Fall, 1998

Prof. Miklos A. Vasarhelyi                                     Ackerson 315
Prof. Peter Gillett                                               180 University Avenue
                                                                           Newark, NJ 07102
                                                                           Tel: (973) 353-5002

Class Hours:          Fridays  after the seminar (either Newark or New Brunswick depending
                                             on the Seminar)

Office Hours:       Before and after class (and by  appointment)
                                          Best method of contact: e-mail  miklosv@andromeda.rutgers.edu

Course Materials

Journal Articles:                      See Reading List
Other References:                  AICPA, Codification of Statements on Auditing Standards.

                                                  Any good basic Auditing book (e.g. Loebbecke & Arens; Robertson)
 

Pre-Requisites

        Participants in this seminar are assumed to have had basic accounting (financial and managerial),
auditing and some research methodology. If this is not the case a special supplementary reading list
will be prepared with the instructor.

Requirements

      Classroom participation, paper presentations, mini-project, and a final exam will serve as the main
medium of instruction in this course. Students are expected to have read all required assignments and
lead the discussion in the papers they are assigned to during the semester.

      Each research paper will have a "discussant" assigned who will be responsible for presenting the
paper as if he/she was the author and defend it as well as analyze it. It is a good idea to prepare a written
critique and pass it along to the other class participants and the instructor prior or at the beginning of the
class. The discussant should also perform a literature search of related papers and be able to present it in class.Other class participants must also read the paper in detail, prepare a summary, hand it to the instructor.
They may be called to support (or replace) the discussant.
 

         Seminar grade will be assigned based on the discussions presented, on the participation in the seminar,
on the mini-project, and on the final exam which will be in the form and content of a field exam.

         All students are required also to participate in the Accounting Research Forum being held on Fridays
10:00: 11:30.Students are expected to prepare and ask questions to the presentor and also hand in these
questions to the instructor.

         The mini-project is of the form of a term-paper and students may choose to replicate an experiment, examine in the research format a particular audit issue, use an empirical database or any other relevant project approved
by  the instructor. The objective of the mini-project is to provide the participants with an experience in audit research. The mini-project is due the last day of classes and projects not received at the beginning of that class
will be assigned a failing grade.
 
 
 
 

Course Outline

       Date         Topic         Reading Assignment.

Sept 04, 1998      Introduction, Exploratory Data Analysis

  EDA, Tukey, Addison-Wesley, 1979.

Brown, Gardner & Vasarhelyi, Accounting Research Directory: the database of accounting literature, Markus Wiener Publishing, Princeton, NJ, 1994.
 

Sept 11, 1998        Internal Control

Meservy, Bailey & Johnson, "Internal Control valuation: A Computational Model of the Review Process," Auditing: A Journal of Theory and Practice, Fall 1986: 44-74.

Ashton, "An Experimental Study of Internal Control Judgments," Journal of Accounting Research, Spring 1984:
143-157.

Biggs & Mock, ""An Investigation of Auditor Decision Processes in the Evaluation of Internal Controls and
Audit Scope Decisions," Journal of Accounting Research Spring 1983: 234-255.
 

 *     Emby  ,C, Finley,D, Debiasing Framing Effects In Auditors' Internal Control Judgments And Testing
        Decisions, Su, 97, 55, 77, Car
 *      Meservy, Bailey & Johnson, "Internal Control Evaluation: A Computational Model of the Review Process,"
        Auditing: A Journal of Theory and Practice, Fall 1986: 44-74.
 *      Ashton, "An Experimental Study of Internal Control Judgments," Journal of Accounting Research, Spring 1984:
        143-157.

LEGEND:

      Aud.        Auditing: A Journal of Practice and Theory
      JAR         Journal of Accounting Research
      TAR        The Accounting Review
      JofA        Journal of Accountancy
      AOS       Accounting, Organization & Society
      JAL         Journal of Accounting Literature
      JAE          Journal of Accounting and Economics

  * Biggs & Mock, ""An Investigation of Auditor Decision Processes in the Evaluation of Internal Controls
and Audit Scope Decisions," Journal of Accounting Research Spring   1983: 234-255.
 

Optional readings:

      Trotman, Yetton & Zimmer, "Individual and Group Judgments of Internal Control Systems," Journal of
Accounting Research, Spring 1983.

