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  • Jennifer M Mueller-Phillips
    A Contemporary Analysis of Accounting Professionals'...
    research summary posted April 18, 2016 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale 
    Title:
    A Contemporary Analysis of Accounting Professionals' Work-Life Balance.
    Practical Implications:

    This study offers (1) insights into how different types of accountants perceive work-life balance and alternative work arrangements (which are supposed to fix the work-life imbalance) and (2) advice from accountants on how firms can make alternative work arrangements more effective. The findings of this study may be useful to public accounting firms (employers in industry) that wish to understand their employees’ perceptions of work-life balance and potentially implement changes to enhance their employees’ actual work-life balance.

    Citation:

    Buchheit, S., D.W. Dalton, N.L. Harp, and C.W. Hollingsworth. 2016. A Contemporary Analysis of Accounting Professionals' Work-Life Balance. Accounting Horizons 30 (1): 41-62.

    Keywords:
    work-life balance, work-family conflict, burnout, alternative work arrangements
    Purpose of the Study:

    Work-life balance is not only the biggest driver of job satisfaction among accountants, but it also has important implications for audit quality and the supply of accountants. Despite its importance, little research has investigated how accountants, employed in various settings, perceive work-life balance (e.g., work-family conflict and job burnout) as well as support for and viability of the alternative work arrangements that are reputed to encourage better work-life balance. The authors address this gap by studying differences in such perceptions between accountants working in (1) Big 4 versus non-Big 4 firms, (2) audit versus tax, and (3) public accounting versus industry. This research not only provides a snapshot of how current accountants, employed in various settings, view work-life balance, but also provides a baseline against which the authors can compare future views of work-life balance.

    Design/Method/ Approach:

    The authors use data from two sources. First, the authors administer a survey to certified public accountants to obtain their perceptions of work-family conflict, job burnout, support for alternative work arrangements, and viability of alternative work arrangements. Second, the authors administer another open-ended survey to a different set of certified public accountants to obtain suggestions for how firms can improve employees’ work-life balance.

    Findings:
    • Support for alternative work arrangements lowers employee burnout, partly by decreasing work-family conflict.
    • Firm Size: Work-family conflict and employee burnout is higher among accountants at Big 4 (mid-sized) firms than their counterparts at mid-sized (local) firms. Big 4 accountants report lower viability of alternative work arrangements than their counterparts at mid-sized firms and local firms.
    • Gender: Work-family conflict is similar between male and female accountants. Male accountants report lower support for and lower viability of alternative work arrangements than female accountants.
      • More female than male accountants report previously utilizing alternative work arrangements. Accountants who report utilizing alternative work arrangements also report higher support for and viability of alternative work arrangements.
    • Rank: Accountants at higher ranks have lower employee burnout than their counterparts at lower ranks. Higher ranking accountants report higher support for and lower viability of alternative work arrangements than lower rankings accountants.
    • Role: Accountants working in audit, tax, and other roles experience similar levels of work-family conflict and employee burnout, as well as support for and viability of alternative work arrangements.  
    • Public vs. Private Sector: Work-family conflict is higher among public accountants than those working in industry. Meanwhile, accountants working at Big 4 firms have higher employee burnout than accountants in industry, accountants working at local firms or as sole practitioners have lower burnout than accountants in industry, and accountants working at mid-sized firms have the same levels of employee burnout as accountants in industry. Furthermore, accountants working in public accounting report higher support for alternative work arrangements than their counterparts working in industry. However, compared to accountants in industry, accountants working at mid-sized firms and local firms report higher viability of alternative work arrangements, but accountants working at Big 4 firms report lower viability of alternative work arrangements.
    • Accountants consider improving work-life balance the best way for firms to improve retention of high-quality employees. Accountants suggest that firms can make alternative work arrangements more effective by:
      • creating greater peer and supervisor support,
      • rating employees on productivity instead of visibility,
      • educating employees more about alternative work arrangements, 
      • keeping promises regarding alternative work arrangements,
      • providing balanced role models and mentors,
      • recognizing that younger employees value work-life balance,
      • offering mini-sabbaticals to employees, and
      • offering other programs to facilitate work-life balance.
    Category:
    Audit Team Composition
    Sub-category:
    Staff Hiring - Turnover & Morale
  • Jennifer M Mueller-Phillips
    A Post-SOX Examination of Factors Associated with the Size...
    research summary posted October 31, 2013 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.05 Impact of SOX, 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale, 13.0 Governance, 13.01 Board/Audit Committee Composition 
    Title:
    A Post-SOX Examination of Factors Associated with the Size of Internal Audit Functions
    Practical Implications:

