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An Application of Data Envelopment Analysis to the Evaluation of Audit Risk

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  • Michael E. Bradbury
  • Paul Rouse

Abstract

This article demonstrates how data envelopment analysis can be used to weight audit risk factors. Data from a previously reported study applying the analytic hierarchy process is used to facilitate a comparison between these two methods. Data envelopment analysis (DEA) has several advantages, including the ability to accommodate a range of expert opinions on the importance of a specific risk factor, rather than using the median or mean value. DEA can be used to provide high‐risk and low‐risk assessments and provides benchmark audit units from which other units can be evaluated.

Suggested Citation

  • Michael E. Bradbury & Paul Rouse, 2002. "An Application of Data Envelopment Analysis to the Evaluation of Audit Risk," Abacus, Accounting Foundation, University of Sydney, vol. 38(2), pages 263-279, June.
    • Handle: RePEc:bla:abacus:v:38:y:2002:i:2:p:263-279
    DOI: 10.1111/1467-6281.00108
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    Cited by:

    1. Mónica Domínguez-Serrano & Francisco Blancas, 2011. "A Gender Wellbeing Composite Indicator: The Best-Worst Global Evaluation Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 102(3), pages 477-496, July.
    2. Gholam R. Amin & Osama El‐Temtamy & Samy Garas, 2022. "Audit Risk Evaluation Using Data Envelopment Analysis with Ordinal Data," Abacus, Accounting Foundation, University of Sydney, vol. 58(3), pages 589-602, September.
    3. Michael E. Bradbury & Gary Monroe, 2017. "Large audit firm premium and audit specialisation in the public sector," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(3), pages 657-679, September.
    4. Nurhan Davutyan & Lerzan Kavut, 2005. "An application of data envelopment analysis to the evaluation of audit risk: a reinterpretation," Abacus, Accounting Foundation, University of Sydney, vol. 41(3), pages 290-306, October.
    5. Sahoo, Biresh K. & Acharya, Debashis, 2010. "An alternative approach to monetary aggregation in DEA," European Journal of Operational Research, Elsevier, vol. 204(3), pages 672-682, August.
    6. Cheng-Ru Wu & Che-Wei Chang & Hung-Lung Lin, 2008. "FAHP Sensitivity Analysis for Measurement Nonprofit Organizational Performance," Quality & Quantity: International Journal of Methodology, Springer, vol. 42(3), pages 283-302, June.
    7. Sueyoshi, Toshiyuki & Shang, Jennifer & Chiang, Wen-Chyuan, 2009. "A decision support framework for internal audit prioritization in a rental car company: A combined use between DEA and AHP," European Journal of Operational Research, Elsevier, vol. 199(1), pages 219-231, November.

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