       Emby  ,C, , Framing And Presentation Mode Effects In Professional Judgment: Auditors' Internal Control
Judgments And Substantive Testing Decisions, Sl, 94, 102, 115, Aud.
 

   Sept 18,1998                               Materiality

* Turner,Jl, , The Impact Of Materiality Decisions On Financial Ratios: A Computer Simulation, Sp, 97,
      125, 147, Jaaf.
*    Edwards,W, , "Number Magic, Auditing Acid And Materiality--A Challenge For Auditing Research", Au,
      95, 176, 187, Aud.
*    Fisher, The Effects of Reporting Auditor Materiality Level Publicly, Privately or Not at All in an Experimental
      Market Setting," Auditing: A Journal of Theory and Practice, 1990 Supplement: 184-223.
*   Whittington & Margheim, The Effects of Risk, Materiality, and Assertion Subjetivity on Externa; Auditor Reliance
      on Internal Auditors" Auditing: A Journal of Theory and Practice, Spring 1993, pp. 50-64..

Optional readings:

       Ward, "An Investigation of the Materiality Construct in Auditing," Journal of Accounting Research,
             Spring 1976: 138-152.

            Holstrum & Messier, "A Review and Integration of Empirical Research on Materiality," Auditing:
            A Journal of Practice and Theory, Fall 1982: 45-63.

           Moriarity & Barron, "Modeling the Materiality Judgments of Audit Partners," Journal of Accounting
           Research, Autumn 1976: 320-341.

           Moriarity & Barron, "Modeling the Materiality Judgments of Audit Partners," Journal ofAccounting
           Research, Autumn 1976: 320-341.

            Loebbecke, Eining & Willingham, "Auditors' Experience with Material Irregularities: Frequency,
            Nature and Detectability, Auditing: A Journal of Practice and Theory, Spring 1989, pp. 90-100.
 

  Sept 25, 1998                           Audit Risk  (Peter Gillett)

                  (Cushing, et al. 1995)
                  (American Institute of Certified Public Accountants 1981)
                  (American Institute of Certified Public Accountants 1983)
                  (Cushing and Loebbecke 1983)
                  (Jiambalvo and Waller 1984)
                  (Kinney 1983)
                  (Kinney 1989)
                  (Sennetti 1990)
                  (Waller 1993)
                  (Daniel 1988)
                  (Strawser 1990)
                  (Strawser 1991)
                  (Haskins and Dirsmith 1995)
 

Oct. 02, 1998             Audit Evidence, Audit Risk & Expert
                                                Systems (Peter Gillett)

                (Leslie 1984)
                 (Leslie et al. 1986)
                 (Boritz and Wensley 1990)
                 (Gillett 1993)
                 (Toba 1975)
                  (Kissinger 1977)
                  (Stephens 1983)
                   (Dutta 1991)

Oct 09, 1998                     Audit Practice Research

*McDaniel, L S., "The Effects of Time Pressure and Audit Program Structure on Audit Performance, “Journal of Accounting Research," Vol. 28, No. 2 Autumn 1990, pp. 267-285.

*Iyer  ,Vm, Iyer  ,Gs, Effect Of Big 8 Mergers On Audit Fees: Evidence From The United Kingdom, Fa, 96, 112, 132, Aud.

*Brackney,Ks, Helms ,Gl, A Survey Of Attestation Practices, Fa, 96, 85, 98, Aud.

* Ashton, Willingham & Elliott, "An Empirical Analysis of Audit Delay," Journal of Accounting Research, Autumn 1987: 275-292.

* Firth ,M The Provision Of Nonaudit Services By Accounting Firms To Their Audit Clients,
Summer 1997 page 1 Contemporary Accounting Research.
 

Optional Readings:

Collins, K. M. & Killough, L. N., "An Empirical Examination of Stress in PublicAccounting," Accounting
Organizations & Society, Vol. 17, Number 6,  August 1992, pp. 535-548.

Loebbecke & Steinbart, "An Investigation of the Use of Preliminary Review to Provide Substantive Audit Evidence,"
Auditing: A Journal of Theory and Practice, Spring 1987: 74-89.

Davis & Weber, "The Impact of Advanced Computer Systems on Controls and Audit  Procedures, "Auditing:
A Journal of Theory and Practice, Spring 1986: 35-49.

