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  • Jennifer M Mueller-Phillips
    Productivity Growth in the Public Accounting Industry: The...
    research summary posted October 15, 2013 by Jennifer M Mueller-Phillips, tagged 04.0 Independence and Ethics, 04.03 Non-Audit Services, 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale, 05.05 Diversity of Skill Sets e.g., Tenure and Experience, 08.0 Auditing Procedures – Nature, Timing and Extent, 08.09 Impact of Technology on Audit Procedures 
    Title:
    Productivity Growth in the Public Accounting Industry: The Roles of Information Technology and Human Capital
    Practical Implications:

    Given the positive effects that human capital and IT accumulation had on productivity growth, the findings of this study imply that firms seeking to improve their revenues per employee could do so by investing in more IT and human capital. The potential effects of these investments on audit quality could be beneficial when determining the level of investment to make. However, firms should keep in mind the possibility of diminishing results once a certain level of IT and human capital is accumulated. This study also has implications for the debate in the United States surrounding the Sarbanes- Oxley Act which prohibits certain non-audit services by public accounting firms. The debate stem from a concern of the effects of non-audit services on independence but this study displays the benefits that could arise if non-audit services were allowed.

    For more information on this study, please contact Hsihui Chang.
     

    Citation:

    Chang, H., J. Chen, R. Duh, and S. Li. 2011. Productivity growth in the public accounting industry: the roles of information technology and human capital. Auditing: A Journal of Practice and Theory 30 (1): 21-48.

    Keywords:
    productivity growth; efficiency change; technical progress; IT capital accumulation; human capital accumulation; Big 4; non-audit services.
    Purpose of the Study:

    The audit industry has changed dramatically over the last two decades. These changes have brought on increased competition among firms which has created immense pressure for audit firms to minimize their costs while maximizing productivity. For many public accounting firms, the way to manage productivity growth and enhance service delivery came in the form of investments in information technology and human capital. Investments in information technology can increase productivity through automation of routine auditing tasks, improvements in audit team collaboration and communication, as well as through an increased level of experience with information systems which can improve auditor performance in engagements to help clients integrate their company information systems. High quality human capital, which is usually indicated through education levels and work experience and results in both technical and tacit knowledge, contributes to the productivity growth of a firm through higher quality services for clients.

    This study breaks down human capital and information technology (IT) into four drivers of productivity growth among public accounting firms; efficiency change, technical progress, IT capital accumulation, and human capital accumulation. The authors assessed both the simultaneous effects of human capital and IT as well as the individual contributions of the four distinct components of these factors on productivity growth. Some firms also chose to boost productivity through engaging in more non- audit services. Although most studies focus on the effects that non-audit services have on auditor independence, this study focuses on how non- audit services can contribute to productivity growth.
     

    Design/Method/ Approach:

    The authors analyzed data on revenues, employees, IT expenditures, and human capital for a sample of public accounting firms in Taiwan from 1993 to 2003. The data was obtained from the Annual Survey of Accounting Firms in Taiwan published by the Department of Statistic of Taiwan’s Ministry of Finance. The authors chose Taiwan as a proper setting for this study because its publications included more advantageous data than that of the United States published in Accounting Today’s annual surveys.

    Findings:
    • Public accounting firms experienced growth in productivity, specifically, labor productivity evidenced through revenue per employee. 
    • This growth, in order of least contribution to greatest contribution, resulted from efficiency improvement, technical progress, human capital accumulation, and IT capital accumulation. Thus, the primary drivers were human capital and IT accumulation.
    • There was a significant difference in productivity growth between Big 4 and non- Big 4 firms. This difference was primarily attributable to greater technical progress and IT capital accumulation among the Big 4. Additionally, there was no difference in human capital accumulation between Big 4 and non- Big 4 firms.
    • Although the advance of technology provides all accounting firms with opportunities to improve productivity, not all firms exploit these opportunities equally. The Big 4 invested more heavily in IT systems and were rewarded with higher productivity growth.
    • Firms with a greater growth in non-audit services had higher productivity than other firms because they accumulated higher IT and human capital over the sample period.
    • Early movers into non-audit services tended to have higher changes in IT capital accumulation.
    • Both early moving firms into non-audit services and firms that emphasized growth in non-audit services presented a direct relationship with productivity growth higher than that of firms which focused on traditional audit services.
       
