Auditing Section Research Summaries Space

A Database of Auditing Research - Building Bridges with Practice

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  • Jennifer M Mueller-Phillips
    Audit team time reporting: An agency theory perspective
    research summary posted October 21, 2015 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.11 Auditor judgment in the workpaper review process, 11.0 Audit Quality and Quality Control, 11.06 Working Paper Review – Conduct, Biases and Predispositions 
    Title:
    Audit team time reporting: An agency theory perspective
    Practical Implications:

    The findings show that managers implicitly encourage auditors to underreport time when dealing with a favorable client. While CPA firms have decreased explicit incentives to underreport, these implicit incentives makes it likely that seniors are underreporting their time. This can lead to unrealistic budgets and possible costing issues for firms. Also, if a senior does not underreport they could risk getting a bad evaluation or not be assigned to desirable future engagements. These situations could lead to a reduction in raises, promotions, and continued employment.

    Citation:

    Agoglia, C. P., R. C. Hatfield, and T. A. Lambert. 2015. Audit team time reporting: An agency theory perspective. Accounting, Organizations and Society 44: 1-14.

  • 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
    Does the Arrangement of Audit Evidence According to Causal...
    research summary posted October 19, 2015 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.11 Auditor judgment in the workpaper review process, 11.0 Audit Quality and Quality Control, 11.06 Working Paper Review – Conduct, Biases and Predispositions 
    Title:
    Does the Arrangement of Audit Evidence According to Causal Connections Make Auditors More Susceptible to Memory Conjunction Errors?
    Practical Implications:

    Evaluating multiple causally arranged evidence sets may precipitate an auditor’s inability to accurately discern the source that pertains to specific information. Susceptibility to source misattributions may cause auditors to inadvertently evoke erroneous client information when rendering memory-based auditing judgments for a client and, therefore, create the potential for impaired judgment quality. Although working papers can serve to curtail informational misattributions, such as those created by MCEs, auditors can become overconfident in the accuracy of their memories and not thoroughly reexamine the working papers for verification. Subsequent to rendering an auditing decision, auditors concurrently working on multiple clients should consider reducing reliance on memory and tailoring working paper review to ensure the relationship between a decision for a certain client and its evidence.

    Citation:

    Grossman, A. M., and R. B. Welker. 2011. Does the Arrangement of Audit Evidence According to Causal Connections Make Auditors More Susceptible to Memory Conjunction Errors? Behavioral Research in Accounting 23 (2): 93-115.

  • Jennifer M Mueller-Phillips
    How Audit Reviewers Respond to an Audit Preparer's...
    research summary posted July 23, 2015 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.11 Auditor judgment in the workpaper review process 
    Title:
    How Audit Reviewers Respond to an Audit Preparer's Affective Bias: The Ironic Rebound Effect.
    Practical Implications:

    These findings extend the audit review process literature by highlighting that reviewers might not always mitigate biases in preparers’ judgments, particularly in cases where they cannot readily determine how much the bias influenced the preparer’s judgment. Reviewers may be inappropriately influenced by the preparer’s judgment. Audit firms should be interested in these findings because they view the review process as a key quality control mechanism. If reviewers rely too heavily on a preparer’s biased judgment, then they inadvertently increase the firm’s audit risk. Identifying this potential limitation of the review process is a necessary first step in helping reviewers respond more appropriately when they believe it is likely that a preparer’s judgment is biased.

    Citation:

    Frank, M. L., & Hoffman, V. B. 2015. How Audit Reviewers Respond to an Audit Preparer's Affective Bias: The Ironic Rebound Effect. Accounting Review 90 (2): 559-577.

  • Jennifer M Mueller-Phillips
    The Auditors’ Approach to Subsequent Events: Insights from t...
    research summary posted February 19, 2015 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.11 Auditor judgment in the workpaper review process, 11.0 Audit Quality and Quality Control, 11.09 Evaluation of Evidence 
    Title:
    The Auditors’ Approach to Subsequent Events: Insights from the Academic Literature
    Practical Implications:

    A concern noted by the authors is the inherent complexity associated with the search for and evaluation of SEs arising from the seemingly boundless universe of potential SEs and the continuous nature of the search. Auditors’ SE procedures may be more effective if the universe of SE possibilities was better understood. One way to understand this universe is to identify undiscovered or incorrectly resolved SEs. Doing this might make these issues more salient to auditors and mitigate judgment biases in the search and evaluation of SEs. Further, auditors would be better equipped to consider potential SEs earlier in the audit if the consideration of potential SEs were incorporated into the risk assessment process during audit planning. This ensures that SE risks are given more detailed attention in the audit program.

    For more information on this study, please contact Janne Chung.

    Citation:

    Chung, J. O. Y., C. Cullinan, M. Frank, J. Long, J. Mueller, and D. O’Reilly. 2013. The Auditors’ Approach to Subsequent Events: Insights from the Academic Literature. Auditing: A Journal of Practice and Theory 32 (Supplement 1): 167-207.

  • 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.

