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Audit risk calibration: Extending the Non-GAAP SEC-Filter

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  • Mohamed Gaber

    (School of Business and Economics, State University of New York:College at Plattsburgh,Plattsburgh, NY, USA)

  • Samy Garas

    (School of Business and Economics, State University of New York:College at Plattsburgh,Plattsburgh, NY, USA)

  • Edward Lusk

    (School of Business and Economics, State University of New York:College at Plattsburgh,Plattsburgh, NY, USA)

Abstract

AS5[v.Dec:2017] issued by the Public Company Accounting Oversight Board [PCAOB] requires the use of Analytical Procedures [AP] at the Planning and Substantive Phases of Assurance Audits for firms traded on active exchanges. We argue that one aspect of AP, relative to risk-setting, should be vetting the information that is produced/published by the audit client pertaining to Regulation G [v.SEC:2003] called: Non-GAAP information. In our research, we intend to leverage the longstanding Reg[G] requirements to extend the Non-GAAP information to firm performance profiles reported for the Environment, Social, and Governance[ESG]Platform on BloombergÒ. There are two research foci: (1) Offer an AP-Model that uses GAAP & ESG variables to contribute audit evidence useful in making the decision to launch an AP-Extended Procedures examination of the firm’s Enterprise Resource Planning & Control [ERP&C] protocols, and (2) Profile a random accrual-set of firms indexed on Bloomberg so as to offer population parameter estimates for refining the AP-Model. The AP-Model is based upon correlational associations for the ESG- & GAAP-variables from the: Income, Balance Sheet & Cash Flow Statements. If there seems to be a disconnect between the nature of these associations for the ESG-variables and those of the GAAP-variables, the auditor may use this as audit evidence in making the decision to conduct an Extended Procedures Examination of the firm’s [ERP&C] protocols. As for the other focus, we found that for the accrual of firms tested there is no inferential evidence that the ERP&C-protocols are consistent drivers for both the ESG- and the GAAP variable sets. Key Words: Analytical Procedures Bloomberg Terminals, ESG-Platform, Correlations, CAM

Suggested Citation

  • Mohamed Gaber & Samy Garas & Edward Lusk, 2020. "Audit risk calibration: Extending the Non-GAAP SEC-Filter," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(4), pages 182-195, July.
    • Handle: RePEc:rbs:ijbrss:v:9:y:2020:i:4:p:182-195
    DOI: 10.20525/ijrbs.v9i4.742
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    References listed on IDEAS

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    1. Jeffrey Cohen & Ganesh Krishnamoorthy & Arnold Wright, 2017. "Enterprise Risk Management and the Financial Reporting Process: The Experiences of Audit Committee Members, CFOs, and External Auditors," Contemporary Accounting Research, John Wiley & Sons, vol. 34(2), pages 1178-1209, June.
    2. Amir Michael & Rob Dixon, 2019. "Audit data analytics of unregulated voluntary disclosures and auditing expectations gap," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 16(4), pages 188-205, December.
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