Theoretical and Methodical Basis for Audit Activity Standardization

One of the problems of performing audit activity is development of methodology basis for the development of audit activity standards. This work proposes the principles of audit activity standardization divided into three groups: principles determining theoretic basis for audit activity standardization; principles determining the procedure for development of audit activity standards; principles determining the content of audit activity standards. The number of audit activity principles is expanded through adding such principles as principle of scientific approach, system approach, reflection, advanced development, rationality, coordination, independence, conformity to plan, feedback, innovative activity, publicity, timeliness, technology application, neutrality, and ability to check compliance with a standard. The conclusion was made that meeting the proposed principles will allow to improve the quality of services provided by auditing organizations and individual auditors. Methods applicable for audit activity standardization were considered. It was determined that practical methods and special standardization methods allow to fully meet all the proposed principles of audit activity standardization. Objects of audit activity standardization were identified: services provided by auditing organizations and individual auditors and processes of providing those services. The following groups of standards were proposed: standards of services, standards of providing services, and standards of infrastructure for providing services. An audit activity standard was defined. A system of indicators evaluating compliance with the principles of audit activity standardization was developed. Two types of evaluation were proposed: rapid evaluation of compliance with the principles of audit activity standardization in the form of testing and detailed evaluation of compliance with the principles of audit activity standardization. The two types of evaluation can serve as criteria for evaluation of the quality of audit activity standards. DOI: 10.5901/mjss.2015.v6n4s4p266


Introduction of the Problem
It is common knowledge that audit activity standards create the required prerequisites for achieving a certain level of audit services. Compliance with the standards allows to optimize costs of providing audit services. Using the standards improves mutual understanding between auditors and clients. At present, however, audit activity standards are developed mainly through generalization of experience in performing audits, while theoretic basis for audit activity standardization is usually limited to classifications of audit activity standards and issues of compliance with the system of international audit standards.

Importance of the Problem
Although audit activity standardization has been implemented in Russia for more than twenty years now, its methodological basis and methodical propositions remain underdeveloped, which shows in the lack of uniform approaches to development of audit activity standards of different levels, lack of a single structure among standards, and different styles of presenting information. All that makes it much more difficult to study the principles in practice, understand individual propositions, and makes working with standards unergonomic. For example, principles and methods of audit activity standardization are understudied and there is no precise classification of the objects of audit activity standardization. In addition, there are no uniform methodical approaches to development of audit activity standards. At present, every subject of standardization independently establishes the procedure for development and review of audit activity standards, which results in non-compliance between standards of different levels. Moreover, there is a lack of a procedure for estimating the quality of audit activity standards. In this connection, study of methodology basis for audit activity standardization is considered relevant, because development of methodology basis for audit activity standardization will allow to eradicate the deficiencies mentioned above.
The goal of this research is to develop methodology for audit activity standardization. To achieve the goal of the research, the following tasks were set: specify the set of principles of audit activity standardization; identify the objects of audit activity standardization, specify the definition of audit services, and expand the classification of audit services; study the set of methods which secure adherence to the author's system of principles of audit activity standardization; propose the author's definition for audit activity standard and add new classification criteria to the classification of audit activity standards; develop methods for evaluation of compliance with the principles of audit activity standardization.

Relevant Scholarship
The concept of audit activity and its fundamental principles were coined and elaborately developed by both foreign and Russian researchers. A significant contribution to the development of theoretical basis of audit activity was made by such scholars, as A. Arens, R.P. Bulyga Conceptual basis for audit has been studied in a great number of works. However, those works ignored the issues surrounding audit activity standardization and development of the mechanism for improving the standards of providing audit services. All that affects negatively the quality and, therefore, practical application of audit activity principles.

Hypotheses and Their Correspondence to Research Design
The authors make the following assumption: although every audit activity standard is unique, they must be developed on a single basis which would provide high quality of the standards.

2.
