Ontological Approach for Modeling of a Financial Statement Audit

A Model of Actions of an Audit of Impairment of Fixed Assets

Abstract

While there is a well-developed model of accounting information systems (e.g., REA), as the business risk approach adopted in financial auditing suggests, auditors have to face the fraud occurring outside the system, especially the ones that management involves. In this research, we have developed models of actions in two fields: accounting of impairment of fixed assets and audit of accounting estimates. Accounting of impairment of fixed assets was selected because impairments are closely related to management decisions. And we chose the auditing standard on accounting estimates because the most challenging part of the audit of impairments is examining the fixed assets' future cash flows. These models are constructed as action decomposition trees: the goal action is accompanied by the method or methods to achieve the action. And the method consists of the component actions that ultimately achieve the goal action. We constructed the models, by embedding the standard provisions into action and method nodes. This research shows that action decomposition trees can express these standards with some complemental description rules and may also clarify the relationships between particular requirements. Moreover, with these models, auditors might effectively examine the accounting estimates.