Auditing Section Research Summaries Space

A Database of Auditing Research - Building Bridges with Practice

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  • The Auditing Section
    Development of a Scale to Measure Professional Skepticism
    research summary posted May 2, 2012 by The Auditing Section, tagged 08.0 Auditing Procedures – Nature, Timing and Extent, 08.04 Auditors’ Professional Skepticism, 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Title:
    Development of a Scale to Measure Professional Skepticism
    Practical Implications:

    This study provides accounting firms with the first instrument theoretically designed to measure professional skepticism in auditors.  Objective measures of professional skepticism may be helpful to firms looking to increase audit efficiency or effectiveness, specifically in critical areas such as hypothesis generation, risk identification and fraud detection.

    Citation:

    Hurtt, R. K. (2010). Development of a Scale to Measure Professional Skepticism. Auditing: A Journal of Practice & Theory 29(1): 149-171.

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  • The Auditing Section
    Do Effects of Client Preference on Accounting...
    research summary posted May 7, 2012 by The Auditing Section, tagged 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind, 11.0 Audit Quality and Quality Control, 11.03 Management/Staff Interaction, 11.09 Evaluation of Evidence 
    Title:
    Do Effects of Client Preference on Accounting Professionals’ Information Search and Subsequent Judgments Persist with High Practice Risk?
    Practical Implications:

    The results of this study should be of interest to audit firms, management, and regulators because high-practice-risk appears to reduce bias in accounting professionals’ judgment and decision-making. The authors’ discussion suggests that similar effects may result from the recent increase in regulatory scrutiny and penalties for aggressive accounting judgments. However, more research is needed in this area. This study also is relevant to companies who must comply with FIN No. 48. Managers certifying the accuracy of the financial statements and their external auditors will want to ensure that tax professionals make unbiased judgments about supportability.

    Citation:

    Kadous, K., A.M. Magro, B.C. Spilker.  2008. Do Effects of Client Preference on Accounting Professionals’ Information Search and Subsequent Judgments Persist with High Practice Risk? The Accounting Review 83 (1): 133-156

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  • The Auditing Section
    Exploring Trust and the Auditor-Client Relationship: Factors...
    research summary posted May 3, 2012 by The Auditing Section, tagged 08.0 Auditing Procedures – Nature, Timing and Extent, 08.04 Auditors’ Professional Skepticism, 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind, 10.0 Engagement Management, 10.04 Interactions with Client Management 
    Title:
    Exploring Trust and the Auditor-Client Relationship: Factors Influencing the Auditor’s Trust of a Client Representative
    Practical Implications:

    The findings provide evidence that auditors do hold a level of trust in client representatives and that the level of trust is associated with commonplace behaviors of client representative that attract trust.  The results of this study are important to make auditors and auditing standards setters aware of factors that may lead to greater auditor trust of client management and perhaps consider whether there may be a potential for excessive trust to overwhelm the auditor’s professional skepticism. Note that the study was unable to determine whether the levels of trust that the auditors had for the client were such that auditor judgment would be compromised.

    Citation:

    Rennie, M. D., L. S. Kopp, and W. M. Lemon. 2010. Exploring Trust and the Auditor-Client Relationship: Factors Influencing the Auditor’s Trust of a Client Representative. Auditing: A Journal of Practice and Theory 29 (1): 279-293

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  • Jennifer M Mueller-Phillips
    Fear and Risk in the Audit Process
    research summary posted November 24, 2014 by Jennifer M Mueller-Phillips, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.05 Assessing Risk of Material Misstatement, 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind, 11.0 Audit Quality and Quality Control, 11.03 Management/Staff Interaction 
    Title:
    Fear and Risk in the Audit Process
    Practical Implications:

    Our analysis of fear helps better understand the relationship between comfort, confidence and fear in the audit process from the perspective of risk. On one hand, it suggests that confidence (self-confidence, confidence in work instrument and confidence in colleagues) without fear is a risky cocktail for auditors, who will not be sufficiently vigilant in carrying out their mission. On the other hand, it shows that fear without confidence is also a dangerous combination, which may induce auditors to maintain at a distance (and thus ignore) the inherent risks of their responsibilities. Ultimately, a sense of fear curbed by confidence and a sense of confidence tempered by fear is what enables public accountants to develop their ‘practical intelligence’, and thus to become comfortable without overlooking the risks of their job. Accordingly, the main implication which falls out of our study is the necessity for audit firms and audit regulators to create the conditions for the development among auditors of the right mix of fear and confidence.

    For more information on this study, please contact Henri Guénin-Paracini.

    Citation:

    Guénin-Paracini, H., Malsch B. and A. Paillé-Marché. 2014. Fear and risk in the audit process. Accounting, Organizations and Society 39 (4): 264-288

  • 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
    How Partners’ Views Influence Auditor Judgment
    research summary posted September 10, 2013 by Jennifer M Mueller-Phillips, tagged 04.0 Independence and Ethics, 04.09 Individual & Team Conduct - e.g., premature signoff, underreporting hours, 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind, 10.0 Engagement Management, 10.03 Interaction among Team Members 
    Title:
    How Partners’ Views Influence Auditor Judgment
    Practical Implications:

    While the audit partner is ultimately responsible, an audit opinion relies upon the work and judgments of numerous auditors at different levels throughout the firm (NYSSCPA 2009). Therefore, it is important that audit teams have access to independent judgments of individual auditors throughout the audit process. However, the authors’ findings provide evidence that “knowledge of superiors’ views biases auditors’ reports of their prior independent judgments, potentially inhibiting discussion and resolution of contrary views.”