    Category:
    Audit Team Composition, Auditing Procedures - Nature - Timing and Extent, Internal Control
    Sub-category:
    Diversity of Skill Sets (e.g. Tenure & Experience), Impact of Technology on Audit Procedures Confirmation – Process and Evaluation of Responses, Non-audit Services, Staff Hiring - Turnover & Morale
  • Jennifer M Mueller-Phillips
    The Auditor-Audit Firm Relationship and Its Effect on...
    research summary posted September 17, 2013 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale 
    Title:
    The Auditor-Audit Firm Relationship and Its Effect on Burnout and Turnover Intention
    Practical Implications:

    Turnover and burnout represent real costs to accounting firms. This study, however, highlights several steps that can be taken to reduce these costs. When making decisions, firms should (1) solicit employee input in decision making, (2) ensure that appropriate criteria are used and applied consistently across employees, and (3) provide explanations for why decisions are made.

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

    Citation:

    Herda, D. N. and Lavelle, J. J. 2012. The Auditor-Audit Firm Relationship and Its Effect on Burnout and Turnover Intention. Accounting Horizons 26 (4): 707-723.

    Keywords:
    burnout; emotional exhaustion; turnover; commitment; fairness
    Purpose of the Study:

    This study was conducted to determine the nature of the relationship between perceived firm fairness and employee burnout.

    Design/Method/ Approach:

    From May to June of 2011 the authors had 204 auditors from 2 accounting firms, a large national firm and a large regional firm, fill out anonymous surveys related to perceived firm fairness and burnout.

    Findings:

    The authors make the following conclusions based on the study:

    • Perceived Firm Fairness relates positively to firm support and negatively related to burnout and turnover intention
    • Firm support relates positively to firm commitment
    • Firm commitment relates negatively to burnout and turnover intention
    • Burnout relates positively to turnover intention
       
    Category:
    Audit Team Composition
    Sub-category:
    Staff Hiring - Turnover & Morale
  • Jennifer M Mueller-Phillips
    The Influence of Mood on Subordinates’ Ability to Resist C...
    research summary posted August 30, 2016 by Jennifer M Mueller-Phillips, tagged 04.0 Independence and Ethics, 04.04 Moral Development and Individual Ethics Decisions, 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale, 11.0 Audit Quality and Quality Control, 11.03 Management/Staff Interaction 
    Title:
    The Influence of Mood on Subordinates’ Ability to Resist Coercive Pressure in Public Accounting
    Practical Implications:

     This study should give pause to investors, auditors and regulators about the potential willingness of subordinate auditors to acquiesce to a superior’s unethical request. As such, the accounting profession should make sure to have a better understanding of the nature of and solutions to the problem such as changes in firm/team culture, personnel placement, etc. Additionally, audit firms can better use this information to understand which employees may be most susceptible to such negative influence and preempt such events.

    Citation:

     Johnson, E. N., D. J. Lowe, and P. M. Reckers. 2016. The Influence of Mood on Subordinates’ Ability to Resist Coercive Pressure in Public Accounting. Contemporary Accounting Review 33 (1): 261-287.

    Keywords:
    Affect, Mood States, Unethical Acts, Obedience Pressure, Superior-Subordinate Relationships
    Purpose of the Study:

    This study examines the relationship between subordinate auditors’ various affective states (i.e. mood/emotion) and their effect on auditors’ willingness to comply with a superiors’ unethical directive in six common auditing scenarios.  The authors also employ more real-world event triggers and scenarios compared with previous research.  This study seeks to better refine and test the broad constructs of mood used in previous research.

    Design/Method/ Approach:

    Sample: 118 audit seniors from two large international public accounting firms

    Experiment: Create a broad distribution of arousal, fear and insignificance among participants by manipulating two aspects of the audit client CEO (high/low dominance and high/low prestige) and one aspect of the auditor (above/below average work-life history).

    Analyses: 2x2x2 between subjects ANOVA using median splits on each measured variable: fear, insignificance and arousal

    Findings:

    Regardless of affective state manipulations, the audit seniors express a high level of willingness to comply with a superiors’ unethical direction.  However, this willingness to comply is increased when auditors are made to feel more insignificant (i.e. weak/low power position relative to others) and fearful (i.e. elevated uncertainty and lower perceptions of control regarding future events and circumstances) but decreased when auditors are in an active, positive mood state (i.e. arousal).  Interestingly, these results obtain despite significant doubt by the firms’ senior management who reviewed the task that any of their subordinates would express willingness to engage in such behavior.  As such, auditors may be more willing to engage in or overlook unethical behavior than previously thought.  

