Improving Risk Assessment in Audits

The use of regression analysis as a risk assessment technique provides independent auditors with both an efficient and effective audit procedure. Regression assists auditors in performing 2 important steps required of any analytical procedure: 1. predicting an account balance, and 2. determining if...

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Bibliographic Details
Published in:The Ohio CPA journal 1990-10, Vol.49 (3), p.7
Main Authors: Campbell, Robert J, Rankin, Larry J
Format: Article
Language:English
Subjects:
Audit engagements
Auditing
Audits
Interest income
Interest rates
Regression analysis
Risk assessment
Variables
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Summary:The use of regression analysis as a risk assessment technique provides independent auditors with both an efficient and effective audit procedure. Regression assists auditors in performing 2 important steps required of any analytical procedure: 1. predicting an account balance, and 2. determining if differences that may exist between reported and predicted account balances are material or insignificant. Key factors to be considered before applying regression include start-up costs, client concerns, and database issues. Two cases that illustrate how Deloitte & Touche auditors have used regression analysis as a risk assessment tool in audit engagements are presented. These examples involve the audit of a sales account for a manufacturing client and the audit of interest income for a savings and loan client.
ISSN:0749-8284