IT Audit Approaches for Enterprise Resource Planning Systems
-- Richard G Brody and Grover Kearns
Auditors operating in an ERP environment face special challenges, many of which they may not be fully
equipped to face. Given the litigious environment, in which the auditors operate and the growth of technology in
many companies, auditors must be prepared to effectively deal with the risks presented by ERP systems. The purpose
of this paper is to address auditing issues that are specific to audits, involving clients with an Enterprise
Resource Planning (ERP) system. The focus is on the risks and internal controls in an electronic environment. The
paper reviews the literature in the ERP area as it relates to audits and covers the special issues that auditors face in
an ERP environment. Suggestions are provided for controlling risks in these complex environments. The
guidance provided will aid auditors, who come across the unique and complex environment created by the use of an
ERP system. This will be a very valuable tool for practicing auditors.
© 2009 IUP. All Rights Reserved.
A Comparison of Earnings Management Patterns
Between Private Listed Companies and State Owned Enterprises:
Evidence from an Emerging Market
-- Arvind Patel, Pranil Prasad and Dharmendra Naidu
This paper explores the Earnings Management (EM) patterns in public companies and State Owned Enterprises
(SOEs) in Fiji. The modified Jones model is used to measure the magnitude and direction of EM in the listed
companies and the SOEs. Results indicate that SOEs practice higher negative earnings management while the private
entities practice higher positive earnings management.
© 2009 IUP. All Rights Reserved.
Questioning the Big 4 Audit Quality Assumption:
New Evidence from Malaysia
-- Tyrone M Carlin, Nigel Finch and Nur Hidayah Laili
Audit quality can be defined as relating to the probability that financial statements contain no material
omissions or misstatements. Previous research on the subject of audit quality relies on the assumption that large audit
firms (Big 4) are homogenous in providing higher audit quality than small audit firms (non-Big 4). However, there is
little evidence in extant literature supportive of quality differentials between Big 4 firms, except that the collapse of
Arthur Anderson certainly undermines this assertion that large auditors are associated with higher audit quality. In
this study, we develop a methodology to distinguish audit quality among Big 4 audit firms and attempt to question
the homogenous audit quality assumption. In exploring this theme, this paper examines the audited disclosures
made during the transition period under Financial Reporting Standards 136Impairment of Assets (the
Malaysian equivalent to IAS 36) of a sample of large Malaysian listed corporations, each of whom have engaged Big 4
auditors. The results of this study are alarming, finding systemic failure on the part of Big 4 auditors in Malaysia to
comply with even the most basic elements of the FRS 136 disclosure framework in relation to goodwill impairment testing.
© 2009 IUP. All Rights Reserved.
Audit Quality and Equity Liquidity: Case of the Listed Tunisian Firms
-- Faten Hakim and Abdelwahed Omri
This paper examines the association between bid-ask spread, a market-based measure of information asymmetry,
and the quality of the external audit in the Tunisian capital market. Our results show that the bid-ask spread is
negatively related to the employment of an industry specialist auditor and Big 4 auditor and positively related to audit
firm tenure. However, further tests refine those conclusions, in that the positive association between tenure and
bid-ask spread differs between specialist and non-specialist auditors and between Big 4 and non-Big 4
auditors. Specifically, we find that bid-ask spread is increasing in tenure for non-specialist and non-Big 4 clients. These
findings are consistent with a market that perceives audit quality diminishing with tenure for non-specialist auditors and
non-Big 4 auditors and a market that finds audit quality increasing with industryspecialization and Big 4 auditors.
© 2009 IUP. All Rights Reserved.
|