    Category:
    Audit Quality & Quality Control, Audit Team Composition, Independence & Ethics
    Sub-category:
    Management/Staff Interaction, Moral Development and Individual Ethics Decisions, Staff Hiring - Turnover & Morale
  • Jennifer M Mueller-Phillips
    The Integration of Women and Minorities into the Auditing...
    research summary posted November 17, 2014 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale 
    Title:
    The Integration of Women and Minorities into the Auditing Profession since the Civil Rights Period
    Practical Implications:

    The auditing profession has been at least as successful as other comparable professions at integrating women and members of most minority groups. However, despite relatively good pay for black workers in auditing, blacks have been persistently underrepresented among auditors. Some have proposed that the underrepresentation of black workers in the auditing profession has been caused by a shortage of qualified black applicants as a result of either a lack interest in perusing accounting degrees among black students choosing college majors or low graduation rates among black students pursuing accounting degrees. The evidence in this study is inconsistent with these claims and suggests that black underrepresentation in the auditing profession can be traced to the time at which college graduates with accounting degrees take their first jobs. The findings are insufficient to confidently identify the cause of black underrepresentation in the auditing profession, but they suggest that the efforts of the auditing profession to attract black workers are likely to be most fruitful if they focus on identifying why relatively abundant black college graduates holding accounting degrees are not entering the auditing profession, and how this pattern can be reversed. 

    Citation:

    Madsen, P. E. 2013. The integration of women and minorities into the auditing profession since the civil rights period. The Accounting Review 88 (6): 2145-2177. 

    Keywords:
    occupational diversity; occupational integration; Current Population Survey; National Survey of College Graduates; Higher Education Research Institute Freshman Survey.
    Purpose of the Study:

    Following the Civil Rights Movement and the ‘‘quiet revolution’’ in women’s work over the years from 1950 to 1970, women and minorities increasingly joined the auditing profession while the profession ramped up efforts to encourage integration. The purpose of this study is to rigorously examine how the integration of auditors has evolved since the civil rights and quiet revolution period to inform policymakers in the auditing profession about the status of the profession’s integration efforts and to explore how resources devoted to increasing the integration of the profession might be most effectively used. The study examines the representation of women and minorities at three stages along the pipeline supplying new auditors: as they enter college, as they graduate from college, and as they enter the workforce. The primary distinctive feature of this study is that it evaluates the auditing profession’s integration by comparing it to samples of occupations similar to auditing for the purpose of isolating auditing-specific forces influencing integration.

    Design/Method/ Approach:

    The study’s main tests use survey data collected from random samples of individuals in the United States each year from 1968 to 2010. Data for supplementary tests come from surveys of random samples of incoming college freshmen conducted each year from 1971-1999 and college graduates conducted in 1993 and 2003.

    Findings:
    • Replicating prior work, the study finds that female and minority workers across the entire labor force are paid poorly relative to men and non-minorities even after controlling for a number of worker characteristics.
    • However, pay for women and minorities working as auditors is not significantly different from pay for men and non-minorities working as auditors.
    • Poor pay in the labor market generally speaking, combined with equal pay in auditing, means that women and minorities might be expected to enter the auditing profession at high rates to take advantage of the better pay available to them in the auditing profession. The study examines the representation of women and minorities in the auditing profession by comparing it against other similar professions. It finds that, relative to similar professions, women, Hispanics, and misc. minorities are well represented in the auditing profession as might be expected given the relatively high pay. However, black workers have been persistently underrepresented in the auditing profession. This is an anomaly given that black workers receive relatively high pay in the auditing profession.
    • The study includes supplemental analyses to examine potential explanations for the underrepresentation of black workers in the auditing profession. It finds that the accounting major is popular among black college freshman, ranking ahead of more than 80% of other college majors in terms of black representation. Black college graduates also received accounting degrees at relatively high rates, ranking ahead of more than 58% of other college majors in terms of black representation. However, black accounting graduates enter the auditing profession at disproportionately low rates, making up fewer than 34% of auditors under 31 years old. 
    Category:
    Audit Team Composition
    Sub-category:
    Staff Hiring - Turnover & Morale
  • Jennifer M Mueller-Phillips
    The Joint Effect of Unfavorable Supervisory Feedback...
    research summary posted November 15, 2016 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale 
    Title:
    The Joint Effect of Unfavorable Supervisory Feedback Environments and External Mentoring on Job Attitudes and Job Outcomes in the Public Accounting Profession
    Practical Implications:

    This study demonstrates that public accounting mentors can provide an important organizational control mechanism, counseling and protecting protégés who experience unfavorable SFEs. The results of the study also suggest that public accounting mentorship training programs should communicate to potential mentors this critical organizational function. 

