ................................................................................. 10
Objectives of an audit.................................................................................................................... 10
Audit planning ............................................................................................................................... 11
Bae et al. (CAR, 2021) – Auditors’ fee premiums and low-quality internal controls ..................... 14
Bae, G. S., Choi, S. U., Lamoreaux, P. T., & Lee, J. E. (2021). Auditors' fee premiums and low‐quality
internal controls. Contemporary Accounting Research, 38(1), 586-620 ........................................... 16
Friedrich, C., Knechel, W. R., Sofla, A. S. & Zuiddam, V. S. (2024). Client Employee Training and Audit
Efficiency. Auditing: A Journal of Practice & Theory 43(1): 73-99 ..................................................... 17
Rozario, A. M., Vasarhelyi, M. A., & Wang, T. (2023). On the Use of Consumer Tweets to Assess the
Risk of Misstated Revenue in Consumer-Facing Industries: Evidence from Analytical Procedures.
Auditing: A Journal of Practice & Theory 42(2): 207-229 .................................................................. 18
Week 3 ................................................................................................................................................... 19
Lecture 3: Ethics ................................................................................................................................ 19
What is Ethics? .............................................................................................................................. 19
What does Ethics mean for the accountant? ................................................................................ 19
Tutorial notes................................................................................................................................. 20
IESBA Handbook 2024 (pages 19-38) ................................................................................................ 20
The fundamental principles ........................................................................................................... 20
The conceptual framework............................................................................................................ 21
Hardies, K., Janssen, S., Vanstraelen, A., & Zehms, K. M. (2024). Using Field-Based Evidence to
Understand the Antecedents to Auditors’ Skeptical Actions. Auditing: A Journal of Practice &
Theory: 1-31....................................................................................................................................... 24
Carlisle, M., Gimbar, C., & Jenkins, J. G. (2023). Auditor-Client Interactions—An Exploration of
Power Dynamics during Audit Evidence Collection. Auditing: A Journal of Practice & Theory 42(1):
27-51.................................................................................................................................................. 25
Week 4 ................................................................................................................................................... 28
Page 1 of 64
, Lecture 4: Audit Procedures & Audit Evidence ................................................................................. 28
Knechel et al. (2013) – Audit quality: insights from the academic literature ................................ 30
Knechel, W. R., Krishnan, G. V., Pevzner, M., Shefchik, L. B., & Velury, U. K. (2013). Audit quality:
Insights from the academic literature. Auditing: A journal of practice & theory, 32(Supplement 1),
385-421.............................................................................................................................................. 32
Aobdia, D., Choudhary, P., & Newberger, N. (2024). The economics of audit production: What
matters for audit quality? An empirical analysis of the role of midlevel managers within the audit
firm. The Accounting Review, 99(2), 1-29.......................................................................................... 34
Christensen, B. E., Newton, N. J., & Wilkins, M. S. (2021). How do team workloads and team
staffing affect the audit? Archival evidence from US audits. Accounting, Organizations and Society,
92, 101225 ......................................................................................................................................... 36
Week 5 ................................................................................................................................................... 38
Lecture 5: Audit completion & Reporting.......................................................................................... 38
Gold et al. (2022) – Walking the talk? Managing errors in the audit profession .......................... 40
Gold, A., Detzen, D., Van Mourik, O., Wallage, P., & Wright, A. (2022). Walking the talk? Managing
errors in the audit profession. Contemporary Accounting Research, 39(4), 2696-2729 ................... 42
Berglund, N. R., Draeger, M., & Sterin, M. (2022). Management’s undue influence over audit
committee members: Evidence from auditor reporting and opinion shopping. Auditing: A Journal of
Practice & Theory 41 (1): 49-74 ......................................................................................................... 46
Lennox, C. S., Schmidt, J. J., & Thompson, A. M. (2023). Why are expanded audit reports not
informative to investors? Evidence from the United Kingdom. Review of Accounting Studies 28:
497-532.............................................................................................................................................. 47
Christensen, B., Schmardebeck, R. & Seidel, T. (2022). Do auditors‘ incentives affect materiality
assessments of prior-period misstatements? Accounting, Organizations and Society 101: 101332.49
Week 6 ................................................................................................................................................... 50
Lecture 6: Fraud................................................................................................................................. 50
Trompeter et al. (2013) – A synthesis of fraud-related research................................................... 50
Tutorial notes................................................................................................................................. 53
Trompeter, G. M., Carpenter, T. D., Desai, N., Jones, K. L., & Riley Jr, R. A. (2013). A synthesis of
fraud-related research. Auditing: A Journal of Practice & Theory, 32(Supplement1), 287-321........ 54
The Fraud Triangle ......................................................................................................................... 55
Anti-Fraud Measures ..................................................................................................................... 56
Elements of Fraud.......................................................................................................................... 56
The Auditor’s Roles with Respect to Fraud.................................................................................... 56
Hale, K. & Truelson, J. M. (2023). Client Acquisition Following an Auditor’s Unethical Behavior: An
Examination of Reputational Consequences Following KPMG’s “Steal the Exam” Scandal.
