Auditing Section Research Summaries Space

A Database of Auditing Research - Building Bridges with Practice

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  • Jennifer M Mueller-Phillips
    On audits and airplanes: Redundancy and...
    research summary posted October 19, 2015 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.03 Adequacy of Evidence 
    Title:
    On audits and airplanes: Redundancy and reliability-assessment in high technologies.
    Practical Implications:

    This article explains the importance of redundancy to both design and assessment practices in aviation, but contests redundancy’s ability to accurately translate between them. It suggests that FAA reliability assessments serve a useful regulatory purpose by couching the qualitative work of engineers and regulators in an idiom of calculative objectivity, but cautions that this comes with potentially perverse consequences. For, like many audit-practices, reliability calculations are constitutive of their subjects, and their construal of redundancy shapes both airplanes and aviation praxis.

    Citation:

    Downer, J. 2011. On audits and airplanes: Redundancy and reliability-assessment in high technologies. Accounting, Organizations & Society 36 (4/5): 269-283.

  • Jennifer M Mueller-Phillips
    The Effect of the Social Mismatch between Staff Auditors and...
    research summary posted April 17, 2014 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.03 Adequacy of Evidence, 10.0 Engagement Management, 10.04 Interactions with Client Management, 11.0 Audit Quality and Quality Control, 11.03 Management/Staff Interaction 
    Title:
    The Effect of the Social Mismatch between Staff Auditors and Client Management on the Collection of Audit Evidence
    Practical Implications:

    Given the extent of audit evidence collected by young staff auditors, the findings of this study have direct implications for workpaper and audit quality. The mismatch of age, experience, and knowledge between staff-level auditors and client management can result in a potentially intimidating situation for the staff-level auditor, and impact decisions made in collecting information and conducting testwork. These results provide new evidence regarding the impact of auditor-client interactions on audit quality. This suggests that firms may want to consider how to manage these social mismatches of their staff.

    For more information on this study, please contact G. Bradley Bennett.
     

    Citation:

    Bennett, G. B., and R. C. Hatfield. 2013. The Effect of the Social Mismatch between Staff Auditors and Client Management on the Collection of Audit Evidence. The Accounting Review 88 (1): 31–50.

  • Jennifer M Mueller-Phillips
    The Impact of Estimate Source and Social Pressure on...
    research summary posted February 16, 2017 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.03 Adequacy of Evidence 
    Title:
    The Impact of Estimate Source and Social Pressure on Auditors’ Fair Value Estimate Choices
    Practical Implications:

    To the auditors’ knowledge this study is the first to examine the joint effect of social pressure and estimate source. By examining the joint effect of these two factors, they identify the boundary conditions under which the effect of estimate source holds. The results of this study indicate that auditors perceive advice to be more acceptable when it is from a superior than when it is from a peer. Further, when advice is received from a peer, auditors in this study indicate that the advice is more likely to be weighed against other evidence than when the same advice is received from a supervisor. 

    Citation:

    Brink, A. G., F. Tang, and L. Yang. 2016. The Impact of Estimate Source and Social Pressure on Auditors’ Fair Value Estimate Choices. Behavioral Research in Accounting 28 (2): 29 – 40. 

  • Jennifer M Mueller-Phillips
    The Impact of Principles-Based versus Rules-Based Accounting...
    research summary posted July 20, 2015 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.03 Adequacy of Evidence, 15.0 International Matters, 15.02 IFRS Changes – Impacts 
    Title:
    The Impact of Principles-Based versus Rules-Based Accounting Standards on Auditors' Motivations and Evidence Demands.
    Practical Implications:

    The heightened epistemic motivation induced by principles-based accounting standards then ultimately increases auditors’ demands for audit evidence. Thus, the results suggest the important influence of accounting standards on auditors’ motivations and consequent program planning decisions. The findings provide valuable information to regulators in their evaluation of how or whether to move forward with potential IFRS adoption or convergence of U.S. GAAP with IFRS. In a principles environment, audit firms must take measures to guard against this potential bias, e.g., review of proposed audit programs and results of tests.

    Citation:

    Peytcheva, M., Wright, A. M., & Majoor, B. 2014. The Impact of Principles-Based versus Rules-Based Accounting Standards on Auditors' Motivations and Evidence Demands. Behavioral Research In Accounting 26 (2): 51-72.

  • The Auditing Section
    The Influence of Auditor Experience on the Persuasiveness of...
    research summary posted April 16, 2012 by The Auditing Section, tagged 07.0 Internal Control, 07.01 Scope of Testing, 09.0 Auditor Judgment, 09.03 Adequacy of Evidence, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Title:
    The Influence of Auditor Experience on the Persuasiveness of Information Provided by Management
    Practical Implications:

    The extent to which auditors’ judgments are persuaded by information from management represents asignificant issue for audit practice, especially when information from more objective sources is also available.  The evidence indicates that less experienced senior auditors rely on information from management that is aligned with management’s self-interest to a greater extent than more experienced audit seniors.  This reliance raises a concern that some senior auditors assess audit evidence more favorably than may be warranted because they inappropriately rely on information provided by management. A lack of appropriate skepticism has the potential to make audits ineffective and expose the firm to audit failures.  The study suggests the importance of carefully assigning audit tasks to auditors with an appropriate level of experience.

    Citation:

    Kaplan, S. E., E. F. O’Donnell, and B. M. Arel. 2008. The Influence of Auditor Experience on the Persuasiveness of Information Provided by Management. Auditing: A Journal of Practice & Theory 27 (1): 67-83.