Chow, McNamee & Plumlee, "Practitioners' Perceptions of Audit Step Difficulty and Criticalness:
Implications for audit Research," Auditing: A Journal of Theory and Practice, Spring 87: 123-133.

Newton & Ashton, "The Association Between Audit Technology and Audit Delay, Auditing: A Journal of
Practice and Theory, Supplement 1989, pp. 22-27.

Oct. 16 1998           Analytical Review

* Kinney, "Attention-Directing Analytical review Using Accounting Ratios: A Case
Study, Auditing: A Journal of Theory and Practice, Spring 1987, 59.73.

*    Heiman, V. "Auditors' Assessment of Likelihood of Error Explanation in Analytical
Review," The Accounting Review," Vol. 65, No. 4, October 1990, pp. 875-890.

*Wilson,Ac, Weld  ,Lg, Regression As An Analytical Procedure: Are Adjustments
For Autocorrelation Really Necessary?, Wi, 97, 67, 82, Jaaf.

* Dzeng, “A Comparison of Aanalytical Procedure Expectation Models Using both
Aggregate and Disaggregate Data,” Auditing: A Journal of Theory and Practice,
Fall 1994, pp. 1-24.

Optional Readings:

Darocca & Holder, "The Use of Analytical Procedures in Review and Audit Engagements," Auditing:
A Journal of Theory and Practice, Spring 1985: 80-92.

Tabor & Willis, "Empirical Evidence on the Changing Role of Analytical Review Procedures," Auditing:
A Journal of Theory and Practice, Spring 1985: 93-103.

Biggs & Wild, "A Note on the Practice of Analytical Review, "Auditing: A Journal of Theory and
Practice, Spring 1984: 68-79.

Kinney & Felix, "Analytical Review Procedures," Journal of Accountancy, Oct. 1980: 95-105.

Kinney, "The Predictive Power of Limited Information in Preliminary Analytical Review: An Empirical
Study," Journal of Accounting Research, Supl. 1979: 148-165.

Heintz & White, "Auditor Judgment in Analytical Review," Auditing: A Journal of Practice and Theory,
Spring 1989, pp. 22-39.
 

Oct. 23, 1998                 Auditing Markets

* Iyer  ,Vm, Iyer  ,Gs, Effect Of Big 8 Mergers On Audit Fees: Evidence From The
  United Kingdom, Fa, 96, 112, 132, Aud
*      Hackenbrack,Ke, Knechel,Wr, Resource Allocation Decisions In Audit
  Engagements, Fa, 97, 481, 499, Car
*  Roberts, Glezen & Jones, "Determinants of Auditor Change In the Public sector,"
Journal of Accounting Research, Spring 1990, 220-228.
*  Ettredge & Greenberg, "Determinants of Fee Cutting on Initial Audit Engagements,"
Journal of Accounting Research, Spring 1990, pp. 198-210.

Optional Readings:

        Schatzberg, "A Laboratory Market Investigation of Low Balling in Audit Pricing,"
The Accounting Review, April 1990, 337-362.

        Turpen, "Differential Pricing on Auditors' Initial Engagements:; Further Evidence,"
Auditing: A Journal of Practice and Theory, Spring 1990, pp. 60-76.

        Magee & Tseng, "Audit Pricing and Independence," The Accounting Review, April 1990,
315-336.

       De Angelo, "Auditor Size and Audit Quality," Journal of Accounting and Economics,
Dec. 1981: 183-200.

      Audit Judgment Joyce & Biddle, "Anchoring and Adjustment In Probabilistic
Inference in Auditing," Journal of Accounting Research, Spring 1981: 120-144.

      Srinidhi & Vasarhelyi, "Auditor Judgment Concerning Establishment of Substantive
Tests Based on Internal Control Reliability," Auditing: A Journal of Theory and Practice, Spring 1986: 64-76.

     Chow, "The Demand for External Auditing: Size, Debt and Ownership Influences," The Accounting Review,
Apr. 1982: 272-291.
 

Oct. 30, 1998              Probabilistic (and Quasi-Probabilistic)
                                                      Expert Systems(Peter Gillett

(Lauritzen and Spiegelhalter 1988)
(Shenoy and Shafer 1990)
(Jensen et al. 1988)
(Jensen et al. 1990)
(Shafer 1996)
(Shafer and Srivastava 1990)
(Srivastava and Shafer 1992)
(