The following methods were applied during the research: methods of system, comparative, and historical analysis, synthesis, induction, deduction, scientific generalization, etc.
The information basis for the research comprised legislative and statutory acts of the Russian Federation, which regulate the issues of standardization and procedure for audit activity, international audit standards, scientific papers and monographs on the studied topic.

3.
Audit activity standardization is built on the principles forming its basis. Unlike the principles of audit activity standardization mentioned in the works by E.M. Guttsait (Guttsait, 2002), S.I. Zhminko and P.V. Baklanova (Zhminko and Baklanova, 2012), B.T. Zharylgasova (Zharylgasova, 2007), and V.I. Podolskiy (Podolskiy, 2010), the authors specified and expanded them by adding such principles as principle of scientific approach, system approach, reflection, advanced development, rationality, coordination, independence, conformity to plan, feedback, innovative activity, publicity, timeliness , technology application, neutrality, and ability to check compliance with a standard. Based on the conducted research, the authors proposed a system of principles of audit activity standardization. The principles of audit activity standardization are divided into three groups: principles determining the theoretical basis for audit activity standardization; principles determining the procedure for development of audit activity standards; and principles determining the content of audit activity standards (Table 1). All the above-mentioned principles are interdependent, both within the same group and across different groups. For example, organization and operation of the system of audit activity standardization is strongly determined by the goals which must be achieved in the result of those processes. Compliance with the principle of purposefulness determines the sense of operation of the system. The goals of audit activity standardization must be set in accordance with the principle of innovative activity, principle of timeliness, principle of independence, principle of conformity to plan, and principle of feedback. The principle of independence allows to set objective and independent goals of audit activity standardization. At the stage of setting goals, the principle of innovative activity contributes to the progress of development of standards. The principle of feedback determines relevance of the goals set and their compliance with the needs of users of the standards. Following the principle of conformity to plan secures rational achievement of the goals of audit activity standardization, while the principle of timeliness secures their real nature and feasibility. Relationships between the principles of advanced development, innovative activity, and relevance can serve as examples of intergroup relationships. Only compliance with the principle of advanced development, i.e. when the development of theoretical aspect of audit activity standardization outstrips its practical aspect, makes it possible to follow the principle of innovative activity. Otherwise, there will be the lack of innovations needed for practical aspects of development of audit activity standards. Compliance with the principles of advanced development and innovative activity allows to follow the principle of relevance as well, because when determining relevance of an audit activity standard one takes into account, among other things, how much it complies with the current level of scientific development.
That set of principles has a new property which every individual principle lacks -the ability to provide high quality of audit activity standards. This calls for a conclusion that the proposed system of principles of audit activity standardization follows the principle of emergence,i.e. non-equality to the sum of properties of the system's elements.
The proposed system of principles of audit activity standardization can serve as a criterion for evaluation of quality of audit activity standards as a final result of audit activity standardization. Quality standards of audit activity determine the quality of services provided by audit organizations and individual auditors. For this reason, only simultaneous adherence to all the proposed principles advances the achievement of such a goal of audit activity standardization, as providing high quality and competitiveness of services provided by audit organizations and individual auditors.
The conducted analysis allows to state that only simultaneous application of the general scientific methods applied in practice and special methods of general theory of standardization will allow to implement the whole set of principles of audit activity standardization. Those methods include: theoretical methods (analysis, synthesis, abstracting, specification, generalization, formalization, induction, deduction); empirical methods (studying relevant literature, documents, results of performance, observation, measurement, survey, expert evaluation, testing, object watching, inspection, monitoring, study and generalization of experience, experiments) (Novikov, Novikov, 2007); special methods of standardization (unification, ranging, selection, simplification, typification, classification, methods of terminology, parametric rows, general technical requirements, general technical conditions, method of typical service) (Belobragin, 2011). To our opinion, unification deserves special attention. Unification is a method based on selecting the optimal number of objects of standardization or their sizes, in order to convert them to a single system, form, i.e. to uniformity (Nikolaeva, Kartashova, 2010). V.T. Chaya emphasizes the importance of establishing a unified system of documents and requirements for the external check of quality of performance of auditing organizations (Chaya, 2012). Y.Y. Kostyleva and V.A. Kostylev emphasize the importance of unifying audit documents, including a report on the results of an audit check (Kostyleva, Kostylev, 2005). Besides the process of control of quality of provided services, a unified documentation procedure is needed for other processes, such as planning of the procedure for providing a service, providing a service, and preparation of final documents.