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  • Jennifer M Mueller-Phillips
    Training Auditors to Perform Analytical Procedures Using...
    research summary posted February 24, 2015 by Jennifer M Mueller-Phillips, tagged 08.0 Auditing Procedures – Nature, Timing and Extent, 08.01 Substantive Analytical Review – Effectiveness, 09.0 Auditor Judgment, 09.03 Adequacy of Evidence 
    Title:
    Training Auditors to Perform Analytical Procedures Using Metacognitive Skills
    Practical Implications:

    This research furthers the understanding of auditors’ judgment performance in four important ways. We show that

    • Effective training in metacognitive skills increases auditors’ diagnostic reasoning by enabling them to control and direct their thinking.
    • Training in both divergent and convergent thinking provides significantly better results than only learning to think divergently. Because the former are better able to piece together all necessary facts.
    • The key to performance improvement due to training in both divergent and convergent thinking is a reduction in a psychological mechanism called “consistency checking.” Auditors trained to use both tend to avoid premature elimination of explanations, instead subjecting explanations they generate to subsequent, explicit evaluation. An important implication of this is that for auditors who try to do both kinds of thinking simultaneously rather than sequentially the best explanation for a problem might not be generated or might be prematurely discarded.
    • In the same amount of time that participants in the other training conditions took to arrive at their inferior answers, auditors trained to use both divergent and convergent thinking chose one of the correct solutions more often, generated better explanations, and eliminated more potentially time-wasting invalid explanations.

    For more information on this study, please contact David Plumlee.

    Citation:

    Plumlee, R. D., B. Rixom, and A. Rosman. 2015. Training auditors to perform analytical procedures using metacognitive skills. The Accounting Review 90 (1): 351-369.

  • Jennifer M Mueller-Phillips
    Triangulation of audit evidence in fraud risk assessments
    research summary posted June 21, 2013 by Jennifer M Mueller-Phillips, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.01 Fraud Risk Assessment, 09.0 Auditor Judgment, 09.03 Adequacy of Evidence, 11.0 Audit Quality and Quality Control, 11.09 Evaluation of Evidence 
    Title:
    Triangulation of audit evidence in fraud risk assessments
    Practical Implications:

    Given the level of regulatory scrutiny surrounding auditor judgment and skepticism of audit evidence, the results indicate that when assessing the risk of fraud, there is a lack of reliance on third party evidence, particularly when management provides a compelling story with its internal evidence.  The results of this study are important in enhancing awareness for auditors to use and corroborate both internal and external audit evidence for purposes of assessing and supporting the level of risk of the audit client.  In addition, in a broader context, the same could be said regarding the evaluation of evidence for purposes of procedures throughout the various stages of the audit process.

    Citation:

    Trotman, K.T., and W.F. Wright. 2012. Triangulation of audit evidence in fraud risk assessments. Accounting, Organization and Society 37: 41-53. 

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  • The Auditing Section
    Why Do Auditor’s Over-Rely on Weak Analytical Procedures? T...
    research summary posted April 13, 2012 by The Auditing Section, tagged 08.0 Auditing Procedures – Nature, Timing and Extent, 08.01 Substantive Analytical Review – Effectiveness, 09.0 Auditor Judgment, 09.03 Adequacy of Evidence 
    Title:
    Why Do Auditor’s Over-Rely on Weak Analytical Procedures? The Role of Outcome and Precision
    Practical Implications:

    Analytical procedures are used frequently and increasingly are relied upon as substantive evidence. Based on this study, auditors are insensitive to the impreciseness of the analytical procedure when the results are favorable and may be a cause for over-reliance on weak evidence.  Performing a stronger, more precise analytical procedure caused participants in the favorable outcome situation to become more aware of the weakness of the initial procedure and re-evaluate their evidence strength rating. Further, evidence suggests that having auditors consider the possible weaknesses of an analytical procedure prior to performing the procedure will cause them to rate the strength of the evidence from a weak analytical procedure lower. Overall, this suggests a need to better train auditors in performing and interpreting analytical procedures.

    In a discussion of Glover et al.’s paper, McDaniel asks whether the findings may indicate that auditors in the unfavorable outcome (i.e. there is a material difference) are under-relying on the evidence rather than that auditors in the favorable outcome (no material difference) are over-relying on the evidence. Glover et al. respond that the over-relying of the evidence is of concern to regulators and the alternative does not explain all of the results.  McDaniel also notes that the case study was of a company in the financial industry but that the participants were not required to have any financial industry experience. Glover et al. note that the interest income item is the issue which is not specific to the industry or complicated.  McDaniel also notes concerns about a potential “anchoring” effect as the participants performed their analytical procedures based on prior year working paper results.  In response, Glover et al. discuss this feature of an audit. 

    Citation:

    Glover, S. M., D. F. Prawitt, and T. J. Wilks. 2005.  Why Do Auditor’s Over-Rely on Weak Analytical Procedures?  The Role of Outcome and Precision.  Auditing: A Journal of Practice & Theory 24 (Supplement):  197-220.  

    McDaniel, L. 2005.  DISCUSSION OF Why Do Auditor’s Over-Rely on Weak Analytical Procedures?  The Role of Outcome and Precision.  Auditing: A Journal of Practice & Theory 24 (Supplement):  221-228. 

    Glover, S. M., D. F. Prawlitt, and T. J. Wilks. 2005. REPLY TO DISCUSSION OF Why Do Auditor’s Over-Rely on Weak Analytical Procedures?  The Role of Outcome and Precision.  Auditing: A Journal of Practice & Theory 24 (Supplement):  229-232.

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