    This study provides insights that should be useful for CAEs and boards of directors (or audit committees) in discussions related to (1) internal audit philosophy regarding its potential contributions to an organization, (2) alternative staffing models, (3) resource allocation, and (4) embracement of audit technology. The study could also help guide external auditors’ evaluation of client internal audit functions. The authors find that the mission of internal audit functions differs from organization to organization. Additionally, the results suggest that internal audit functions used for leadership development purposes (i.e., a rotational staffing strategy) are larger, presumably because the staff have less experience and staff are rotating in and out of the department more frequently. Finally, these findings help illustrate the importance of internal audit proving that it is ‘‘value added’’ to the organization. Management and audit committees are often looking for more than financial statement compliance, and those internal audit functions that have responded to these greater needs are rewarded with more resources, likely because they are perceived to deliver more value.

    For more information on this study, please contact Karla Johnstone.
     

    Citation:

    Anderson, U. L., M. H. Christ, K. M. Johnstone, and L. E. Rittenberg. 2012. A Post-SOX Examination of Factors Associated with the Size of Internal Audit Functions. Accounting Horizons 26(2): 167-191

    Keywords:
    Internal Audit; resource allocation; budgeting; staffing.
    Purpose of the Study:

    Internal auditing is a key element of an organization’s governance, risk management, and internal control structure. However, many organizations struggle to know if the investments they make in the internal audit function are appropriate and use size benchmarking data (e.g., firm assets, revenues, number of employees) to determine if internal audit is appropriately sized. However, benchmark data fails to incorporate other factors that influence internal audit size such as the effectiveness and efficiency of an internal audit function, the scope of the internal audit mission, or internal audit objectives and staffing strategies. Therefore, the objectives of the study include the following:

    • Develop and test a conceptual model that articulates the factors associated with internal audit size in the contemporary post-SOX era. The model includes four determinants of internal audit size: (1) audit committee characteristics, (2) internal audit characteristics and mission, (3) assurance activities performed by others (including internal audit outsourcing providers and assurance provided by other functions within the organization), and (4) organization characteristics.
    • Conduct an examination using contemporary post-SOX data in order to extend earlier related research on internal audit sizing by considering a variety of previously unexamined characteristics that differentiate internal audit functions from one another.
    • Examine the state of internal audit staffing in the post-SOX environment.
       
    Design/Method/ Approach:

    The authors collected data with which to test their model by first conducting field interviews with a variety of chief audit executives across a broad range of industries. The authors then distributed a survey to chief audit executives that are members of the Institute of Internal Auditors. The survey includes questions related to each of the four determinants of internal audit size (as mentioned above), as well as internal audit size based on number of internal audit personnel. The field interviews were conducted between August 2006 to November 2006 and the survey was conducted from August 2007 and October 2008.

    Findings:

    The authors find that internal audit size is positively associated with:

    Audit Committee Characteristics:

    • the size of the audit committee;
    • the frequency of audit committee meetings with the CAE
    • audit committee review and approval of the internal audit budget.

    Internal Audit Characteristics and Mission:

    • CAE tenure in the organization;
    • performance of IT auditing;
    • the use of a staffing model in which internal audit is used for rotational leadership development
    • the use of sophisticated audit technology.

    Organization Characteristics:

    • the total assets of the organization
    • the number of foreign subsidiaries that the organization possesses.


    Further, the authors find that internal audit size is inversely associated with:

    Internal Audit Characteristics and Mission:

    • the percent of audit staff designated as Certified Internal Auditors.

    Internal Audit Activities Performed by Others:

    • the extent of internal audit activities outsourced to a third party.
    Category:
    Audit Team Composition, Governance, Standard Setting
    Sub-category:
    Board/Audit Committee Composition, Impact of SOX, Staff Hiring - Turnover & Morale
  • The Auditing Section
    A Theoretical Framework of the Relationship between Public...
    research summary posted May 9, 2012 by The Auditing Section, tagged 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale 
    Title:
    A Theoretical Framework of the Relationship between Public Accounting Firms and Their Auditors
    Practical Implications:

    The model developed by the authors provides a theoretical foundation for understanding and exploring issues related to CPA firm and auditor employee behavior in the public accounting environment. Most important, the framework identifies factors impacting both what firms should provide to their CPA employees and how the employees may value what is provided. For example, the compensation package received by employees should include not only salaries and benefits, but also the opportunities for future development, flexibility of work and personal satisfaction.

