Current affairs in audit

Current Affairs in Audit highlights and discusses developments in auditing. The Current Affairs in Audit are prepared monthly by Rod Johnson, lecturer in the School of Accounting and Finance at Deakin University. Tom Ravlic, Financial Journalist, is also contributing articles.

An exploratory study on internal audit independence in Australia

This study draws on agency and institutional theory to examine the issue of internal audit’s independence through its relationship with components of corporate governance.

The internal audit function is actively considered as one of the four components of corporate governance, along with the board, management and external auditors. It serves this purpose by providing a range of services in its capacity of monitoring and consulting which is actively sought by the other components of corporate governance to satisfy their extended accountability requirements. The integrity of these services is, however, only assured if internal audit maintains its independent status. As such there is a “tension” resulting from the pressure to provide these value added services as perceived by the parties involved and maintaining its independence status.

Based on an extended survey with organisations in the Australian corporate sector, this study critically examines the results of the survey against existing literature and best practice guidelines to determine if internal audit functions operating under this tense environment are operating independently.

The results indicate an interesting analysis. While it indicates a somewhat trend in complying with best practice guidelines for maintaining independence, it also indicates that this is not consistently adhered to as organisations are able to operate in an environment that compromises internal audit independence. A main reason for this appears to be a mix of internal audit structural set ups brought about by a lack of statutory backing to provide for consistency in implementation of best practice guidelines for maintaining independence. This is exacerbated by internal audit being viewed as partner by these parties thus widening the “tension” gap between its advisory role and its independent status. A wider question emerges which questions the ability to maintain this independence concept under a partnership management environment. The concept of internal audit being an independent function as promulgated by the Institute of Internal Auditors through its definition of internal audit is seriously questioned under the totality of this environment.

Online newsgathering : research and reporting for journalism

If you are a journalist of any kind, you now realize that you need to know how to find the information you need online. This book shows you how to find declassified governmental files and statistics of all kinds, outlines the use of simple and complex search engines for small and large data gathering, and provides directories of subject experts. This book is for the many journalists around the world who didn't attend a formal journalism school before going to work, those who were educated before online research became mainstream, and for any student studying journalism today. It will teach you how to use the Internet wisely, efficiently, and comprehensively so that you will always have your facts straight and fast.

Audit quality, auditor compensation and initial public offering underpricing

We jointly study the impact of audit quality on auditor compensation and initial public offering (IPO) underpricing using a sample of Australian firms going public over the period 1996–2003. We find that quality (Big Four) audit firms earn significantly higher fees than non-Big Four auditors, and audit quality is positively associated with IPO underpricing. The positive relation between audit quality and underpricing is more pronounced for small issues, IPOs underwritten by non-prestigious underwriters, and those that are not backed by venture capitalists. Taken together, our results suggest that quality auditors serve as a signalling device that enhances post-issue market value of equity.

How prepared was Australia for international financial reporting standards? The case of listed firms

We measure the preparedness of listed firms for international financial reporting standards (IFRS) by changes in explanations from Australian GAAP to IFRS between the half-year and annual accounts. About one-third of sample firms changed their explanations for earnings, cashflows or equity by averages of about −7%, 67% and 3% respectively. Most changes are less than 5% for earnings and equity, and tax is the item most commonly revised. More profitable firms and firms with more reconciling items are most likely to change an explanation. In a telephone survey of chief financial officers, 70% revealed that the change followed an incorrect application of an accounting rule in the half-year accounts.

The marketing audit and organizational performance an empirical profiling

This study investigates the use of strategy to address changes in business performance. It suggests the use of the marketing audit as a facility that can assist with the establishment, maintenance, and management of a market orientation strategy. The practice of the marketing audit and its perceived benefits are examined, and their relationships with change in business performance are investigated. The results indicate a positive association between the usage of the marketing audit and increase in market share, and a stronger increase in market share than increase in overall financial performance.

Risk management and ethical environment : effects on internal audit and accounting control procedures

This study examines the impact of the scope of risk management and ethical environment on internal audit activities and the quality of accounting control procedures (ACPQ). The conceptual framework for the study is guided by COSO’s frameworks on internal controls and enterprise risk management and data from a questionnaire survey of 64 Australian firms are analysed using a structural equation model. The results of the study support that (1) internal audit activities have a significant intervening effect on the relationship between the scope of risk management and ACPQ, and (2) a direct and positive relationship exists between ethical environment and ACPQ. Our findings suggest that widening the scope of risk management activities do not directly improve ACPQ, but that it leads to more extensive internal audit activities and in turn such activities promote better ACPQ. Further, the results indicate that fostering a more ethical environment directly leads to higher ACPQ. These results have implications for the design of internal controls, namely with respect to the role of internal audit activities and ethical environment in enhancing ACPQ.

Development of a professional practice audit questionnaire for mental health nursing in Aotearoa/New Zealand

This paper reports the three-stage development of a professional practice audit questionnaire for mental health nursing in Aotearoa/New Zealand. In Study 1, clinical indicator statements (n = 99) generated from focus group data, which were considered to be unobservable in the nursing documentation in consumer case notes, were included in a three-round Delphi process. Consensus of ratings occurred for the mental health nurse and academic participants (n = 7) on 83 clinical indicator statements. In Study 2, the clinical indicator statements (n = 67) that met importance and consensus criteria were incorporated into a questionnaire, which was piloted at a New Zealand mental health service. The questionnaire was then modified for use in a national field study. In Study 3, the national field study, registered mental health nurses (n = 422) from 11 New Zealand District Health Board mental health services completed the questionnaire. Five categories of nursing practice were identified: professional and evidence-based practice; consumer focus and reflective practice; professional development and integration; ethically and legally safe practice; and culturally safe practice. Analyses revealed little difference in the perceptions of nurses from different backgrounds regarding the regularity of the nursing practices. Further research is needed to calibrate the scores on each clinical indicator statement with behaviour in clinical practice.

Ambulance call triage outcomes for patients reporting pain : a retrospective cross-sectional analysis of pain score versus traige level

Objective: To identify any association between the response priority code generated during calls to the ambulance communication centre and patient reports of pain severity.

Methods: A retrospective analysis of patient care records was undertaken for all patients transported by paramedics over a 7-day period. The primary research interest was the association between the response code allocated at the time of telephone triage and the initial pain severity score recorded using a numeric rating scale (NRS). Univariate and multivariate logistic regression methods were used to analyse the association between the response priority variable and explanatory variables.

Results: There were 1246 cases in which both an initial pain score using the NRS and a response code were recorded. Of these cases, 716/1246 (57.5%) were associated with a code 1 ("time-critical") response. After adjusting for gender, age, cause of pain and duration of pain, a multivariate logistic regression analysis found no significant change in the odds of a patient in pain receiving a time-critical response compared with patients who had no pain, regardless of their initial pain score (NRS 1–3, odds ratio (OR) 1.11, 95% CI 0.7 to 1.8; NRS 4–7, OR 1.12, 95% CI 0.7 to 1.8; NRS 8–10, OR 0.84, 95% CI 0.5 to 1.4).

Conclusion: The severity of pain experienced by the patient appeared to have no influence on the priority (urgency) of the dispatch response. Triage systems used to prioritise ambulance calls and decide the urgency of response or type of referral options should consider pain severity to facilitate timely and humane care.