Unification of terms used in professional audit standards is also important. Analysis of regulations performed by V.F. Massarygina demonstrates that one and the same term is defined differently in different documents (Massarygina, 2012).
The role of an object of standardization can be performed by everything that can be used multiple times (Burtsev, 2000). In this connection, according to the analysis of approaches to identifying objects of standardization by V.M. There is a lack of a single classification of services which can be provided by audit organizations and individual auditors. According to M.V. Chernova, the current notion of "audit" goes beyond financial aspects. Audit has taken new forms and started to develop in multiple directions (Chernova, 2011). There is financial audit and such types of "audit", as ecological audit, production audit, operating audit, as well management audit, performance audit, constitution audit, etc. (Sheremet, 2007).
Along with M.V. Chernova, expansion of areas of audit application and new forms of audit are mentioned in the works by R.P. Bulyga (Bulyga, 2012), M.V. Melnik, and V.G. Kogdenko (Melnik, Kogdenko, 2005), S.V. Pankova, and L.V. Pasechnikova (Pankova, Pasechnikova, 2013). One can hardly deny that fact, because it is an objective reflection of the current state of the audit services market.
In academic literature, specialists also failed to come to a single opinion about the legitimacy of providing audit services by audit organizations and individual auditors. While some authors think that extra services provided by subjects of audit activity must not go beyond providing accounting services and tax consultations, others propose to reduce the range of those services within further improvement of legislation by excluding training, evaluation activity, and other services, others suggest establishing an exhaustive list of services relating to compulsory audit, others insists on raising almost all limitations on audit-relating services (Zevaikina, 2010). For example, V.I. Petrova notes that audit-related services include all other services which audit organizations are permitted to provide by law (Petrova, 2009).
According to E.M. Guttsait, the issue of establishing a register and regulation of audit-related services must be addressed by using a deductive method, which means that a definition must be introduced which would allow to decide whether that permission covers each area of activity (Guttsait, 2002). A.D. Sheremet also emphasizes the importance of that issue: "there is an obvious need for a scientific interpretation of audit, audit-related services, and their classification" (Sheremet, 2007). I.B. Shurchkova also points out that the lack of definitions of audit-related and other services makes it difficult to identify some areas of activity (Shurchkova, 2012).
It cannot be denied that the lack of such a definition makes differentiation between audit-related services and other services difficult. Moreover, this allows to include any service into that group, if the relevant standard is developed.
To our opinion, audit checks should be understood as checks, the purpose of which is to confirm compliance of the studied subject with the set criteria. When providing audit services, the subject of study may be both financial and nonfinancial information about all types of resources, the proper use of which must be confirmed. Table 2 shows the classification of audit services. Audit services confirming accuracy of information about the use of labor forces When performing audit, the auditor must reach a reasonable level of certainty, while when performing reviews the level of certainty must be limited. That approach will also allow to combine all the existing types of audit.
Audit-related services are services which do not give the auditor any certainty regarding the accuracy of information.
The identified objects imply identification of the following groups of standards: standards of services (standards describing the result of providing audit services and audit-related services); standards of providing services (standards of processes of providing audit and audit-related services); standards of infrastructure for providing services (standards of conditions needed to provide audit and auditrelated services and to achieve the final result). Under a standard of audit activity one should understand a document, which contains compulsory and repeatedly used rules for providing audit and audit-related services. That definition expands the circle of potential developers of standards. Compulsory use of standards is a necessary condition for securing uniformity of audit activity. The definition points out providing audit and audit-related services as an area of application of standards.
