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  • Jennifer M Mueller-Phillips
    Learning the ’Craft’ of auditing: a dynamic view of aud...
    research summary posted October 19, 2015 by Jennifer M Mueller-Phillips, tagged 11.0 Audit Quality and Quality Control, 11.01 Supervision and Review – Effectiveness, 11.05 Training and General Experience 
    Title:
    Learning the ’Craft’ of auditing: a dynamic view of auditor’s on-the-job learning.
    Practical Implications:

    Although the results in this study are only collected from a single group, audit partners, it provides valuable insights for both audit firms and their employees in respect to the development of technical knowledge in auditing. The results heighten the awareness that professional learning is a complex web of different factors. Audit firms might reconsider the fundamental model of learning in today´s professional environment.

    Citation:

    Westermann, K. D., J. C. Bedard, and C. E. Earley, 2015. Learning the ‘Craft’ of auditing: a dynamic view of auditor’s on-the-job learning. Contemporary Accounting Research 32 (3): 864-896.

    Keywords:
    Auditing, Learning, Apprenticeship, Personnel Development
    Purpose of the Study:

    In the current environment audit practitioners must master a comprehensive body of intricate knowledge in order to obtain the class of professional proficiency requisite to comply with auditing standards, pass over supervisory inspections, and uphold their public responsibility. Besides mandatory requirements to become certified, that is partly retrieved at a university, a significant part of knowledge gained by auditors occurs trough on-the-job-learning. A learner (audit staff) shows how to perform a particular task and eventually this guidance will evoke in mastery of audit procedures by the youngster.

    The researchers in this study are mainly interested in the question how technical knowledge of auditing is created and reinforced in every day practice that is situated within the social context of performing engagements. In more detail the researchers are interested in the processes through which new auditors learn technical knowledge (i.e. the craft of auditing) on the job, relying on candid comments of audit partners to depict these processes within the social and economic factors comprising their everyday work environment of the firm.

    Design/Method/ Approach:

    The authors used a semi-structured interview approach. Thirty practicing audit partners of a single big four audit firm in the USA participated. The interview instruments are developed via several stages: in the preliminary phase comments were received of two audit directors and one manager and in a later stage a pilot test was executed in conjunction with a retired big 4 partner. Interviews were conducted in the late 2008 and the early 2009 and are collected via phone or in person.

    Findings:

    The data in this article reveals that on the job learning is a movable process that is subject to societal and economic forces. The authors have structured their findings in chronological progression of trainee development from hiring towards promotion as an audit senior. Audit partners placed their perspective on learning technical knowledge in the following categories: requirements and induction, learning on engagements, supervisory review and feedback practices and on-the-job learning in the senior role. 

    Most significant detailed expressions by partners were: (1) an important part of technical learning takes place on engagements, but success strongly depends on facing challenging situations and gaining skills via trial and error, (2) audit partners are consistent regarding the magnitude of coaching and supervisory feedback (both formal and informal). It directly improves audit quality and enhances learning in technical accounting knowledge, and (3) on more complex accounting levels audit partners concerned the current structure of senior development. Seniors are less exposed to higher level issues since more complex work is more often being performed at higher level (manager or partner). This structure has only a short term benefit to audit quality because limits the opportunity to engage and learn complex accounting transactions.

    Overall the researchers concluded that effective learning is a long, complex, multifaceted, and integrated process that achieves success trough a delicate balance of specific conditions in order to nurture development.

    Category:
    Audit Quality & Quality Control
    Sub-category:
    Supervision & Review – Effectiveness, Sustainability ServicesTraining & General Experience
  • Jennifer M Mueller-Phillips
    Perspective Taking in Auditor-Manager Interactions: An...
    research summary posted September 21, 2015 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind, 11.0 Audit Quality and Quality Control, 11.05 Training and General Experience 
    Title:
    Perspective Taking in Auditor-Manager Interactions: An experimental investigation of auditor behavior.
    Practical Implications:

    The results of this study are important for firms to consider in hiring and training practices as the evidence supports increased perspective taking improves auditor performance and ultimately audit quality. Audit firms may benefit from hiring auditors with prior experience in the corporate world and involvement in financial-reporting, and should continue efforts to hire more “boomerangs.” Audit firms can measure dispositional (i.e., trait) perspective taking among current employees and use this measure in determining staffing assignments. In terms of training design, audit firms can consider implementing training targeted toward role-taking. Finally, audit firms can also encourage perspective taking in other ways, for example, by including perspective taking prompts in audit programs.

    Citation:

    Church, B. K., M. Peytcheva, W. Yu, and O. Singtokul. 2015. Perspective taking in auditor-manager interactions: An experimental investigation of auditor behavior. Accounting, Organizations and Society 45: 40-51.

