This study investigates how auditors alter their audit program decisions in response to an increased likelihood of fraud risk. A total of 48 auditors from one Big 5 CPA firm were surveyed regarding the type of audit procedures they would use in response to an increased likelihood of material misstatements caused by fraud. The auditors were provided with a scenario that reflected changes in economic and industry factors that increase audit risk and typically require a reevaluation of the audit program. They were asked to make choices as to which tests of balances and details and analytical procedures to perform. The results of the study are summarized and tabulated and then explained in terms of the tradeoff between effectiveness and efficiency and corporate governance.

The research on the factors that influence foreign direct investment (FDI) has ignored the role of population of a country. Such neglect seems to be motivated by the theoretical support for the assumption that large population is likely to be negatively related to economic growth. Based on a review of the latest research on the role of population in economic growth and the determinants of FDI, it was hypothesized that a country's population would be positively related to FDI. The data from 56 African and Asian countries supported the hypothesis.

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This study investigates the effect of the risk of material misstatement at the financial statement level on audit program planning. Using an inventory‐production cycle case study, we engaged forty‐eight auditors to assess the risk of material misstatement at the financial statement level. The auditors incorporated their assessments in planning the total number of audit hours and the timing of performance of interim tests and the majority of audit work. To further investigate the sources of variation, we classified auditors by their level of audit experience and tolerance‐for‐ambiguity, and analyzed the effects of these variables on the audit program planning. The results indicate that the risk of material misstatement is statistically significant in explaining changes in the total number of audit hours and the timing of the majority of audit work. Moreover, experience and tolerance‐for‐ambiguity were significant in explaining changes in the timing of interim tests and majority of work. Interaction between experience and tolerance‐for‐ambiguity was also significant in explaining the variation in the total number of hours planned for the overall audit work. This result indicated that inexperienced auditors with a low tolerance‐for‐ambiguity planned more audit procedures than the more experienced auditors with a high tolerance‐for‐ambiguity. Implications for audit practice and research are discussed.

The U. S. Public Oversight Board’s Panel on Audit Effectiveness suggests that both audit effectiveness and efficiency may benefit from greater consideration being given to auditors’ risk assessments. The association between several independent variables (e.g., tolerance-for-ambiguity, field dependence/independence, and industry stability) and auditors’ perceived risk assessments is examined in an experimental setting. Six hypotheses suggested from a review of the literature are tested. The results indicate that industry stability and (to a lesser extent) tolerance-for-ambiguity (TFA) each have a main effect on auditors’ perceived risk assessments. Further, these two variables are found to have a moderately significant interactive effect on such assessments. The level of industry stability (stable or unstable) is found to affect the risk assessments of low-TFA subjects more than high-TFA subjects. Implications of these results for the audit process are provided.

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