Orientation of the standards must be taken into account as well. For example, the standards of services must be oriented mainly at clients; the standards from the second group-at providers of services, and the standards from the third group -at supervising agencies which supervise the procedure for providing services.
Each of the three groups of standards has its internal classification, which depends on the needs of main users of a given group of documents. Lack of standards from one of the groups endangers providing high-quality services and compliance with the principles of audit activity standardization. Each group of the proposed standards implements the relevant group of principles. The relationship between groups of standards and group of principles is shown in Table 3. Lack of evaluation of compliance with the principles of audit activity standardization, which must form the basis for the process of audit activity standardization and can serve as evaluation criteria for quality of audit activity, makes it difficult to develop necessary measures aimed at improvement of audit activity standardization. It should be noted that evaluation of compliance with the principles is necessary for determining the level of their observation, because a principle of audit activity standardization may be followed to completely or partially, or not followed at all, and for development of the necessary measures aimed at improvement of the procedure for development and review of audit activity standards. The extent of compliance with the principles of audit activity standardization depends on the indicators used for evaluation.
Evaluation of compliance with the principles of audit activity standardization must be performed in accordance with certain principles, e.g. the principles of evaluation proposed by E.M. Korotkov. They include: principle of scientific approach. Evaluation must be performed by using scientifically grounded methods.
principle of purposefulness. Evaluation must be aimed at a specific goal.
principle of diversity, completeness, and consistency. When performing an evaluation, one should take into account relationships between characteristics of the object of evaluation, aspiration to their completeness, diversity, and sufficiency. principle of criterion rigidity. When performing an evaluation, optional change of criterion is inadmissable.
principle of quantity determination of an evaluation. An evaluation must be performed in quantity indicators, whenever possible. principle of combining evaluation of state and alterations.
principle of independence. Evaluation must be isolated from the influence of interested parties (Korotkov, 2000). In our opinion, the list of principles identified by E.M. Korotkov is sufficient for performing an evaluation of compliance with the principles of audit activity standardization.
Depending on the goal, one can differentiate between rapid and detailed evaluation of compliance with the principles of audit activity standardization. Table 4 contains comparative analysis of the two types of evaluation. Indicator is a means of evaluation. Indicators help judge about the development or progress of something (Ozhegov, 1987). Indicators must meet certain requirements. In our opinion, the following requirements proposed by E.M. Korotkov can be used as requirements for indicators of compliance with the principles of audit activity standardization: validity -indicator must comply with the goals for which it is used; dimensions -indicator must not combine factors of different dimensions; measurability -indicator must be quantity-measurable or have a word form (increase, more, less, admissible, positive tendency, reasonable, etc.); fact basis -indicator must rely on facts; reasonable simplicity -if possible, indicator must be simple in structure, calculations, conditions of use, and structure of information; function determination -indicator must have its own function (aggregation of information, means of analysis, motivation, control, regulation leverages, etc.); consistency -indicators must be compatible and interdependent, meet the integrating purpose, rule out duplication and unjustified overlapping; orientation at practical use -indicators must be applicable in practice (Korotkov, 2000). Every type of evaluation has its own indicators. As the principles of audit activity standartization are interrelated and the principles determining the procedure for audit activity standartization and the content of standards are built on the principles determining the theoretical basis, we think that it will suffice to develop indicators for those two groups of principles only.
In our opinion, rapid evaluation of compliance with the principles of audit activity standartization can be performed in the form of testing. Table 5 shows the indicators used for rapid evaluation of compliance with the principles of audit activity standardization. Do audit activity standards have a single structure? yes no Total number of "Yes"/"No" answers * Note-"yes" is worth 1 point, "no" is worth 0 point The maximum number of points totals 24. The higher the number of "yes" answers, the more principles are met and the higher is the quality of standards.
