In this dissertation, I examine the effects of regulatory changes that affect the auditor's loss function on investors' perceptions of audit effectiveness. Specifically, I examine two changes intended (1) to improve audit efficiency and (2) to reduce auditor liability exposure. The first regulatory change, which was recently enacted, is the replacement of Auditing Standard 2 (AS2) with Auditing Standard 5 (AS5). The second regulatory change, which is currently a hypothetical change, is the passage of litigation reform aimed at limiting the auditor's liability exposure following an alleged audit failure. I examine perceived audit effectiveness rather than actual effectiveness because actual audit effectiveness is unobservable by investors. In an experiment using 101 MBA students as proxies for individual investors, I find that both changes are perceived by investors as reducing the amount of testing performed by the auditor when performing the internal control audit. I also find that both regulatory changes negatively affect investors' perceptions of audit effectiveness. Following the change in the auditing standard, experienced and inexperienced investors predict opposite stock price movement and, as a result, make different investment allocation decisions. In performing supplemental analyses, I find significant gender differences in predicted future stock prices, but not in perceptions of audit effectiveness or in perceptions of internal control quality.

This dissertation examines the effect of accountability and client risk on auditor efficiency and effectiveness during an audit review task. I considered two types of accountability. The first type is outcome accountability, which represents the type of accountability in the current audit review process. The second type of accountability is process accountability, which is not currently utilized in the audit review process. I also examined two levels of client risk (high and low) because client risk has been shown to impact efficiency and effectiveness of the audit review process. An internet-based experimental instrument was utilized for this study. Participants were practicing auditors. Findings indicate that process accountability improved performance by exhibiting both an increase in identification of errors and a decrease in likelihood of agreement with the preparer. Findings also show that process accountability decreases efficiency by increasing overall time to complete the study and the amount of information reviewed. These results suggest that process accountability, the act of documenting the process used to perform a task, may reduce the chances of audit failure, making the reduction in efficiency acceptable. I also find that participants in the process accountability and high risk groups may have experienced information overload. Both high client risk and process accountability have been shown to increase attention to information and time spent on a task. A decrease in errors identified by individuals in this group when compared to individuals in the process accountability and low risk group may indicate information overload. Also, attrition rates and followup responses from participants who did not complete the study indicate that information overload may have been an issue for participants in the process accountability/high risk group. / Ph. D.

This study considers the ability of the audit team to configurally process information, that is, to piece together information cues held by individual team members and recognize the underlying pattern in the information. It also examines how the hierarchical structure of the audit team impacts the team's ability to process information and affects the quality of decisions made by the team. The study also considers the ability of a specific audit procedure, the fraud brainstorming session required by Statement on Auditing Standards No. 99, to overcome barriers to communication and improve team judgments in subsequent tasks. I recruited 57 dyads (114 professional auditors) from public accounting firms to complete an experimental instrument, and employed a 2x2 between-groups ANOVA, manipulating team structure (peer versus hierarchical teams) and the level of the counterfactual prime (team brainstorming session versus individual strategic prompting). I find evidence of a relationship between team structure and judgment quality, but interestingly it is in the opposite direction predicted. Research from other domains suggests differences in status within the hierarchical team may hinder communication and lead to process losses. However, I find the opposite to be true in the accounting domain. When auditors are paired in hierarchical dyads, the senior auditor assumes a leadership role, taking greater interest in the content of his/her teammate's workpapers, asking more questions, and motivating the staff auditor to volunteer a greater amount of information, which results in a higher quality judgment. Thus, this study provides initial evidence that the hierarchical nature of the audit team does not lead to the process losses documented in other domains as the assumption of a leadership role by the senior auditor allows the team to overcome any challenges inherent in the hierarchical structure. This study also considers the ability of the SAS 99 fraud brainstorming session, serving as a counterfactual prime, to lead to improved decisions later in the audit process. As predicted, the brainstorming session conducted during the planning stage of the audit increases the amount and quality of communication during the testing phase and leads to better judgments. These results are of importance for accounting firms as they determine which audit team members are required to participate in the brainstorming session. While a novice auditor may not make significant contributions to the planning decisions made during the brainstorming session, my study finds there are benefits from staff auditors participating in the brainstorming session, over and above what they are able to contribute to the session itself. Participation of staff auditors in the brainstorming session strengthens communication and enhances team-level cognition in subsequent tasks, improving the ability of the audit team to detect fraud throughout the course of the audit. These findings may be relevant for other forms of teamwork, including management teams, audit committees, and interdepartmental taskforces. / Ph. D.