    Keywords:
    perspective taking, role-taking experience, individual difference, experimental economics
    Purpose of the Study:

    This study investigates how taking the perspective of client management affects auditors’ assessment of managers’ reporting choices and whether successful perspective taking can lead to enhanced financial-reporting quality and audit quality. Perspective taking involves taking the point of view of another, and understanding another’s thoughts, attitudes, or concerns in a specific situation. Perspective taking has been shown to improve individual judgment and decision making, thus the authors of this study investigate whether these benefits extend to the audit setting when auditors take on the role and perspective of client management. Audit firms have been increasing recruiting of former employees (or “boomerangs”), asserting the knowledge and experience auditors gain while in industry is an asset to the auditor and the firm. This study provides evidence supporting that prior role experience is a reason why “boomerangs” are successful.

    Design/Method/ Approach:

    The participants in this experimental study were students at a public university, mostly at the undergraduate level in business or economics. The evidence for this study was collected prior to September 17, 2012. The authors conduct two multi-round experiments providing participants monetary incentives designed to mimic the auditing context. In the first experiment, participants either took on a manager role followed by an auditor role or remained in the auditor role for the entire experiment. In the second study, participants took on an auditor role for the entire experiment and perspective taking disposition was measured. The task involved estimating earnings and making decisions regarding accepting or rejecting manager reported earnings values.

    Findings:
    • Overall, the authors find that perspective taking is beneficial to auditor performance and audit quality. Further, role-taking (i.e., taking the role of another) stimulates perspective taking.  
    • The authors find auditors with role-taking experience as a manager more accurately estimate managers’ reported earnings, compared to auditors without the role-taking experience. Auditors with role-taking experience also make better reporting decisions, in terms of whether to accept or reject manager reported earnings.
    • The authors find dispositional perspective taking (i.e., an individual’s natural ability to spontaneously take the viewpoint of another) influences auditor performance. Auditors with high perspective-taking disposition are better able to judge managers’ reported earnings than auditors with low perspective taking disposition.
    Category:
    Audit Quality & Quality Control, Auditor Judgment
    Sub-category:
    Prior Dispositions/Biases/Auditor state of mind, Sustainability ServicesTraining & General Experience
  • 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
    The Validity of Auditor Industry Specialization Measures
    research summary posted June 15, 2016 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.02 Industry Expertise – Firm and Individual, 11.0 Audit Quality and Quality Control, 11.05 Training and General Experience 
    Title:
    The Validity of Auditor Industry Specialization Measures
    Practical Implications:

     This study draws attention to the potentially large issues involved with inconsistencies in the measurement of auditor industry specialization with a focus on audit fees and audit quality. The findings of this study suggest that audit fee-based measures should probably be prioritized by researchers and that previous empirical findings based on other measurement variables need to be re-examined. Results also show that choosing a market share approach or a portfolio approach has very significant consequences, so the decision should not be made absent-mindedly. Furthermore, the choice of absolute versus relative measures of ISP if not neutral, either, and the sensitivity tests indicated that ISP calculations are very sensitive to the industry classification used.

    Citation:

     Audousset-Coulier, S., A. Jeny, and L. Jiang. 2016. The Validity of Auditor Industry Specialization Measures. Auditing: A Journal of Practice and Theory 35 (1): 139-161.

    Keywords:
    auditor industry specialization and construct validity
    Purpose of the Study:

    Industry specialist auditors are auditors who have developed a specific expertise and are therefore able to provide high quality and more efficient services to their clients. Despite being widely examined in literature, the effect of auditor industry specialization (ISP) has no wholly agreed upon degree of measurement with empirical results exhibiting inconsistencies and uncertainties.  In fact, a multiplicity of measures of industry specialization has been developed over the years. These inconsistencies found with the measurement of auditor industry specialization have led to issues in audit pricing and audit quality. The audit pricing models inconsistencies, in particular, are a challenge for researchers in archival auditing research; the results of their studies are highly sensitive to ISP measures. This study focuses on the measurement issues of ISP, with the hope to be the first study to conduct a comprehensive test of the consistency among different combinations of measurement variables, such as audit fee, client size, and number of clients, and approaches, such as absolute or relative market shares, absolute or relative portfolio shares, and weighted market shares. 

    Design/Method/ Approach:

    The authors use an audit pricing model and an earnings quality model as their empirical fields of study to present empirical evidence about the consequences of using different proxies for ISP on audit pricing and earnings quality research results. The data, which is from 2000 to 2010, is used to compute 30 different measures of ISP in order to test their internal and external construct validity.  

    Findings:
    • The authors find that the choice of the type of measure used to identify industry specialists has a significant influence on the designation of auditors as industry specialists.
    • The authors show that the use of five different assignment approaches modifies the classification of auditors as specialists or not.
    • The authors show that the use of different calculating variables to compute these shares also leads to significant differences of classification.
    • The authors find in the audit pricing model test that the alternative use of the 30 ISP variables in an audit fee model leads to the determination of a significant ISP fee premium in 14 cases, to the determination of a fee discount in 6 cases, and to nonsignificant results in 10 cases.
    • The authors find in the earnings quality test that industry specialization is found to significantly reduce the level of discretionary accruals in only five cases compared to the 21 cases where ISP measures were associated with higher levels of discretionary accruals and with nonsignificant results found in four cases.
    Category:
    Audit Quality & Quality Control, Audit Team Composition
    Sub-category:
    Industry Expertise – Firm and Individual

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