When using the indicators of rapid evaluation, one should bear in mind that they are "rigid" and imply only two variants of compliance with the standardization principles: the principle is complied with or not. The results of the rapid evaluation do not allow to identify reasons for non-compliance with a given principle and depend on the opinion of the expert performing the evaluation. Despite those deficiencies, the results of rapid evaluation allow to identify weak spots regarding compliance with the principles of audit activity standardization and form the basis for development of a plan of measures aimed at eradicating the deficiencies identified in audit activity standardization.
Detailed evaluation allows to identify the need to develop the tools which would secure compliance or enhance compliance with the principles which were not met or undermet. Table 6 shows the absolute and relative indicators of detailed evaluation of compliance with the principles of audit activity standardization.  -share of standards with the structure different from the generally established one, in the total number of standards; The indicators from Table 6 allow to estimate the state of the system of principles of audit activity standardization. As the relative indicators of detailed evaluation may vary from 0 to 1, it is not quite right to say that the principle is complied or not complied with completely: the principle is complied with partially. Values of those indicators can give information about support of functions securing compliance with the principles, authorities, technical tools, etc. In addition, there is a need for indicators which would reflect changes taking place in the system of principles of audit activity standardization. Those are indicators of dynamics which show growth of characteristics, expansion of their area of application, new options of using resources, and anything that characterizes a new quality. Those indicators include: relative indicator of dynamics defined as a ratio of current indicator to indicator in previous (basis) period; relative indicator of plan fulfillment defined as a ratio of planned value of the indicator over period i to the its actual value over period i. -In our opinion, to improve effectiveness of work on compliance with the principles of audit activity standardization, the indicators of compliance with the principles of audit activity standardization can be divided into: procedural indicators, i.e. compulsory ones. For example, the number of contradictions identified in the texts of standards at the development stage, amount of time needed to provide the recipient with information, the number of standards with the structure different from the generally established one; regulatory indicators, which regulate the activity through average values or divergence limits. For example, costs for organizing the work on audit activity standardization; instruction and information indicators, which allow to take into account specific work environment and positive experience. For example, the number of the developed standards fully complying with international standards, share of justified contradictions between the developed and international standards in the total number of contradictions of that kind, average number of proposed innovative changes. All the above-mentioned indicators are individual, i.e. they characterize only one aspect of a given object of evaluation. Based on those individual indicators, it is impossible to judge about the quality of development of standards regarding compliance with the principles of audit activity standardization.
As mentioned earlier, the proposed principles are not just a set but a system which acquires a new qualitycompliance with all the principles leads to quality standards meeting the needs of their users. That calls for a single indicator which would allow to estimate the state of the system of standards of audit activity standardization. In our opinion, that role can be performed by a rating.
Rating is a cardinal or ordinal indicator, which reflects the expert's (group of experts') opinion about the significance of an object or action generated by using a certain method and usually expressed in points (Zavarikhin, Paramonov, 2012).
A possible method for calculating the rating of the state of the system of principles of audit activity standardization is described below. To calculate the rating, the above-mentioned indicators of detailed evaluation over different periods are used. For each indicator, its optimal value is determined and set equal to 1. By using the values of that indicator over other periods, the share of the indicator in its optimal value is calculated. By summing up the ratings for each indicator over a relevant period, the total rating of the period is calculated. The matrix of rating evaluation in its general form is shown in Table 7. Thus, the proposed integral evaluation will allow to get general idea of the state of the system of principles of audit activity standardization, while changes of that evaluation are determined through the individual indicators. It should be noted that rating and detailed evaluation, can be performed in the interests of developers of audit activity standards to order to make the necessary changes into the standardization process, from one hand, and used by supervisors as a monitoring tool, on the other hand.
The proposed rating and detailed evaluation, can be performed in the interests of developers of audit activity standards to order to make the necessary changes into the standardization process, from one hand, and used by supervisory agencies as a tool for monitoring the effectiveness of audit activity standardization.

4.
During the research, the authors attempted to develop the conceptual basis for development of audit activity standards.