This dissertation examined the effects of interruption on auditor efficiency and effectiveness for one simple and two complex tasks within the audit domain. I evaluated these effects for novice and experienced auditors. In addition, I considered two ways in which the negative effects of interruption might be mitigated: varying an individual's interruption response strategy (immediate vs. negotiated) and the presence or absence of a memory-aid (notes). I investigated these phenomena using an internet-based experimental instrument. Subjects included both students and practicing auditors. My findings indicate that interruption hindered performance on certain complex audit tasks, and that it differentially affected auditor performance at two levels of experience. When interrupted, inexperienced auditors completed complex audit tasks less efficiently; experienced auditors completed them less effectively. In addition, experienced auditors who negotiated interruption completed a complex audit task more efficiently and effectively than those that responded to the interruption immediately. Furthermore, note-taking increased experienced auditor task efficiency on a complex audit task requiring judgment. These results suggest that auditors should limit task interruption when they are engaged in complex audit tasks. When task interruption cannot be avoided, auditors should consider negotiating a delay in the onset of an interruption. Finally, auditors who are interrupted while they complete a complex task requiring judgment should consider using notes to mitigate the deleterious effect of interruption on task efficiency. Participants also completed a post-experimental questionnaire which provided evidence about interruptions in the audit environment. The responses confirmed that auditors are frequently interrupted in practice. In addition, auditors preferred differing interruption response strategies dependent upon both the level of primary task complexity (easy vs. difficult), and the medium through which the interruption occurred (electronic vs. interpersonal). They chose interruption response strategies according to their place in the social hierarchy relative to the interrupter (client/boss vs. subordinate /friends/family). Finally, I found that interruption influences affect. Auditors reported significantly more positive affect reactions to interruption on easy tasks (e.g., alert, cheerful, friendly, happy and relaxed) and substantially negative affect reactions to interruption on difficult tasks (e.g., angry, hostile, irritated, nervous and tense). / Ph. D.

Does social similarity between the auditor and a specialist induce social biases that impair the auditor's reliance on the specialist? It is important to examine potential impairments to reliance since auditors do not possess expertise in many of the areas examined during the audit. One type of specialist that is increasingly relied upon by the auditor is the IT specialist. Since firms have two approaches to the organization of IT personnel (decentralized vs. centralized) and often use professional designations as a hiring criteria for specialists, I examine two dimensions of social similarity: domain knowledge distinctiveness and spatial distance. Using a 2 × 2 experiment manipulating the IT specialist's domain knowledge distinctiveness (distinct vs. overlapping) and spatial distance (in-house office location vs. outsourcing from another office) relative to the auditor, I investigate financial auditors' reliance on IT specialists. My findings provide evidence of a boundary condition to the widely accepted social identity theory. Specifically, when specialists (IT specialists in this study) are outsourced, marginally less reliance is placed on specialists possessing overlapping (shared) domain knowledge relative to distinct domain knowledge. Additionally, I find evidence of a "consultant effect" in which greater auditor reliance is placed on IT specialists from other offices when the IT specialist possesses distinct domain knowledge relative to the financial auditor. Findings suggest that a broader theory of social similarity in which dimensions of social similarity can interact to produce social biases appears to be more descriptive of real-world social complexities than social identity theory.