Accounting Horizons 37 (2): 85-104 .................................................................................................. 57
Relevance....................................................................................................................................... 57
Literature Review........................................................................................................................... 57
Methodology ................................................................................................................................. 57
Page 2 of 64
, Results ........................................................................................................................................... 58
Discussion ...................................................................................................................................... 58
Conclusion ..................................................................................................................................... 59
Barrios, J. M. (2022). Occupational Licensing and Accountant Quality: Evidence form the 150-Hour
Rule. Journal of Accounting Research 60 (1): 3-43 ............................................................................ 59
Relevance....................................................................................................................................... 59
Literature Review........................................................................................................................... 59
Methodology ................................................................................................................................. 59
Results ........................................................................................................................................... 60
Discussion ...................................................................................................................................... 60
Dal Maso, L., Lobo, G.J., Mazzi, F., & Paugam, L. (2020). Implications of the joint provision of CSR
assurance and financial audit for auditors’ assessment of going concern risk. Contemporary
Accounting Research 37(2), 1248-1289 ............................................................................................. 61
Relevance....................................................................................................................................... 61
Literature Review........................................................................................................................... 61
Methodology ................................................................................................................................. 61
Results ........................................................................................................................................... 61
Discussion ...................................................................................................................................... 62
Page 3 of 64
, Week 1
Lecture 1: Introduction to Auditing & Assurance
The main goals of this course are:
• Understand the economic role of statutory audits
• Understand the main concepts underlying auditing → Assertions, audit evidence, materiality, client
acceptance, etc.
• Understand the professional and regulatory requirements that guide the conduct of audits
• Be familiar with audit theory and research → Audit quality, independence, audit committees, etc.
• Be familiar with contemporary developments → Audit market reform, auditor responsibilities, etc.
Introduction to Auditing & Assurance
According to the International Standard on Assurance Engagements (ISAE 3000), formed by the International Auditing
and Assurance Standards Board (IAASB), an assurance engagement is “An engagement in which a practitioner aims to
obtain sufficient appropriate evidence in order to express a conclusion designed to enhance the degree of confidence of
the intended users other than the responsible party about the subject matter information.” As such an assurance
service is an independent professional service that improves the quality of information for decision makers. Assurance
engagements include:
• Attestation engagements: a party other than the
practitioner measures or evaluates the underlying
subject matter against the criteria
• Direct engagements: the practitioner measures or
evaluates the underlying subject matter against
the criteria.
The IAASB has issued several pronouncements. The most
relevant are the ISA 100-999 about the International
Standards on Auditing.
Financial Statement Audits
According to ISA 200, the objective of an audit of financial statements is to enhance the degree of confidence of
intended users in the financial statements. This is achieved by the expression of an opinion by the auditor on whether
the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting
framework. In the case of most general purpose frameworks, that opinion is on whether the financial statements are
presented fairly, in all material respects, or give a true and fair view in accordance with the framework. An audit
conducted in accordance with ISAs and relevant ethical requirements enables the auditor to form that opinion.
