Analyzing the autocorrelation relationship between profit and audit revision

Abstract

Accounting is an information system and it is considered in economic enterprises as an effective tool in the process of preparing and presenting financial information in order to make informed decisions for users. Based on the information reported in the financial statements, users of accounting information evaluate the profitability and forecast future cash flows of the company, and then by establishing a logical relationship between profitability and future cash flows, they evaluate the value of the company and make decisions based on these forecasts. . Profit autocorrelation and profit volatility are important characteristics of profit that affect audit risk. Although these characteristics may be elements of inherent risk, their correlation and direction of effect is unclear. As inherent risk increases, auditors should perform more substantive testing to reduce overall audit risk. This more effort of the auditor increases the revision of the audit. Due to the complexity and high volume of business transactions, the occurrence of mistakes in financial reporting, and as a result the re-presentation of published financial statements seems inevitable, re-presentation is not an insignificant issue and can delay the company's ability to obtain external financing at a low cost.