Abstracts in English, Swahili and Southern Sotho / The study reported in this thesis considered the implementation of the internal audit provisions of the Public Finance Management Act (Act No. 1 of 1999) or PFMA at the South African Social Security Agency (SASSA). A review of literature pointed to the scarcity of research that focuses on the role that an effective internal audit function could play in advising management, when it comes to the institution of internal controls, in developing countries such as South Africa. In this context, the study emphasised the importance of internal controls that should be recommended by an internal audit function, specifically for purposes of averting financial misconduct. Thus, the problem statement for the study was articulated as follows: The existence of an internal audit function at SASSA has not resulted in improved internal controls, which contribute to the curbing of financial misconduct. Consequently, the main research question for the study was: What are the necessary conditions under which the internal audit function at SASSA could be improved? Using agency theory, the study conceptualised an internal audit function as an important part of internal management controls that functions by reviewing, evaluating and making recommendations for the improvement of other controls within an institution, with the ultimate aim of promoting good governance. The research design and methodology for the study were qualitative, as it was necessary to get the views of the respondents on the various themes covered in the interview schedules and survey questionnaire. The case study design was employed as the operational framework for data collection. The data collection techniques employed in the study were personal one-on-one interviews with two sets of senior managers, a survey questionnaire comprising open-ended questions, and a focus group discussion. The four data sets were collected as follows: one-on-one personal interviews with senior internal audit managers, interviews with other senior managers in some of the Agency’s areas that have been identified as strategic high-risk areas, a survey questionnaire that was completed by junior internal audit managers, as well as a focus group discussion with managers from the supply chain management department. The population for the study was purposefully selected to achieve one of the key objectives of purposive sampling, namely ensuring that some diversity is included in a sample in order to allow for the influence of differences in respondents’ views due to the positions that they occupy. As per the requirements of a doctorate, this study contributes at two levels: a theoretical and an empirical level. At theoretical level, the researcher developed data collection instruments, which other researchers could improve and use. At empirical level, the contribution of the study is a conceptual framework for the implementation of an internal audit function. The framework identifies the 18 conditions that must be in place for an internal audit function to be effective. In addition, the researcher makes recommendations for amendments to the PFMA and/or Treasury Regulations: PFMA. These recommendations will benefit all public institutions. It is thus believed that the study will make an important contribution towards efforts aimed at improving the internal audit function in the South African public sector at large. This is important, as the PFMA requires internal audit functions to assist accounting authorities with recommendations pertaining to the maintenance of effective controls. Internal audit functions have to evaluate these controls to determine their effectiveness and efficiency. Following that, they should develop recommendations for enhancement or improvement. / Dyondzondzavisiso leyi ku vikiwaka yona eka thesis leyi yi langutile ku humelerisiwa ka swipimelo swa oditi ya le ndzeni ya nawu wa Public Finance Management Act 1 of 1999 kumbe PFMA eka nhlangano wa South African Social Security Agency (SASSA). Nkambelo wa matsalwa (lithirecha) leyi faneleke wu paluxile nkalo wa ndzavisiso lowu tshikilelaku miehleketo eka ntirho lowu oditi ya le ndzeni leyi fikelelaka wu nga vaka na wona eka ku tsundzuxa vufambisi, loko swi ta eka ku tumbuxa vulawuri bya le ndzeni eka matiko lama ya ha hluvukaka tanihi Afrika-Dzonga. Eka xiyimo lexi, dyondzondzavisiso leyi yi tshikilela nkoka wa vulawuri bya le ndzeni lebyi faneleke