    Citation:

    Almer, E. D., J. L. Higgs, and K. L. Hooks. 2005.  A Theoretical Framework of the Relationship between Public Accounting Firms and Their Auditors. Behavioral Research in Accounting 17: 1-22.

    Purpose of the Study:

    The behavior of auditors employed by public accounting firms has drawn significant attention.  Prior accounting research explains and predicts auditor behavior in the work environment, such as socialization, turnover, expertise and audit quality reduction acts. However, none has developed an overall model of the auditor-public accounting firm employment relationship. The primary purpose of this study is to provide a model for the auditor-public accounting firm employment relationship, and to identify how auditing professionals contribute and what they receive as a result of their work efforts, as well as influences on those work efforts.

    Design/Method/ Approach:

    Not applicable, it is a theoretical paper.

    Findings:

    Propositions

    • An employment contract represents the relationship between a CPA firm employer and an employee. The value of the CPA-
      employee provided professional work received by the CPA firm should be equal to the compensation package received by the CPA employee.
    • Some factors can influence the value received by the CPA firms, such as the value of the CPA employees’ professional work, or some inefficiency due to temporary interruptions of work, and labor market forces. Also, the compensation package should include salary, benefits, development, flexibility, deferred compensation, and satisfaction of personal preferences.
    • The two parties of an employment contract may not well understand the nature of multidimensional job activities of an auditor, as well as how they are valued, communicated and measured.
    • It is unclear how CPA firms incorporate the temporary interruptions of work into the employment contracts and how interruptions may or may not benefit the firm and the auditors.
    • Salary and traditional benefits are not the only compensation received by auditors.
    • The value placed on professional development is unknown and influenced by various factors, and may differ between the auditor and the firm.
    • The value placed on flexibility is influenced by the personal needs of the auditor and confidence in the firm’s information system.
    • The value placed on deferred compensation is unknown and influenced by unspecified factors, and differs between the parties to the contract.
    • Satisfaction of personal preferences is necessary to the auditor, but the personal preferences are ill-defined and thus may not be properly valued or explicitly recognized in the employment contract.
    Category:
    Audit Team Composition
    Sub-category:
    Staff Hiring - Turnover & Morale
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  • The Auditing Section
    Academic Instruction as a Determinant of Judgment...
    research summary posted May 7, 2012 by The Auditing Section, tagged 05.0 Audit Team Composition, 05.02 Industry Expertise – Firm and Individual, 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:
    Academic Instruction as a Determinant of Judgment Performance
    Practical Implications:

    The results of this study are important for audit firms to consider providing decision aids and/or on job training. The results suggest that considerable practical experience is necessary to achieve good judgment performance. In addition, the evidence indicates that auditing firms may wish to concentrate their training earlier to more quickly create a basis for high-quality auditor judgments.

    Citation:

    Wright, William F. 2007.  Academic Instruction as a Determinant of Judgment Performance. Behavioral Research in Accounting 19: 247-259.

    Keywords:
    Audit judgment; instruction; experience;
    Purpose of the Study:

    Knowledge and personal involvement are important factors that affect auditor judgment quality. It is generally believed that sufficient knowledge can lead to good auditor judgment.  Two sources of relevant knowledge are academic instruction and practical experience. Yet the relative benefits of the two sources remain unclear. The primary purpose of the study is to test for the benefit of task-specific academic instruction and practice relative to task-specific CPA training and experience in making auditor judgments. 

    Design/Method/ Approach:

    The research evidence is collected during 1991. Three groups of people participated in the experiment: (1) graduate business students, (2) inexperienced financial institution audit seniors, and (3) experienced financial institution auditors (managers, senior managers, and junior partners). Participants were asked to complete a simulated case involving evaluating the collectability of commercial loans to a fictitious manufacturer of microcomputers.