    Citation:

    Dalton, D. W., A. B. Davis, and R. E. Viator. 2015. The Joint Effect of Unfavorable Supervisory Feedback Environments and External Mentoring on Job Attitudes and Job Outcomes in the Public Accounting Profession. Behavioral Research in Accounting 27 (2): 53-76.

    Keywords:
    supervisor feedback environment, mentoring, job satisfaction, organizational commitment, role clarity, and turnover intentions.
    Purpose of the Study:

    The supervisory feedback environment (SFE) refers to the manner in which supervisory feedback is delivered, processed, and used on a daily basis. Favorable SFEs are helpful, consistent, and tactful, whereas unfavorable SFEs are unhelpful, inconsistent, and often inconsiderate. Preexisting literature establishes the predictable result that unfavorable SFEs have adverse effects on subordinate outcomes, including lower levels of job satisfaction, organizational commitment, and higher turnover intentions. The fundamental question addressed in this study, however, is whether public accounting mentoring support, which is external to the supervisor-subordinate relationship, can attenuate the predictable adverse effects of unfavorable SFEs. Examining the potential moderating effect of having a mentor out of the supervisor-subordinate relationship is important given the negative effects associated with unfavorable SFEs, specifically if support from external mentors diminishes protégés’ elevated stress levels leading to a diminishment in negative job outcomes attributable to unfavorable SFEs. 

    Design/Method/ Approach:

    The authors conducted a survey of public accounting professionals. 

    Findings:
    • The authors find that unfavorable SFEs are associated with lower levels of role clarity and job satisfaction, which, in turn, lead to lower organizational commitment and higher turnover intention.
    • The authors find that external mentoring moderates the negative effects of unfavorable SFEs on both role clarity and job satisfaction. In other words, the negative effects of unfavorable SFEs on both role clarity and job satisfaction are lower for employees who receive higher levels of support from external mentors. 
    Category:
    Audit Team Composition
    Sub-category:
    Staff Hiring - Turnover & Morale
  • Jennifer M Mueller-Phillips
    The O*NET: A Challenging, Useful Resource for Investigating...
    research summary posted November 17, 2014 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale, 11.0 Audit Quality and Quality Control, 11.05 Training and General Experience 
    Title:
    The O*NET: A Challenging, Useful Resource for Investigating Auditing and Accounting Work
    Practical Implications:

    By exploring the O*NET database, the authors discover its potential professional accounting applications. Because of its extensive listing of required occupational skills and knowledge, the O*NET provides a useful starting point for writing accounting job descriptions. The O*NET’s focus on entry-level positions makes it an important resource for recruiting accounting professionals. Its data can help structure and clarify the recruiting process by helping to build descriptions of required knowledge, ability and skills and required competencies. Data can also contribute to designing compensation and performance evaluation systems by defining the required knowledge, skill and abilities required for accounting positions, and, in determining appropriate compensation. Existing or proposed accounting positions can be assessed, i.e., benchmarked, against the standardized O*NET occupational categories of accounting work, as a means of determining their minimal requirements, organizational rank, or compensation.

    For more information on this study, please contact Dan N. Stone.

    Citation:

    Scarlata, A. N., D. N. Stone, K. T. Jones, and C. C. Chen. 2011. The O*NET: A Challenging, Useful Resource for Investigating Auditing and Accounting Work. Accounting Horizons. 25 (4): 781-809

    Keywords:
    auditor employment, entrants, occupations, professional accountancy, recruiting
    Purpose of the Study:

    This paper introduces a data resource, the O*NET, that partially fills the need for a publicly available database that is relevant to investigating accounting and auditing work. The O*NET is a unique occupational data resource regarding U.S. worker attributes, attitudes, knowledge and skill, and job characteristics.  The O*NET was released in 1998, with subsequent annual updates. It provides detailed occupational information from multiple sources both within and outside each profession. Unfortunately, the O*NET is an underused resource, potentially due to complexity and user “unfriendliness”. The authors describe the database and share potential applications for professional accountants and academic researchers.

    Design/Method/ Approach:

    The Occupational Information Network database (O*NET), a publicly available employment and occupation resource created and maintained by the U.S. Department of Labor, contains considerable relevant data on accountants’ and auditors’ work and employment. The authors explore data from the O*NET database (Version 15.0, released in June 2010), which includes about 1,100 occupations. They consider the history, organization and validity of the O*NET, as well as its potential value in non-accounting, professional accounting, and scholarly accounting applications. 

