The Relationship between Assessing Audit Risks and Revealing Creative Accounting Methods in Accounting Estimates: The Perspective of Algerian External Auditors

Abstract

Numerous studies have underscored the pivotal role of external auditors in identifying unfair estimates and preventing accounting manipulation. This is achieved by gathering sufficient and appropriate evidence when material misstatements are detected and verifying the existence of such misstatements. This study aims to explore the relationship between audit risk assessment (comprising the assessment of inherent risks, control risks, and the control of detection risks) and the detection of creative accounting methods in accounting estimates, from the perspective of Algerian external auditors. To fulfill this objective, a descriptive-analytical approach was adopted. The review encompasses the most significant findings of prior studies, supplemented by a field study involving the distribution of a questionnaire to a random sample of Algerian external auditors practicing the profession (n=300). The collected data were subsequently analyzed using the Statistical Package for the Social Sciences (SPSS26). The study concludes that there exists a positive and statistically significant relationship between the assessment of audit risks and the revelation of creative accounting methods in accounting estimates, according to Algerian external auditors. This implies that as audit risks are assessed, the likelihood of detecting creative accounting methods in accounting estimates increases, accounting for 62.8% of the variance. The remaining 37.2% is attributed to other factors. Notably, there is a positive relationship, varying in degree, between the assessment of audit risks and the detection of creative accounting methods. Assessing inherent risks has the highest impact, followed by assessing control risks and controlling detection risks. Additionally, the study identifies statistically significant differences in the perception of audit risks and creative accounting methods in accounting estimates among Algerian external auditors based on demographic characteristics within the study sample.