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A Database of Auditing Research - Building Bridges with Practice

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  • Jennifer M Mueller-Phillips
    Do auditor judgment frameworks help in constraining...
    research summary posted November 14, 2016 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.09 Impact of Consultation on Judgments, 09.12 Impact of potential post-audit review - e.g., PCAOB, internal firm inspections 
    Title:
    Do auditor judgment frameworks help in constraining aggressive reporting? Evidence under more precise and less precise accounting standards
    Practical Implications:

    By examining the cognitive impact of the different judgment frameworks, this study provides academics, practitioners, and regulators with important insight into why counterfactual reasoning and a structured thought process differentially enhance auditors’ professional skepticism. 

    Citation:

    Backof, A. G., E. M. Bamber and T. D. Carpenter. Do auditor judgment frameworks help in constraining aggressive reporting? Evidence under more precise and less precise accounting standards. Accounting, Organizations and Society 51: 1-11. 

  • Jennifer M Mueller-Phillips
    Does Disclosure of Conflict of Interest Increase or Decrease...
    research summary posted August 31, 2016 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.01 Use of Specialists e.g., financial instruments, actuaries, valuation, 09.0 Auditor Judgment, 09.09 Impact of Consultation on Judgments 
    Title:
    Does Disclosure of Conflict of Interest Increase or Decrease Bias?
    Practical Implications:

     Valuators’ judgment and decision making is currently unexplored. This study provides preliminary evidence on how valuators act in the presence of conflict of interest, and the need for conflict disclosures. The results of this study have implications for public accounting firms to the extent that they provide either fairness opinions and associated valuation judgments or are involved in some audit aspects related to mergers/acquisitions. This study contributes to accounting and psychology literature on conflict of interest disclosures and is the first study to test the biasing effects of conflict disclosure specifically targeting professionals performing familiar tasks. Further, this study extends existing literature of the topic by documenting that bias arising from disclosure of conflict of interest depends on whether the conflict of interest is aligned or misaligned with the client’s interest. This study provides the first evidence that disclosure of conflict of interest causes bias in Client-Aligned, but not in a Client-Misaligned, conflict of interest setting.

    Citation:

     Jamal, K., E. Marshall and H. Tan. 2016. Does Disclosure of Conflict of Interest Increase or Decrease Bias? Auditing: A Journal of Practice and Theory 35 (2): 89-99.

  • The Auditing Section
    Effects of Technical Department’s Advice, Quality A...
    research summary posted May 7, 2012 by The Auditing Section, tagged 09.0 Auditor Judgment, 09.09 Impact of Consultation on Judgments 
    Title:
    Effects of Technical Department’s Advice, Quality Assessment Standards, and Client Justifications on Auditors’ Propensity to Accept Client-Preferred Accounting Methods
    Practical Implications:

    The results of this study are important for audit firms to consider when outlining best practices for their technical department.  They highlight the role and limitations of in-house consultation and advice in enhancing auditors’ decisions, and suggest that the nature of advice sought by, and presented to, auditors matters. Technical advice that merely reduces ambiguity may not be sufficient to counteract auditors’ bias toward accepting client-preferred methods. In fact, such advice could lead to an unintended consequence of bolstering auditors’ support for client-preferred methods. Explicit recommendations to use the most appropriate methods and reference to QAS should be included as well.

    Citation:

    Ng, T.B. and P. G. Shankar. 2010. Effects of Technical Department’s Advice, Quality Assessment Standards, and Client Justification on Auditors’ Propensity to Accept Client-Preferred Accounting Methods. The Accounting Review 85 (5): 1743-1761.

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  • Jennifer M Mueller-Phillips
    Effects of Technical Department’s Advice, Quality A...
    research summary posted March 16, 2015 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.09 Impact of Consultation on Judgments, 11.0 Audit Quality and Quality Control 
    Title:
    Effects of Technical Department’s Advice, Quality Assessment Standards, and Client Justifications on Auditor’s Propensity to Accept Client-Preferred Accounting Methods
    Practical Implications:

    “These findings demonstrate the complementary roles that professional standards and the audit firms’ technical departments play in enhancing the quality of auditor’s decisions, and indicate that the nature of advice matters.” Furthermore, as asserted in its concluding remarks, this study highlights, “the role and limitations of in-house consultation and advice in enhancing auditors’ decisions, and suggests that the nature of advice sought by, and presented to, auditors matters.”

    For more information on this study, please contact Terence Bu-Peow Ng.

    Citation:

    Ng, T.B. and P. G. Shankar. 2010. Effects of Technical Department’s Advice, Quality Assessment Standards, and Client Justification on Auditors’ Propensity to Accept Client-Preferred Accounting Methods. The Accounting Review 85 (5): 1743-1761.

  • Jennifer M Mueller-Phillips
    Group judgment and decision making in auditing: Past and...
    research summary posted February 17, 2016 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.09 Group Decision-Making, 09.0 Auditor Judgment, 09.09 Impact of Consultation on Judgments, 09.11 Auditor judgment in the workpaper review process 
    Title:
    Group judgment and decision making in auditing: Past and future research.
    Practical Implications:

    The insights highlighted in this paper from research on audit groups/teams inform one’s understanding of how best to design group interactions between auditors within the firm and with professionals outside the audit firm, including management, audit committees, and inspectors. These insights are important given the criticism audit firms have faced from regulators and inspectors over the past decade and the multi-person setting present in auditing. Further, while a large literature exists on single-person decision-making, these studies may not generalize to multi-person settings. The review also highlights the need for continued research in this area and the importance audit practitioner involvement with future research efforts.

    Citation:

    Trotman, K., T. Bauer, and K. Humphreys. 2015. Group judgment and decision making in auditing: Past and future research. Accounting, Organizations and Society 47: 56-72.

