Auditor evaluation of loss contingencies*

Raghunandan, K.; Grimlund, Richard A.; Schepanski, Albert

doi:10.1111/j.1911-3846.1991.tb00829.x

Cited by 33 publications

(16 citation statements)

References 3 publications

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“…Prior research in both psychology and accounting has investigated the numerical interpretation of various qualitative expressions and words. The most developed area of this research involved determining the numerical equivalents of probability phrases such as "likely," "probable," "remote," and "reasonably possible" (AICPA 2000;Amer et al 1994Amer et al , 1995Chesley 1986Chesley , 1979Harrison and Tomassini 1989;Jiambalvo and Wilner 1985;Raghunandan et al 1991;Reimers 1992;Schultz andReckers 1981, 1992). The focus of this prior work was primarily on determining the average numerical interpretation of the probability phrases.…”

Section: Prior Literature -Numerical Equivalentsmentioning

confidence: 99%

Signal Words and Signal Icons in Application Control and Information Technology Exception Messages—Hazard Matching and Habituation Effects

Amer

Maris

2007

Journal of Information Systems

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Information technology (IT) users encounter signal words (e.g., “Warning”) and signal icons (e.g., an exclamation point) in “exception messages.” The first of two experiments reported in this paper examines the “arousal strength” associated with signal words and icons that commonly appear in exception messages. An elicitation exercise was completed by 316 participants, in which each viewed exception messages containing combinations of signal words and icons and provided their perception as to the severity of a computer problem communicated. The results allow “hazard matching”; whereby, the severity of hazard implied by the exception message can be matched to the level of the hazard. The second experiment reports a strong habituation effect in that users exhibit decreased attention to an exception message after repeated exposure, with a corresponding decrease in compliance. The effect was also found to be mitigated by increasing the arousal strength of the exception message.

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Section: Prior Literature -Numerical Equivalentsmentioning

confidence: 99%

Signal Words and Signal Icons in Application Control and Information Technology Exception Messages—Hazard Matching and Habituation Effects

Amer

Maris

2007

Journal of Information Systems

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“…'reasonably possible', 'probable', 'remote') has also been examined (e.g. Schultz & Reckers, 1981;Jiambalvo & Witner, 1985;Harrison & Tomassini, 1989;Raghunandan et al, 1991;Reimers, 1992). In general, these studies show a low correspondence between auditors' interpretations of verbal probability terms and the associated numerical probabilities.…”

Section: Effective Communication Of the Levels Of Assurancementioning

confidence: 99%

The Different Types of Assurance Services and Levels of Assurance Provided

Hasan

Maijoor

Mock

et al. 2005

International Journal of Auditing

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In 2001 the International Auditing Practices Committee (IAPC, now the International Auditing and Assurance StandardsBoard (IAASB)) commissioned research on the determination and communication of moderate assurance. This research was published in IFAC research monograph No. 1 (2002). Part of this research involved surveying the types of assurance services undertaken by 56 assurance firms from 11 different countries, the levels of assurance at which these assurance services were generally provided, and for those services provided as moderate assurance services, the reasons why. This paper re-analyses this data and extends the IFAC research report (2002) by examining the differences between the types of assurance services (other than historical financial statement assurance) and levels at which these assurance services are provided by the former Big 5 audit firms compared with the non-Big 5 audit firms. Information was also collected on 166 moderate assurance engagements provided by these participating assurance firms. The determinants of the level of assurance for these assurance service engagements were identified and differences between the Big 5 and the non-Big 5 audit firms are reported.

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“…5 deals with footnote disclosure of loss contingencies and is discussed later in this paper. 3 Jiambalvo and Wilner (1985), Harrison and Tomassini (1989), and Raghunandan, Grimlund, and Schepanski (1991) provide evidence about the correspondence between these verbal probability terms and numerical p-obability values. Interestingly, there is little variation in the average values reported in these three studies for the reasonably possible-probable threshold.…”

Section: Statistical Issuesmentioning

confidence: 98%

Predictive Ability of Audit Qualifications for Loss Contingencies*

Raghunandan

1993

Contemporary Accting Res

Self Cite

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. Adequate disclosure of risks and uncertainties is an issue of interest to the accounting profession and regulators both in Canada and in the United States. Previously, auditors were required to modify their audit reports in the presence of material uncertainties. However, following suggestions that such disclosure is redundant and not useful, the CICA removed this requirement in 1980. Auditors in the United States are still required to disclose material uncertainties in the audit report. The criterion of predictive ability is used in this research to evaluate the potential usefulness of this report modification requirement. Specifically, the study examines the ability of report modifications to predict the materially adverse resolutions of pending litigation. The subsequent resolution patterns for a sample of litigation loss contingencies (with an audit report modification) and a control sample of litigation loss contingencies (without an audit report modification) were compared. The results indicate that a larger proportion of contingencies with an audit report modification were resolved materially against the client. Also noteworthy, audit report modifications had incremental predictive ability over other types of disclosures such as footnotes to the financial statements and prior media disclosure of the contingency. Résumé. La présentation adéquate des risques et des incertitudes est une question d'intérêt pour la profession comptable et les responsables de la réglementation, tant au Canada qu'aux États‐Unis. Les vérificateurs étaient auparavant tenus de modifier leur rapport en cas d'incertitudes importantes. Toutefois, à la suite de suggestions selon lesquelles cette information était redondante et sans véritable utilité, l'I.C.C.A. a supprimé cette exigence en 1980. Aux États‐Unis, les vérificateurs sont encore tenus de prvérificateurssenter les incertitudes importantes dans leurs rapports. L'auteur utilise le critère de la capacité de prédiction pour évaluer l'utilité potentielle de cette demande de modification du rapport des vérificateurs. Il examine plus précisément dans quelle mesure les modifications apportées au rapport permettent de pédire si les litiges en instance auront un dénouement défavorable dont les conséquences seront importantes. Les modèles de dénouement ultérieur d'un échantillon de pertes éentuelles attribuantes à des litiges, avec modification du rapport des vérificateurs, et d'un échantillon de contrôle de pertes éventuelles attribuables à des litiges, sans modification du rapport des vérificateurs, ont été comparés. Les résultats de cette comparaison indiquent qu'une plus grande proportion de pertes éventuelles attribuables à des litiges avec modification du rapport des vérificateurs se sont soldées par un résultat défavorable important pour le client. Autre fait digne de mention: les modifications apportées au rapport des vérificateurs présentaient une capacité de prédiction marginale par rapport aux autres types d'information tels que les notes afférentes aux états fina...

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Auditor evaluation of loss contingencies*

Cited by 33 publications

References 3 publications

Signal Words and Signal Icons in Application Control and Information Technology Exception Messages—Hazard Matching and Habituation Effects

Signal Words and Signal Icons in Application Control and Information Technology Exception Messages—Hazard Matching and Habituation Effects

The Different Types of Assurance Services and Levels of Assurance Provided

Predictive Ability of Audit Qualifications for Loss Contingencies*

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