Page 4 of 64
6314M0406Y
Table of Contents
Week 1 ..................................................................................................................................................... 4
Lecture 1: Introduction to Auditing & Assurance ................................................................................ 4
Introduction to Auditing & Assurance ............................................................................................. 4
Financial Statement Audits .............................................................................................................. 4
Lennox and Pittman (TAR, 2011) – Voluntary Audits versus Mandatory Audits ............................. 6
Lennox, C. S., & Pittman, J. A. (2011). Voluntary audits versus mandatory audits. The Accounting
Review, 86(5), 1655-1678 .................................................................................................................... 8
Week 2 ................................................................................................................................................... 10
Lecture 2: Client Acceptance & Audit Planning ................................................................................. 10
Objectives of an audit.................................................................................................................... 10
Audit planning ............................................................................................................................... 11
Bae et al. (CAR, 2021) – Auditors’ fee premiums and low-quality internal controls ..................... 14
Bae, G. S., Choi, S. U., Lamoreaux, P. T., & Lee, J. E. (2021). Auditors' fee premiums and low‐quality
internal controls. Contemporary Accounting Research, 38(1), 586-620 ........................................... 16
Friedrich, C., Knechel, W. R., Sofla, A. S. & Zuiddam, V. S. (2024). Client Employee Training and Audit
Efficiency. Auditing: A Journal of Practice & Theory 43(1): 73-99 ..................................................... 17
Rozario, A. M., Vasarhelyi, M. A., & Wang, T. (2023). On the Use of Consumer Tweets to Assess the
Risk of Misstated Revenue in Consumer-Facing Industries: Evidence from Analytical Procedures.
Auditing: A Journal of Practice & Theory 42(2): 207-229 .................................................................. 18
Week 3 ................................................................................................................................................... 19
Lecture 3: Ethics ................................................................................................................................ 19
What is Ethics? .............................................................................................................................. 19
What does Ethics mean for the accountant? ................................................................................ 19
Tutorial notes................................................................................................................................. 20
IESBA Handbook 2024 (pages 19-38) ................................................................................................ 20
The fundamental principles ........................................................................................................... 20
The conceptual framework............................................................................................................ 21
Hardies, K., Janssen, S., Vanstraelen, A., & Zehms, K. M. (2024). Using Field-Based Evidence to
Understand the Antecedents to Auditors’ Skeptical Actions. Auditing: A Journal of Practice &
Theory: 1-31....................................................................................................................................... 24
Carlisle, M., Gimbar, C., & Jenkins, J. G. (2023). Auditor-Client Interactions—An Exploration of
Power Dynamics during Audit Evidence Collection. Auditing: A Journal of Practice & Theory 42(1):
27-51.................................................................................................................................................. 25
Week 4 ................................................................................................................................................... 28
Page 1 of 64
, Lecture 4: Audit Procedures & Audit Evidence ................................................................................. 28
Knechel et al. (2013) – Audit quality: insights from the academic literature ................................ 30
Knechel, W. R., Krishnan, G. V., Pevzner, M., Shefchik, L. B., & Velury, U. K. (2013). Audit quality:
Insights from the academic literature. Auditing: A journal of practice & theory, 32(Supplement 1),
385-421.............................................................................................................................................. 32
Aobdia, D., Choudhary, P., & Newberger, N. (2024). The economics of audit production: What
matters for audit quality? An empirical analysis of the role of midlevel managers within the audit
firm. The Accounting Review, 99(2), 1-29.......................................................................................... 34
Christensen, B. E., Newton, N. J., & Wilkins, M. S. (2021). How do team workloads and team
staffing affect the audit? Archival evidence from US audits. Accounting, Organizations and Society,
92, 101225 ......................................................................................................................................... 36
Week 5 ................................................................................................................................................... 38
Lecture 5: Audit completion & Reporting.......................................................................................... 38
Gold et al. (2022) – Walking the talk? Managing errors in the audit profession .......................... 40
Gold, A., Detzen, D., Van Mourik, O., Wallage, P., & Wright, A. (2022). Walking the talk? Managing
errors in the audit profession. Contemporary Accounting Research, 39(4), 2696-2729 ................... 42
Berglund, N. R., Draeger, M., & Sterin, M. (2022). Management’s undue influence over audit
committee members: Evidence from auditor reporting and opinion shopping. Auditing: A Journal of
Practice & Theory 41 (1): 49-74 ......................................................................................................... 46
Lennox, C. S., Schmidt, J. J., & Thompson, A. M. (2023). Why are expanded audit reports not
informative to investors? Evidence from the United Kingdom. Review of Accounting Studies 28:
497-532.............................................................................................................................................. 47
Christensen, B., Schmardebeck, R. & Seidel, T. (2022). Do auditors‘ incentives affect materiality
assessments of prior-period misstatements? Accounting, Organizations and Society 101: 101332.49
Week 6 ................................................................................................................................................... 50
Lecture 6: Fraud................................................................................................................................. 50
Trompeter et al. (2013) – A synthesis of fraud-related research................................................... 50
Tutorial notes................................................................................................................................. 53
Trompeter, G. M., Carpenter, T. D., Desai, N., Jones, K. L., & Riley Jr, R. A. (2013). A synthesis of
fraud-related research. Auditing: A Journal of Practice & Theory, 32(Supplement1), 287-321........ 54
The Fraud Triangle ......................................................................................................................... 55
Anti-Fraud Measures ..................................................................................................................... 56
Elements of Fraud.......................................................................................................................... 56
The Auditor’s Roles with Respect to Fraud.................................................................................... 56
Hale, K. & Truelson, J. M. (2023). Client Acquisition Following an Auditor’s Unethical Behavior: An
Examination of Reputational Consequences Following KPMG’s “Steal the Exam” Scandal.