    Whether judgment subordination is intentional or attributable to unconscious biases is not clear from the study. However, it is clear that it is insufficient for an auditor simply to formulate an opinion prior to hearing that of a superior. Rather, auditors should formulate and document their opinions prior to consulting with superiors and colleagues.

     

    It is not clear from this study whether the behavior described is prevalent among audit managers. It is possible that experience mitigates the likelihood of auditors to rely upon superior’s opinions. In addition, the judgment task involved a conservative alternative; it is possible that the effect will diminish when the partner’s opinion represents a less conservative alternative. 

    Citation:

    Peytcheva, M. and P.R. Gillett. 2011. How Partners’ Views Influence Auditor Judgment. Auditing: A Journal of Practice & Theory 30 (4): 285-301.

  • The Auditing Section
    Identity Narratives Under Threat: A Study of Former Members...
    research summary posted May 4, 2012 by The Auditing Section, tagged 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Title:
    Identity Narratives Under Threat: A Study of Former Members of Arthur Andersen
    Practical Implications:

    Relying exclusively on official statements and documents may prevent one from accessing backstage behavior and representations. 
    In private interviews people may disclose information that differs from the formal representations they appear to support in more formal environments.

    Citation:

    Gendron, Y. and L. F. Spira. 2010. Identity narratives under threat: A study of former members of Arthur Andersen. Accounting, Organizations and Society 35: 275-300.

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  • The Auditing Section
    Improving Assessments of Another Auditor’s Competence
    research summary posted April 23, 2012 by The Auditing Section, tagged 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Title:
    Improving Assessments of Another Auditor’s Competence
    Practical Implications:

    The results of this study are important for auditors to consider when assessing others and when deciding what audit actions to take based on those assessments.  The results are also important for audit firms when considering what types of performance feedback to provide related to assessments of other auditors.  The evidence indicates that auditors use multiple anchors when assessing others. 
    Furthermore, it indicates that familiarity affects the anchors used by auditors in various assessment.  The study suggests that providing auditors with feedback on the accuracy of their assessments can increase performance, but only when the feedback type is appropriate to the level of familiarity between the auditor and the assessee.

    Citation:

    Harding, N. and K.T. Trotman. 2009. Improving Assessments of Another Auditor’s Competence. Auditing: A Journal of Practice and Theory 28 (1): 53-78.

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  • The Auditing Section
    Judgment and Decision Making Research in Auditing: A Task,...1
    research summary posted April 13, 2012 by The Auditing Section, tagged 09.0 Auditor Judgment, 09.01 Audit Scope and Materiality Judgments, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Title:
    Judgment and Decision Making Research in Auditing: A Task, Person, and Interpersonal Interaction Perspective
    Practical Implications:

    The last 25 years has been an exciting and very productive period for judgment and decision making research in auditing.  The author of the discussion believes this review study will help stimulate important audit judgment and decision making research.  This line of
    research is important because it has potential to make important contributis to the audit practice.

    Citation:

    Nelson, M.W. and H. Tan. 2005. Judgment and Decision Making Research in Auditing: A Task, Person, and Interpersonal Perspective. Auditing: A Journal of Practice & Theory 24 (Supplement): 41-71.

    Trotman, K. T. 2005. Discussion of Judgment and Decision Making Research in Auditing: A Task, Person, and Interpersonal Perspective. Auditing: A Journal of Practice & Theory 24 (Supplement): 73-87.

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  • Jennifer M Mueller-Phillips
    Measuring Reflective Cognitive Capacity: A Methodological...
    research summary posted July 20, 2015 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Title:
    Measuring Reflective Cognitive Capacity: A Methodological Recommendation for Accounting Research of Feedback Effects.
    Practical Implications:


    The primary finding from the study is that average effects can mask real differences in participants’ cognitive capacity. Thus, the fundamental issue is not whether reflective cognitive capacity is malleable. Rather, the issue is this: can participants whose thinking dispositions predispose them to avoid being reflectiveto avoid reevaluating their initial responses and subsequently consider alternative theories (rules)enhance their ability to engage in reflective thinking? Future accounting behavioral research, especially studies that provide participants with feedback and an opportunity to learn, should include measures of reflective cognitive capacity (either the Need for Cognition scale or the Cognitive Reflection Test) in order to improve explained variance and more rigorously test techniques used to train accounting professionals. 

    Citation:

    Viator, R. E., Bagley, P. L., Barnes, B. G., & Harp, N. L. 2014. Measuring Reflective Cognitive Capacity: A Methodological Recommendation for Accounting Research of Feedback Effects. Behavioral Research In Accounting 26 (2): 131-160.

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