انتخاب حسابرس با استفاده از شاخص های کیفیت حسابرسی
Abstract
1- Introduction
2- The importance of audit quality
3- Selecting an auditor for Bradco
4- Teaching notes
5- Instructional efficacy
6- Solutions
Acknowledgments
Appendix A. Audit committee member
Appendix B. Member of financial management
Appendix C. Student worksheet
Appendix D. Supplementary material
References
Abstract
In this activity, you are introduced to the auditor selection process and how indicators of an auditor’s audit quality may influence that process. You will gain an understanding of factors that can affect audit quality and apply that knowledge in a decision-making task – selecting an auditor for Bradco. The CAQ, PCAOB, IAASB, and other entities classify indicators according to how they impact audit quality. By completing the activity, you will learn to delineate how certain inputs (e.g., auditor training) may influence how an audit is conducted and certain outputs (e.g., PCAOB inspection findings) may measure or indicate whether an audit was conducted with an appropriate level of quality. The activity also demonstrates how indicators of audit quality may be used by audit committee members and company management to evaluate and select an auditor
Introduction
Bradco, Inc. is a publicly-traded builder of custom, single-family homes in Illinois. Home builders like Bradco design and build homes to customers’ specifications.1 Every part of the construction process from pouring the concrete foundation, to cutting and attaching shingles on the roof, is performed at the building site.2 In the current year, Bradco reported revenues of $100 million and had a market value of $125 million. Two years ago, Bradco’s revenues were $35 million and its market value was $40 million. Most of this growth is the result of Bradco’s merger with one of its competitors, consistent with its strategy of increasing market share through acquisitions. To a lesser extent, growth in revenues stems from an increase in demand for homes to replace those that were destroyed or damaged during tornados that hit the Midwest about 27 months ago. Bradco plans to continue its strategy of acquiring other competitor home builders to accelerate its growth. Companies in the residential construction industry face unique accounting issues, such as cost capitalization, accounting for predevelopment costs, estimating projects’ costs-to-complete, and accruals for explicit and implied warranties. Downturns in the economy tend to negatively impact homebuilders ahead of companies in other industries.3 Bradco is not immune to these types of cyclical operating trends. While natural disasters, like the recent tornados, may increase demand for Bradco’s services, they also make it difficult to find building materials at reasonable prices. These issues, and Bradco’s strategy of acquiring competitor businesses, complicate its operations and may have an impact on the quality of its financial statements.