ku bumabumeriwa hi ntirho wa oditi ya le ndzeni, ngopfungopfu hi xikongomelo xa ku sivela matikhomelo yo biha eka swa timali. Hikwalaho, xitatimende xa mbulaxiphiqo (problem statement) xa dyondzondzavisiso leyi xi vile hi ndlela leyi: The existence of an internal audit function at SASSA has not resulted in improved internal controls, which contribute to the curbing of financial misconduct. Hikwalaho, xivutisokulu xa ndzavisiso lowu xi vile lexi: What are the necessary conditions under which the internal audit function at SASSA could be improved? Hi ku tirhisa thiyori ya ejensi (agency theory), dyondzondzavisiso leyi yi anakanyile ntirho wa oditi ya le ndzeni tanihi xiyenge xa nkoka xa vulawuri bya le ndzeni lexi tirhaka hi ku pfuxeta (reviewing), ku kambela (evaluating) na ku endla swibumabumelo swo antswisa vulawuri byin’wana endzeni ka instituxini, hi xikongomelo xo tlakusa mafambiselo na vulawuri lebyinene. Dizayini ya ndzavisiso na methodoloji (reseach design and methodology) swa dyondzondzavisiso leyi, swi tirhise qualitative, hikuva a swi laveka ku va ku kumiwa mavonelo ya vaanguri eka mikongomelo yo hambana-hambana leyi angarheriwaka eka tixejulu ta inthavhiyu na nxaxamelo wa swivutiso leswi tsariweke swo valanga (survey questionnaire). Ku tirhisiwile dizayini ya case study tanihi rimba ro tirha hi rona eka ku hlengeleta data. Tithekiniki to hlengeleta data leti ti nga tirhisiwa eka dyondzondzavisiso leyi a ti ri tiinthavhiyu ta munhu hi wun’we wun’we, (personal one-one one interviews), na tisete timbirhi ta timanejara ta xiyimo xa le henhla, nxaxamelo wa swivutiso leswi tsariweke (questionnaire) swo valanga a ku ri swivutiso swo pfuleka na nkanelo na ntlawa wo karhi (focus group discussion). Tisete ta data leti ta mune ti hlengeletiwe hi ndlela leyi: tiinthavhiyu ta munhu hi wun’we wun’we na timanejara ta xiyimo xa le henhla ta oditi ya le ndzeni; tiinthavhiyu na timanejara ta xiyimo xa le henhla tin’wana eka swin’wana swa swivandla swa Ejensi leswi swi nga kumiwa swi ri swivandla leswi nga le ka khombo swinenenene; nxaxamelo wa swivutiso leswi tsariweke swa mbalango lowu, xi tatisiwe hi timanejara ta xiyimo xa le hansi ta oditi ya le ndzeni; na nkanelo hi ntlawa wo karhi na timanejara ta le ka ndzawulo ya vulawuri bya nandzelelano wa mafambiselo ya mphakelo (supply chain management department). Ntsengo wa vanhu (population) wa dyondzondzavisiso leyi wu hlawuriwe hi xikongomelo xa ku fikelela xin’we xa swikongomelokulu swa vusampuli byo va na xikongomelo, ku nga, ku tiyisisa leswaku ku va na ku katsiwa ka swo hambana-hambana eka sampuli ku pfumelela nkucetelano wa swo hambana-hambana eka mavonelo ya vaanguri hikwalaho ka swivandla leswi va nga le ka swona. Hilaha dyondzo ya vudokodela yi lavaka hakona, dyondzondzavisiso leyi yi hoxa xandla eka tilevhele timbirhi: levhele ya thiyori na levhele ya vumbhoni bya ndzavisiso ku nga emphirikali (empirical). Eka levhele ya thiyori, mulavisisi u tumbuluxile switirhisiwa swo hlengeleta leswi valavisisi van’wana va nga swi antswisaka no swi tirhisa. Eka levhele ya emphirikali, leswi dyondzondzavisiso leyi yi nga hoxa xandla eka swona i rimba ra mianakanyo ro humelerisa ntirho wa oditi ya le ndzeni. Rimba leri ri komba swiyimo swa 18 leswi swi faneleke ku va kona ku va ntirho wa oditi ya le ndzeni wu va na vuyelo lebyi faneleke no tirheka. Ku engetela kwalaho, mulavisisi u endla swibumabumelo swo cinca swin’wana eka PFMA na/kumbe Treasury Regulations: PFMA. Swibumabumelo leswi, swi ta vuyerisa tiinstituxini hinkwato ta mfumo. Hikwalaho, ku tshembiwa leswaku dyondzondzavisiso leyi, yi ta hoxa xandla hi ndlela ya nkoka eka matshalatshala lama nga na xikongomelo xa ku antswisa ntirho wa oditi ya le ndzeni eka xiyenge xa mfumo hi ku angarhela eAfrika-Dzonga. Leswi i swa nkoka, hikuva PFMA yi lava mitirho ya oditi ya le ndzeni ku pfuneta vulawuri bya vutihlamuleri bya mitirho ya ku langutana na mahlamuselelo na matirhiselo ya timali (accounting authorities) hi swibumabumelo mayelana na ku hlayisa swilawuri leswi nga na vuyelo lebyinene. Mitirho ya oditi ya le ndzeni yi fanele ku kambela vulawuri lebyi ku vona mpimo wa vuyelo lebyinene na ku tirheka ka swona hi ndlela leyi faneleke. Ku landza sweswo, va fanele ku tumbuluxa swibumabumelo swo tlakusela ehenhla kumbe ku antswisa. / Thuto e go begilweng ka ga yona mo kakanyotheong eno e tsere tsia go tsenngwa tirisong ga ditlamelo