When planning the audit, auditors will typically examine the financial statements for unexpected fluctuations in account balances and ratios that indicate where additional audit work may be warranted. After observing any unexpected fluctuations and asking management for explanations, Auditor decides how to revise the audit plan and document in the audit work papers justifications for the plan.
The purpose of this study is to determine how the anticipation of the audit review process and the degree to which evidence supporting of refuting management’s explanations influence the justifications of audit planning decisions.
In this study, we examined how two aspects of the audit environment- The audit review process and the type of evidence available- influence the way auditors Justify their audit planning decisions. Overall, our results indicate that these two factors do influence auditor’s justification.
Auditors who expected a subsequent review documented more total justifications than auditors who did not expect a review. Our result also show the auditors’ justifications, are affected by the type of available evidence. Auditors receiving inconsistent evidence documented more Justification in their planning memos than those who received corroborating evidence or no evidence.