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Paper Information

Journal:   FINANCIAL ENGINEERING AND SECURITIES MANAGEMENT (PORTFOLIO MANAGEMENT)   SUMMER 2010 , Volume 1 , Number 3; Page(s) 21 To 52.
 
Paper: 

FUZZY AUDIT RISK MODEL( EVIDENCE FROM REAL ENVIRONMENT)

 
 
Author(s):  KHANMOHAMADI S.*, NIKOOMARAM HASHEM, HAJIHA ZOHREH
 
* TABRIZ UNIVERSITY
 
Abstract: 

Fuzzy logic has provided an appropriate Mathematics to decision making in uncertain environment like professional judgments. One of these circumstances is the assessments of auditee risks. Risk Based Audit (RBA) has been forerunner to fight against fraud in recent years. The central point toward RBA approach is appropriate assessment of overall risk level. This assessment can directly influence on the effectiveness and efficiency of auditing. The risk assessment process as a central framework will promote the quality and efficiency of auditing and lead to a necessary change on an audit.
In this research we re-designed Audit Risk Model proposed by auditing standards, using of Fuzzy theory and the view point of audit experts. To provide a fuzzy model, we used from Triangular Function and to defuzificatin we utilized from Center of Gravity method. For fuzzy interference, we also applied Mamdani method. Modeling algorithm is based on three fuzzy interference systems (for Audit, Inherent and Control Risks) and the measurement levels of verbal variables are 5 levels. We made 25, 25 and 81 If-Then rules for Audit, Inherent and Control Risks respectively which have been confirmed by Iranian audit risk experts. Then, for Model validation, designed Fuzzy Audit Risk Model was tested by two methods namely examining of total interference rules and Sensibility Analysis and the model was proved.
Finally proposed model of this research was applied in a tile manufacturing company for the year 2008. The results of the model application was compared with the results from a check list which helped to assess real auditee risks of the company. The results indicate that the assessments of auditee risks are completely matched with real company risks, while we observed some problems in auditors' assessments of the risks.

 
Keyword(s): FUZZY LOGIC, AUDIT RISK MODEL, AUDIT RISK, INHERENT RISK, CONTROL RISK
 
References: 
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