Accounting Horizons 37 (2): 85-104 .................................................................................................. 57
Relevance....................................................................................................................................... 57
Literature Review........................................................................................................................... 57
Methodology ................................................................................................................................. 57
Page 2 of 64
, Results ........................................................................................................................................... 58
Discussion ...................................................................................................................................... 58
Conclusion ..................................................................................................................................... 59
Barrios, J. M. (2022). Occupational Licensing and Accountant Quality: Evidence form the 150-Hour
Rule. Journal of Accounting Research 60 (1): 3-43 ............................................................................ 59
Relevance....................................................................................................................................... 59
Literature Review........................................................................................................................... 59
Methodology ................................................................................................................................. 59
Results ........................................................................................................................................... 60
Discussion ...................................................................................................................................... 60
Dal Maso, L., Lobo, G.J., Mazzi, F., & Paugam, L. (2020). Implications of the joint provision of CSR
assurance and financial audit for auditors’ assessment of going concern risk. Contemporary
Accounting Research 37(2), 1248-1289 ............................................................................................. 61
Relevance....................................................................................................................................... 61
Literature Review........................................................................................................................... 61
Methodology ................................................................................................................................. 61
Results ........................................................................................................................................... 61
Discussion ...................................................................................................................................... 62
Page 3 of 64
, Week 1
Lecture 1: Introduction to Auditing & Assurance
The main goals of this course are:
• Understand the economic role of statutory audits
• Understand the main concepts underlying auditing → Assertions, audit evidence, materiality, client
acceptance, etc.
• Understand the professional and regulatory requirements that guide the conduct of audits
• Be familiar with audit theory and research → Audit quality, independence, audit committees, etc.
• Be familiar with contemporary developments → Audit market reform, auditor responsibilities, etc.
Introduction to Auditing & Assurance
According to the International Standard on Assurance Engagements (ISAE 3000), formed by the International Auditing
and Assurance Standards Board (IAASB), an assurance engagement is “An engagement in which a practitioner aims to
obtain sufficient appropriate evidence in order to express a conclusion designed to enhance the degree of confidence of
the intended users other than the responsible party about the subject matter information.” As such an assurance
service is an independent professional service that improves the quality of information for decision makers. Assurance
engagements include:
• Attestation engagements: a party other than the
practitioner measures or evaluates the underlying
subject matter against the criteria
• Direct engagements: the practitioner measures or
evaluates the underlying subject matter against
the criteria.
The IAASB has issued several pronouncements. The most
relevant are the ISA 100-999 about the International
Standards on Auditing.
Financial Statement Audits
According to ISA 200, the objective of an audit of financial statements is to enhance the degree of confidence of
intended users in the financial statements. This is achieved by the expression of an opinion by the auditor on whether
the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting
framework. In the case of most general purpose frameworks, that opinion is on whether the financial statements are
presented fairly, in all material respects, or give a true and fair view in accordance with the framework. An audit
conducted in accordance with ISAs and relevant ethical requirements enables the auditor to form that opinion.
Page 4 of 64
