Essay about Transaction Focused

747 Words Dec 5th, 2010 3 Pages
The authors in this article examines how procedures used in different audit methodologies influence the likelihood that auditors will integrate their business risk judgments about risk of material misstatements. Auditing standards require auditors to assess business risk, which are “conditions that threaten an organization’s ability to execute business processes effectively”. The two methodologies focused on in the article are the transaction-focused approach (TFA) and the strategic-systems approach (SSA). The transaction-focused approach emphasizes transaction cycle relationships, meaning it focuses on specific accounts. Whereas the strategic systems approach focus on attention to business processes needed to achieve the auditee’s …show more content…
The laboratory study consisted of two groups of auditors, one group with strategic-systems training and experience (SSTE), the other with transaction-focused training and experience (TFTE). The SSTE auditors were American (worked for one firm in the US) and the TFTE were Canadian (acquired auditing experience during co-op). Each auditor was to examine a case, which were patterned after Loblaws financial statement account balances and adapted from the annual report for Safeway Inc. The SSDS instrument was patterned after the audit support software used by the firm that provided the SSTE participants. The TFDS instrument was patterned after traditional audit support software that provides documentation about business activities followed by information about interperiod changes in accounting metrics.
Participants in the study were asked to analyze the case and document their initial assessment of the overall risk of material misstatement that they would anticipate for such a client as well as their initial account-level risk assessment for inventory, sales, cost of sales, and store expense. They were asked to assess the risk on a scale of one (low) to seven (high). To quantify business risk participants read information about their clients strategic business processes, with key performance indicators for those activities and asked to rate the viability of their client’s business strategy on the same scale. The auditors were then asked to

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