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Using Dependency Structure Matrix In Optimazing Financial Audit Process

Author

Listed:
  • Popa Adriana Florina

    (Academia de Studii Economice, Departamentul CAAE, sala 1011, Piata Romana Nr. 6, Sector 1, Bucuresti,)

  • Vilsanoiu Daniel

    (Academia de Studii Economice, Departamentul CAAE, sala 1011, Piata Romana Nr. 6, Sector 1, Bucuresti,)

  • Dobre Florin

    (Academia de Studii Economice, Departamentul CAAE, sala 1011, Piata Romana Nr. 6, Sector 1, Bucuresti,)

  • Stanila Oana Georgiana

    (Academia de Studii Economice, Departamentul CAAE, sala 1011, Piata Romana Nr. 6, Sector 1, Bucuresti,)

Abstract

This paper presents a new approach in evaluating risks of material misstatements in financial audit using dependency structure matrices (DSM). This perspective allows the identification of significant audit risks and can be used by audit managers to optimise resource allocation by focusing on higher risk areas. DSM matrix is widely used in other areas such as industrial production, design engineering and risk management. This approach is not used in financial audit so far. The financial crisis has diminished the activity of the audit clients and has imposed smaller audit fees. The auditors have to optimize their processes in order to maintain the quality of audit, even to improve it for the same audit remuneration. DSM matrix is a solution for this problem. This article points out have to use DSM matrix in financial audit process in order to optimize the allocation of resources, while maintaining audit quality. Our research aims to improve the risk evaluation stage in the financial audit process using DSM matrix to evaluate higher risk areas. We used the Project DSM Tool for representing significant accounts in the Purchase to pay process for a financial audit. Dependencies between accounts were used for creating a DSM matrix that depicts higher risk areas. Also, for each account, several resource allocation parameters such as costs and number of hours to be used for performing audit procedures on that account (from both audit team and client personnel). Our research suggests that DSM can provide useful information in detecting risk areas in significant classes of transactions identified in a risk based audit and we recommend using DSM matrix in the planning phase of the audit in order to avoid redundancies in the audit execution phase. This is important considering that the European Commission recommends in the Green Paper for Audit to improve the quality of audits following the setbacks to the profession caused by the financial crisis.

Suggested Citation

  • Popa Adriana Florina & Vilsanoiu Daniel & Dobre Florin & Stanila Oana Georgiana, 2013. "Using Dependency Structure Matrix In Optimazing Financial Audit Process," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 1345-1353, July.
  • Handle: RePEc:ora:journl:v:1:y:2013:i:1:p:1345-1353
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    File URL: http://anale.steconomiceuoradea.ro/volume/2013/n1/142.pdf
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    More about this item

    Keywords

    audit; risk based approach; DSM matrix; optimizing cost; resources’ allocation;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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