  • The Auditing Section
    The effects of feedback type on auditor judgment performance...
    research summary posted May 3, 2012 by The Auditing Section, tagged 09.0 Auditor Judgment, 09.11 Auditor judgment in the workpaper review process, 10.0 Engagement Management, 10.03 Interaction among Team Members 
    Title:
    The effects of feedback type on auditor judgment performance for configural and non-configural tasks
    Practical Implications:

    The results of this study indicate management should consider the level of task complexity before determining the best form of feedback to provide a staff member.  For simple tasks, it may be effective to merely provide staff with the correct answer.  However, for more complex tasks, it would be beneficial to provide staff with an explanation of the decision-making process in addition to the correct answer for that task.  The study also suggests that it could be beneficial to provide staff with insight into their own decision making process for complex tasks, particularly when they have low-levels of self-insight.  Thus, the results can directly inform the protocol of a firm’s workpaper review process.  This feedback could ultimately improve auditors’ subsequent decisions in audit tasks, which would improve audit quality.

    Citation:

    Leung, P. W. and K. T. Trotman. 2005. The effects of feedback type on auditor judgment performance for configural and non-configural tasks. Accounting, Organizations and Society 30 (6): 537-553.

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  • The Auditing Section
    The Effect of Alternative Types of Review on Auditors’ P...
    research summary posted May 2, 2012 by The Auditing Section, tagged 09.0 Auditor Judgment, 09.02 Documentation Specificity, 09.11 Auditor judgment in the workpaper review process, 11.0 Audit Quality and Quality Control, 11.06 Working Paper Review – Conduct, Biases and Predispositions 
    Title:
    The Effect of Alternative Types of Review on Auditors’ Procedures and Performance
    Practical Implications:

    The results of this study are important for audit firms to consider when designing their audit review process.  Though the initial reason for using interactive review was to increase efficiency and enhance training, the results of this study show that the use of interactive review can potentially increase audit effectiveness.  The anticipation of an interactive review enhanced auditors’ efforts toward more cognitively demanding, conclusion-oriented audit procedures.  At the same time, the type of review anticipated had no effect on the performance of the mechanical steps in the audit program (both groups performed well in the mechanical, documentation-oriented audit steps).

    Citation:

    Payne, E. A., R. J. Ramsay, and E. M. Bamber. 2010.  The Effect of Alternative Types of Review on Auditors’ Procedures and Performance.  Auditing: A Journal of Practice & Theory 29 (1): 207-220.

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  • The Auditing Section
    The Effects of a Supervisor’s Active Intervention in S...
    research summary posted May 7, 2012 by The Auditing Section, tagged 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind, 09.11 Auditor judgment in the workpaper review process, 11.0 Audit Quality and Quality Control, 11.01 Supervision and Review – Effectiveness 
    Title:
    The Effects of a Supervisor’s Active Intervention in Subordinates’ Judgments, Directional Goals, and Perceived Technical Knowledge Advantage on Audit Team Judgments
    Practical Implications:

    This study suggest that supervisors can not only influence their subordinates’ judgment by intervening in subordinates’ judgment process(es), but can also increase their own biases by intervening. In doing so, their increased biases impact the final decisions regarding the audit testwork. Findings suggest that auditors are not aware of this increase in supervisors’ biases, and, thus are not consciously taking steps to mitigate this effect (e.g., avoiding early interventions). Authors suggest training or policy changes that could lower the risk of additional bias. This could be done by making auditors aware of consequences of intervening in subordinates’ judgments. Policies and/or planning could take additional steps to reduce the amount of superiors’ early interventions as much as possible.

    Citation:

    Peecher, M. E., Piercey, M. D., Rich, J. S., and R. M. Tubbs. 2010. The Effects of a Supervisor’s Active Intervention in Subordinates’ Judgments, Directional Goals, and Perceived Technical Knowledge Advantage on Audit Team Judgments. The Accounting Review 85 (5):  1763-1786. 

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  • The Auditing Section
    The Effects of Audit Review Format on Review Team Judgments
    research summary posted April 23, 2012 by The Auditing Section, tagged 09.0 Auditor Judgment, 09.11 Auditor judgment in the workpaper review process, 11.0 Audit Quality and Quality Control, 11.01 Supervision and Review – Effectiveness, 11.06 Working Paper Review – Conduct, Biases and Predispositions 
    Title:
    The Effects of Audit Review Format on Review Team Judgments
    Practical Implications:

    The results of this study are important for audit firms to consider when planning how workpaper reviews will be performed, when setting preparers’ review expectations and when reviewing electronic workpapers.  Though the paper does not discuss these implications explicitly, the findings point to the following potential implications auditors may consider:

    • Anticipation of face-to-face review by preparers tends to result in workpapers of higher quality.
    • Face-to-face reviews tend to be of higher quality than electronic reviews.
    • Workpapers prepared in anticipation of an electronic review tend to be lower in quality than the workpapers prepared in anticipation of a face-to-face review.  Thus, electronic reviewers may consider decreasing their reliance on such workpapers, spending more time reviewing the workpapers, providing more review notes, and/or increasing the amount of rework they require from the preparers.
    Citation:

    Agoglia, C.P., R. C. Hatfield, and J. F. Brazel. 2009. The Effects of Audit Review Format on Review Team Judgments. Auditing: A Journal of Practice and Theory 28(1):95-111.

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