    Findings:
    • The O*NET provides an important publicly available, longitudinal and cross-sectional resource for investigating accountancy employment and work. 
    • The content model, around which the O*NET is organized, includes six “domains” or categories of data, each of which identifies a related set of activities and characteristics of workers and occupations. Data is in the following domains: 1) Worker characteristics, 2) Worker requirements, 3) Experience Requirements, 4) Workforce Characteristics, and 5) Occupation-Specific Information.
    • Data is collected and updated annually from multiple sources including job analysts, surveys of employers and employees, and labor economists’ employment projections.
    • Users of the O*NET include scholars, state employment agencies, employers, career counselors and job seekers.
    • The O*NET provides research opportunities for both accounting professionals and academics.
    • The limitations of the O*NET include overly broad categories of accounting work, issues related to biases and construct validity, and poor organization and unfriendly interface. 
    Category:
    Audit Quality & Quality Control, Audit Team Composition
    Sub-category:
    Staff Hiring - Turnover & Morale, Sustainability ServicesTraining & General Experience
  • Jennifer M Mueller-Phillips
    “When You Make Manager, We Put A Big Mountain In Front Of Y...
    research summary posted October 31, 2013 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale, 10.0 Engagement Management, 10.03 Interaction among Team Members, 10.04 Interactions with Client Management 
    Title:
    “When You Make Manager, We Put A Big Mountain In Front Of You”: An Ethnography Of Managers In A Big 4 Accounting Firm
    Practical Implications:

    This study points out the paradox that managers find themselves in as they struggle to manage relationships with staff, partners, and clients while simultaneously engaging in non-client productive activities in order to gain notoriety in the firm and impress the partners. The “mountain” referred to in the title of this article represents the different and unpredictable obstacles that managers must overcome in order to reach the other side of their career; partnership.

    For more information on this study, please contact Martin Kornberger.
     

    Citation:

    Kornberger, M., L. Justensen, and J. Mourtsen.2011. When you make manager, we put a big mountain in front of you: an ethnography of managers in a big 4 accounting firm. Accounting, Organizations and Society 36 (8): 514-533.

    Purpose of the Study:

    The “missing link” between trainee accountants and their senior employees, i.e. partners is the manager. This article suggests that becoming a manager is a rite of passage with two main effects:

    • Destabilization of the manager’s previous identity.
    • Shaping of the new identity as a manager through a set of new practices.

    The authors address the important, yet under-researched, role of the manager through an ethnographic analysis of their fundamental transition from junior trainees to potential partners in the context of a Big 4 Firm. This analysis outlines how managers in a complex network balance being an efficient client manager while also being a good team and time manager; additionally, how managers generate visibility to develop a “fame agenda” is addressed.

    Design/Method/ Approach:

    The authors collaborated with a Big 4 Firm to gather the data.  The data consisted of four sources of empirical materials. First, the Big 4 Firm’s website, newsletters, and other publicly accessible materials were analyzed along with confidential internal documents including employee satisfaction surveys, performance reports, change management surveys, exit surveys, and employment statistics. Second, the research team performed un-obtrusive on site observation including participating in meetings, planning sessions, client site visits, and other internal gatherings. Third, they conducted semi-structured interviews with 17 employees from different divisions of the organization and included partners, managers, and directors. Fourth, researchers shadowed 7 organizational members, managers and directors, for one working day each. The empirical research for this study was conducted between January 2005 and September 2006. However, a second round of interviews with senior executives was conducted from mid- 2009 until May 2010. An ethnographic approach was deemed the most appropriate method to allow researchers to focus on real data from many sources.

    Findings:
    • Managers must manage relationships with junior staff which involves acting as a mentor, a supervisor, a nurturer, and also as a person responsible for reviewing work and providing feedback.
    • Managing client relationships is another key role for a manager. This role involves adjusting behavior towards the client according to the hierarchical position of the client representative as well as handling relationships with global and local clients differently. Relationships with higher ranked representatives and with local clients are more nurtured because of the increased influence that these clients have when deciding to keep the Big 4 Firm as the auditor. Additionally, managers have to find a way to use clients as a vehicle for self-promotion.
    • Managers also have to be able to manage partner relationships. Managers must begin to show interests in different aspects of the firm to impress the partners who are ultimately responsible for the future of the managers. Managers must be able to handle the uncertainty that comes with a partner that can override any and all of a manager’s decisions.
    • However, one of the most important things that managers must be able to do has no technical relevance at all; it is to become visible to the firm. Managers must find time to get involved with firm initiatives in order to essentially gain popularity and increase their chances for promotion. This is referred to in the article as developing a “fame agenda”.
       
    Category:
    Audit Team Composition, Engagement Management
    Sub-category:
    Interaction among Team Members, Interactions with Client Management, Staff Hiring - Turnover & Morale

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