tsa boruni jwa ka fa gare tsa Molao wa Botsamaisi jwa Ditšhelete tsa Setšhaba (Molao wa bo1 wa 1999) kgotsa PFMA kwa Setheong sa Tshireletsego ya Loago sa Aforikaborwa (SASSA). Tshekatsheko ya dikwalo tse di maleba e supile tlhaelo ya patlisiso e e tsepameng mo seabeng se se ka tsewang ke tiro ya boruni jwa ka fa gare jo bo nonofileng mo go gakololeng botsamaisi, fa go tla mo go diriseng ditaolo tsa ka fa gare mo dinageng tse di tlhabologang tse di tshwanang le Aforikaborwa. Ka bokao jono, thutopatlisiso e gatelela botlhokwa jwa ditaolo tsa ka fa gare tse di tshwanetseng go atlenegiswa ke tiro ya boruni jwa ka fa gare, bogolosegolo mo go efogeng maitsholomabe mo go tsa ditšhelete. Ka jalo, polelo ya bothata ya thutopatlisiso eno e ne ya tlhagisiwa ka tsela e e latelang: Go nna teng ga tiro ya boruni jwa ka fa gare kwa SASSA ga go a dira gore go nne le ditaolo tsa ka fa gare tse di tokafetseng, tse di tshwaelang mo go thibeleng maitsholomabe mo go tsa ditšhelete. Ka ntlha ya seo, potso e kgolo ya patlisiso mo thutopatlisisong eno e ne e le: Seemo se se tlhokegang se mo go sona tiro ya boruni jwa ka fa gare mo SASSA e ka tokafadiwang ke sefe? Go diriswa tiori ya boemedi, thuto e akantse tiro ya boruni jwa ka fa gare jaaka karolo ya botlhokwa ya ditaolo tsa botsamaisi jwa ka fa gare jo bo dirang ka go sekaseka, go lekanyetsa le go dira dikatlenegiso tsa tokafatso ya ditaolo tse dingwe mo teng ga setheo, ka maikaelelo a bofelo a go tsweletsa taolo e e siameng. Thulaganyo le mokgwa wa patlisiso ya thuto e ne e le e e lebelelang mabaka, jaaka go ne go le botlhokwa go bona dikakanyo tsa batsibogi mo dithitokgannyeng tse di farologaneng tse di akareditsweng mo mananeong a dipotsolotso le lenane la dipotso tsa tshekatsheko. Go dirisitswe thulaganyo ya thutopatlisiso e e lebelelang seemo mo pakeng e e rileng jaaka letlhomeso la tiragatso ya kgobokanyo ya data. Ditheniki tsa kgobokanyo ya data tse di dirisitsweng mo thutopatlisisong eno e ne e le dipotsolotso tsa motho ka namana ka disete di le pedi tsa batsamaisi ba bagolwane, lenane la dipotso tsa tshekatsheko le le nang le dipotso tse di sa lekanyetseng dikarabo, le puisano ya setlhopha se se tlhophilweng. Go kokoantswe disete tsa data di le nne ka tsela e e latelang: dipotsolotso tsa motho ka namana tsa batsamaisi ba boruni jwa ka fa gare ba bagolwane; dipotsolotso le batsamaisi ba bangwe ba bagolwane mo dikarolong dingwe tsa Setheo tse di supilweng jaaka tse di nang le matshosetsi a a kwa godimo; lenane la dipotso tsa tshekatsheko le le tladitsweng ke batsamaisipotlana ba boruni jwa ka fa gare go tswa mo lefapheng la botsamaisi jwa theleso. Go tlhophilwe setlhopha sa thutopatlisiso go lebeletswe mabaka go fitlhelela nngwe ya maikemisetso a botlhokwa a go tlhopha sampole go ya ka maitlhomo a thutopatlisiso, e leng go netefatsa gore go akarediwa dipharologantsho mo sampoleng gore go nne le tlhotlheletso ya dipharologano mo dikakanyong tsa batsibogi ka ntlha ya maemo ao bona. Go ya ka ditlhokego tsa dithuto tsa bongaka (doctorate), thutopatlisiso eno e tshwaela mo magatong a mabedi: legato la tiori le le le ka netefadiwang (empirikale). Mo legatong la tiori, mmatlisisi o ne a tlhama didiriswa tsa kgobokanyo ya data, tse e leng gore babatlisisi ba bangwe ba ka di tokafatsa, mme ba di dirisa. Mo legatong la empirikale, tshwaelo ya thutopatlisiso ke letlhomeso la dikakanyo tsa go tsenngwa tirisong ga tiro ya boruni jwa ka fa gare. Letlhomeso le supa maemo a le 18 a a tshwanetseng go nna gona gore tiro ya boruni jwa ka fa gare e atlege. Go tlaleletsa, mmatlisisi o atlenegisa gore go nne le dipaakanyo tsa PFMA le/kgotsa Melawana ya Lefapha la Matlole: PFMA. Dikatlenegiso tseno di tlaa ungwela ditheo tsotlhe tsa setšhaba. Ka jalo go dumelwa gore thutopatlisiso eno e tlaa nna le tshwaelo ya botlhokwa mo maitekong a a ikaeletseng go tokafatsa tiro ya boruni jwa ka fa gare mo lephateng la setšhaba ka kakaretso mo Aforikaborwa. Seno se botlhokwa, jaaka PFMA e tlhoka gore ditiro tsa boruni jwa ka fa gare di thuse bothati jo bo rweleng maikarabelo ka dikatlenegiso tse di malebana le go tsweletsa ditaolo tse di nonofileng. Ditiro tsa boruni jwa ka fa gare di tshwanetse go lekanyetsa ditaolo tseno go tlhomamisa nonofo le bokgoni jwa tsona. Go latela seo, go tshwanetse ga dirwa dikatlenegiso tsa tokafatso. / Public Administration and Management / D. Litt. et Phil. (Public Administration)