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

Mohamed Gaber, Samy Garas and Edward Lusk
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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

International Journal of Research in Business and Social Science (2147-4478), 2020, vol. 9, issue 4, 182-195

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

Date: 2020
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