A Vetting Protocol for the Analytical Procedures Platform for the AP-Phase of PCAOB Audits

Mohamed Gaber and Edward J. Lusk

Accounting and Finance Research, 2019, vol. 8, issue 4, 43

Abstract: Study Context AS5[2017], issued by the Public Company Accounting Oversight Board, requires the use of Analytical Procedures [AP] at the Planning and Substantive Phases of Assurance Audits of firms traded on active exchanges. Logically, an aspect of this requirement is satisfied by using a Panel of the Client’s data at the Planning Phase to forecast the Client’s YE-closing values and then at the Substantive Phase to dispose the directional difference between the- [Actual Client’s YE-value and the AP-Forecasted YE-value]—the Disposition Phase. Research Focus To date, neither the PCAOB nor the AICPA have suggested a pilot-test paradigm to vet the AP-forecasting Protocol under consideration. To address this lacuna, we detail an AP- Decision Support System [AP-DSS] that offers to the Audit InCharge a two-stage pre-analysis AP-vetting [Pilot-Test] platform that employs False Negative [FN] and False Positive [FP] Profilers. In inferential analyses, the FP-Risk is usually benchmarked using the FN-Risk. Deliverables A comprehensive AP-vetting model is offered and illustrated using- (i) a preliminary estimator of a reasonable sample size, (ii) two Standard Forecasting Models- The Excel versions of the OLS Linear Two-parameter and the Moving Average Models, and (iii) a Benchmarking protocol. Unique in this AP-DSS vetting protocol is that the FP-risk is contexted by the FN-risk from the independent benchmark domain. This duality enhances the inferential impact of the vetting protocol as it uses separate variable sets. The AP-DSS is available at no cost as an e-Download. Â

Date: 2019
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