| dc.description.abstract | Program planning regarding the nature, extent, and timing of procedures is critical to
audit efficiency and effectiveness. The prevailing paradigm in practice to accomplish this
task is the Audit Risk Model. This model has been found to be deficient and outdated
because it fails to incorporate the structure of audit evidence and also fails to represent
uncertainties in audit evidence.
This article relates belief functions to the structure of audit risk and provides formulas
for audit risk under certain simplifying assumptions. These formulas give plausibilities of
error in the belief-function sense.
The belief-function plausibility represents auditors' intuitive understanding of audit risk
better than ordinary probability. The plausibility of a statement, within belief-function
theory, measures the extent to which we lack evidence against the statement. High
plausibility for error indicates only a lack of assurance, not positive evidence that there is
error. This high plausibility does not necessarily indicate any evidence that the
statement is materially misstated, and hence it is inappropriate to interpret it as a
probability of material misstatement.
Our findings indicate that the Belief-Function model accurately reflect the views of the
auditor regarding the assurance obtained on the engagement in testing the accounts
receivable area. Sensitively analyses revealed that the model can be used to assess the
assurance provided by a given test or set of tests in attaining a cost-effective audits.
A working prototype has been implemented and tested indicating that belief - function
model would result in cheaper audits, timely reports among other benefits. However, the
model has some applicability limitations that require some improvements and more
research. | en |
