Modeling the Materiality Judgements of Audit Partners

Moriarity, Shane; Barron, F. Hutton

doi:10.2307/2490546

Cited by 52 publications

(21 citation statements)

References 15 publications

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“…MDS is a multivariate visualisation technique that attempts to find a solution by locating objects in a spatial configuration or graphical representation (Kruskal andWish, 1978, Schiffman et al, 1981). Although traditionally a social sciences approach, MDS has been applied in the accounting, finance and banking disciplines as an alternative to the more traditional statistical techniques when the data do not satisfy parametric assumptions (Moriarity andBarron, 1976, Emery et al, 1982). Mar Molinero and Ezzamel (1991) extended MDS to insolvency research in the UK.…”

Section: Literature Review and Research Questionsmentioning

confidence: 99%

Analysing corporate insolvency in the Gulf Cooperation Council using logistic regression and multidimensional scaling

Khoja

Chipulu

Jayasekera

2014

Rev Quant Finan Acc

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Design/methodology/approach: Financial ratio data on 56 matched pairs of insolvent and solvent firms are analysed using logistic regression with best-subset selection criteria to identify significant ratios, and prediction accuracy is tested on an ex-ante sample. The main dimensions of ratios, and the weights that firms attach to them, are examined using 3-way Multidimensional Scaling (MDS).Findings: A parsimonious Logit model comprising one profitability, one leverage and two cash flow ratios has accuracy levels of 84.4% overall, 95.6% type I and 73.9% type II. Four financial-ratio dimensions are extracted from the MDS: (i) 'Non-strategic sales activities', (ii) 'Profitability and financial stability balance', (iii) 'Sales activities against capital conversion'; and (iv) 'Market value against cash generation'. Insolvent firms appear very specific and attach most salience to the 'Non-strategic sales activities' dimension; unlike solvent firms which attach more salience to the other three dimensions.Practical Implications: Results indicate profitability ratios should be included in GCC insolvency classification models. It is suggested that firms' managers should focus less on non-strategic sales activities to reduce susceptibility to insolvency. Originality/value:The study provides empirical evidence on insolvency in the GCC and introduces the application of 3-way MDS to insolvency research in the region.

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Section: Literature Review and Research Questionsmentioning

confidence: 99%

Analysing corporate insolvency in the Gulf Cooperation Council using logistic regression and multidimensional scaling

Khoja

Chipulu

Jayasekera

2014

Rev Quant Finan Acc

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“…Research has generally revealed a wide range of results regarding expert judgmeot consensus (Goldberg 1968;Nystedt 1974;Tomkins and Groves 1983). Empirical research in accounting has also yielded mixed results regarding the consensus among auditors, from low to high (Holstmm 1980;Joyce 1976;Lewis 1980;Libby 1981;Libby and Lewis 1982;Moriarity and Barron 1976), although the consensus among auditors has been found to be higher than other expert groups examined (Libby 1981). It has been concluded that either auditor judgment consensus could be improved, possibly by substituting a decision model of a composite expert for the individual (Libby 1981), or that research has been inadequate and could be improved by making experimental judgment tasks more reflective of audit reality or by using altemative statistical techniques in assessing judgment.…”

Section: Auditor Consensusmentioning

confidence: 99%

Of paradigms and metaphors in auditing thought*

Dirsmith

Covaleski²,

McAllister

1985

Contemporary Accting Res

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Abstract. Assumptions serve as the basis from which we reason and therefore pervasively influence the nature of our understanding of any substantive area. Auditing is no exception. Yet, the core assumptions that underlie auditing thought have largely been left unexamined.The purpose of this paper is to examine the core ontological assumptions, (assumptions as to the primitive elements of what constitutes reality), and epistemological assumptions, (assumptions as to how knowledge is attained), that underlie contemporary auditing thought. It is concluded: 1) that auditing is characterized by an overwhelming domination of a functionalist paradigm, which views reality as concrete and objective (rather than uncertain and subjective) and which emphasizes a regularized, patterned existence (rather than one characterized by intrinsic tension and contradiction); and 2) that this paradigm ultimately influences and constrains our understanding of auditing. Altemative paradigms are used to examine the concepts of audit evidence and auditor consensus to dramatize the effects of making altemative assumptions of reality. Implications for practitioners and for researchers are also explored.Resume. Les hypotheses servent de fondement a nos raisonnements et par consequent, influencent l'essence de notre comprehension de tout domaine. La verification n'est pas une exception et les hypotheses essentielles qui sous-tendent la pensee en verification, n'ont pas vraiment ete examinees. L'objectif de cet article est d'examiner les hypotheses essentielles ontologiques (hypotheses concemant les elements primitifs de ce qui consdtue la realite) et les hypotheses epistemologiques (hypotheses relatives au comment de I'atteinte de la connaissance) qui sous-tendent la pensee contemporaine en verification. On y conclut: 1) que la verification est caracterisee par une domination ecrasante d'un paradigme fonctionnel qui voit la realite comme etant concrete et objective (plutot qu'incertaine et subjective) et qui met l'emphase sur une existence regularisee et modelee (plutot qu'une existence caracterisee par la contradiction et une tension intrinseque) ; et 2) que ce paradigme influence et contraint ultimement notre comprehension de la verification. Des paradigmes alternatifs * Portions of this paper vi-ere presented at the Price Waterhouse Auditing Research Symposium, August, 1982. We wish to thank Arthur Bettauer, William Felix, Jr., Anthony Hopwood, Henry Jaenicke, James Loebbecke and Henry Mintzberg for their comments on an earlier version of this manuscript. We also wish to thank the two anonymous reviewers for their constructive guidance.

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“…The ability of auditors to formulate these judgments appropriately is crucial, since they may be held liable at common law or under the federal securities laws should the audited financial statements prove to be materially in error. Thus, the ability of auditors to process information in audit-related tasks has recently become the subject of research (e.g., Ashton [1974], Gibbins [1977], Joyce [1976], Joyce and Biddle [1981], Moriarity and Barron [1976;1979], Uecker and Kinney [1977]). …”

Section: Are Auditors' Judgmentsmentioning

confidence: 99%