  • Jennifer M Mueller-Phillips
    How Do Auditors Weight Informal Contrary Advice? The Joint...
    research summary posted September 14, 2015 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.09 Impact of Consultation on Judgments, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Title:
    How Do Auditors Weight Informal Contrary Advice? The Joint Influence of Advisor Social Bond and Advice Justifiability.
    Practical Implications:

    By treating worse justified advice as though it were better justified advice, auditors are likely to overestimate the defensibility of their conclusions that are based on this advice. It also is worrisome that specialists appear to defensively resist well-justified, contrary advice from stronger social bond advisors. In response to a stronger social bond advisor’s better justified advice, specialists assess advisor competence to be higher and they assess the advice itself to be of higher quality, but they assign relatively low weight to the advice. This inconsistency implies that specialists may have difficulty accepting good advice even when they recognize its high quality.

    Citation:

    Kadous, K., J. Leiby, and M. E. Peecher. 2013. How Do Auditors Weight Informal Contrary Advice? The Joint Influence of Advisor Social Bond and Advice Justifiability. Accounting Review 88 (6): 2061-2087.

  • Jennifer M Mueller-Phillips
    If You Want My Advice: Status Motives and Audit...
    research summary posted February 16, 2017 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.01 Use of Specialists e.g., financial instruments, actuaries, valuation, 09.0 Auditor Judgment, 09.09 Impact of Consultation on Judgments 
    Title:
    If You Want My Advice: Status Motives and Audit Consultations About Accounting Estimates
    Practical Implications:

    The finding that higher decision authority can have negative audit quality implications is relevant to audit firm policies, which often vest substantial authority in consultants, and to the ongoing debate over standards for the use of specialists. This and other findings also suggest that it may be beneficial to advocate lower decision authority. Finally, the findings can inform audit firm policies that require consultation with knowledgeable persons, as well as standard-setters and regulators whose responsibilities to provide guidance on using consultation to conduct more effective audits of financial statement estimates. 

    Citation:

    Knechel, W. R. and J. Leiby. 2016. If You Want My Advice: Status Motives and Audit Consultations About Accounting Estimates. Journal of Accounting Research 54 (5): 1331 – 1364. 

  • Jennifer M Mueller-Phillips
    Resolving Audit Engagement Challenges through Communication
    research summary posted September 10, 2013 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.09 Impact of Consultation on Judgments 
    Title:
    Resolving Audit Engagement Challenges through Communication
    Practical Implications:

    This study documents successful resolutions to actual self-identified audit challenges. Auditors can use this information to be proactive in minimizing future audit challenges and resolving any challenges that do arise in a timely manner. Additionally, the list of unresolved challenges can aid firms in making wise client acceptance decisions as unresolved challenges represent potential liability.

    Citation:

    Bobek, D.D., B.E. Daughtery, and R.R. Radtke.  2012.  Resolving Audit Engagement Challenges through Communication.  Auditing: A Journal of Practice and Theory. (31) 4:21–45.

  • Jennifer M Mueller-Phillips
    The Audit of Fair Values and Other Estimates: The Effects of...
    research summary posted November 10, 2014 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.09 Impact of Consultation on Judgments, 09.11 Auditor judgment in the workpaper review process 
    Title:
    The Audit of Fair Values and Other Estimates: The Effects of Underlying Environmental, Task, and Auditor-Specific Factors
    Practical Implications:

    The paper gives practitioners, policy makers, and researchers a framework for considering audit of FVOEs. In considering environmental, task, and auditor-specific factors that individually and interactively affect auditors’ judgments, one may better analyze observed practice deficiencies and contribute to practitioners’ and regulators’ understanding of their likely causes and potential remedies.

    The framework is also valuable in identifying and evaluating the merit of future research topics. Central to the goal of developing research that will improve audits of FVOEs is the deliberate consideration of important interactions among the environmental, task, and person-specific factors involved in the development and audit of FVOEs. Identifying the important interactions among these factors allows researchers to better design studies that evaluate ways to improve the quality of audited FVOEs. Conducting practice-relevant research within the three-factor framework will help researchers, practitioners, and regulators better communicate their perspectives on issues surrounding audits of FVOEs.

    For more information on this study, please contact Gregory E. Sierra.

    Citation:

    Bratten, B., L. M. Gaynor, L. McDaniel, N. R. Montague & G. E. Sierra. 2013. The audit of fair values and other estimates: The effects of underlying environmental, task, and auditor-specific factors. Auditing: A Journal of Practice and Theory 32(Supplement 1): 7-44.

  • Jennifer M Mueller-Phillips
    The Effect of the Strictness of Consultation Requirements on...
    research summary posted October 22, 2013 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 06.0 Risk and Risk Management, Including Fraud Risk, 06.01 Fraud Risk Assessment, 09.0 Auditor Judgment, 09.09 Impact of Consultation on Judgments 
    Title:
    The Effect of the Strictness of Consultation Requirements on Fraud Consultation
    Practical Implications:

    In cases where fraud risks are high or time pressures are severe, auditors are more likely to consult a fraud specialist regarding the presence of fraud indicators when the requirement to do so is mandatory and the advice received is binding.  The authors indicate that a strict requirement is more likely to cause auditor compliance with the policy than a more lenient policy that merely suggests consultation and where the advice from the specialist is nonbinding.  Additionally, the auditors’ perceptions of fraud risks increased when a more strict consultation policy was in place which may indicate that the mere presence of a strict policy increases assessed fraud risks.

    For more information on this study, please contact Anna Gold.
     

    Citation:

    Gold, A., W.R. Knechel, and P. Wallage. 2011.The Effect of the Strictness of Consultation Requirements on Fraud Consultation. The Accounting Review 87 (3): 925-949.

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