    Findings:
    • The author finds that, compared to the inexperienced audit seniors, the graduate students who completed an elective course in credit analysis made more accurate and less biased judgments.
    • The author finds that, the graduate students who completed an elective course in credit analysis made judgment similar to that of the experience auditors.
    Category:
    Audit Team Composition, Auditor Judgment, Audit Quality & Quality Control
    Sub-category:
    Industry Expertise – Firm and Individual, Prior Dispositions/Biases/Auditor state of mind, Training & General Experience
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  • The Auditing Section
    Accountants’ Commitment to Their Profession: Multiple D...
    research summary posted May 9, 2012 by The Auditing Section, tagged 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale 
    Title:
    Accountants’ Commitment to Their Profession: Multiple Dimensions of Professional Commitment and Opportunities for Future Research
    Practical Implications:

    This paper studies professional commitment and is of importance to practitioners. The results contribute to a greater understanding of how accountants’ professional commitment forms. Most importantly, it helps practitioners to better understand how the combination of an accountant’s professional commitment and other factors influence work related outcomes (e.g. work performance, turnover intentions, job satisfaction, ethical development, etc.).

    Citation:

    Hall, M., D. Smith, and K. Langfield-Smith. 2005.  Accountants’ Commitment to Their Profession: Multiple Dimensions of Professional Commitment and Opportunities for Future Research. Behavioral Research in Accounting 17: 89-109.

    Purpose of the Study:

    Professional commitment (PC) refers to the attachments that individuals form to their profession. Since PC has been linked to important outcomes such as improved work performance, reduced turnover intentions, and greater satisfaction at both the organizational and professional levels, it is very important to develop a more complete understanding of individuals’ PC. Professional Commitment consists of three dimensions, including affective PC (of or relating to experience of feeling or emotion), continuance PC, and normative PC. The primary purpose of this study is to examine the different dimensions of PC, how they develop, and how they affect accountants’ professional and organizational outcomes.

    Design/Method/ Approach:

    Not applicable; this is a review paper.

    Findings:
    • Affective PC leads one to willingly stay in his/her profession. Continuance PC leads one to stay in the profession because of the high costs associated with leaving. Normative PC leads one to remain in the profession out of a sense of obligation.
    • The factors which affect affective PC include job level, personal characteristics (personality type and ethical orientation), organizational characteristics (work environment such as public accounting, private industry, or government), and situational factors (e.g. satisfaction with rewards). Affective PC together with job and professional satisfaction influence employees’  urnover intentions, organizational-professional conflict, and ethical attitudes and decision making.
    • Examining multiple dimensions of PC may provide a more complete understanding of an individual’s commitment to his/her profession.
    Category:
    Audit Team Composition
    Sub-category:
    Staff Hiring - Turnover & Morale
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  • Jennifer M Mueller-Phillips
    An empirical investigation of the impact of audit and...
    research summary posted July 20, 2015 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.05 Diversity of Skill Sets e.g., Tenure and Experience 
    Title:
    An empirical investigation of the impact of audit and auditor characteristics on auditor performance.
    Practical Implications:

    The study provides a real-life setting, offering external validation, allowing the authors to analyze the performance and the characteristics of an audit team, as opposed to an individual as it is done in most experimental studies. As they measure audit performance by the tax adjustment resulting from a tax audit, the study also contributes to the tax audit literature by further explaining the determinants of a corporate tax audit outcome. The authors provide additional insight on audit and audit team characteristics that are associated with tax adjustments.

    Citation:

    Alissa, W., Capkun, V., Jeanjean, T., & Suca, N. 2014. An empirical investigation of the impact of audit and auditor characteristics on auditor performance. Accounting, Organizations & Society 39 (7): 495-510.

    Keywords:
    tax audits, audit performance, audit experience
    Purpose of the Study:

    Audit performance is determined not only by the inherent complexity of the firm or the business unit audited, but also by audit task and auditor characteristics. A large body of experimental and theoretical research in psychology and auditing shows that audit performance increases with effort , decreases in task complexity, and increases in auditor experience. In this paper, the authors offer external validation to these findings by providing supporting empirical archival evidence.

    Due to increasing regulation, the number and complexity of audit tasks is rising, requiring more effort and knowledge on the part of auditors in internal, financial, and tax audits alike. This, in turn, puts more pressure on internal audit departments, audit firms, and tax authorities to understand and manage the design of their audits and audit teams in order to maximize performance. Given that audit tasks vary in complexity, and, unavoidably, auditors vary in knowledge and ability, maximum performance will be achieved only if the combination of task complexity and audit team characteristics is such so as to allow for the highest output per unit of effort (dedicated capacity). Consequently, the optimal allocation of effort becomes one of the most important drivers of performance, especially in the environment where the capacity is constrained, such as internal audit departments, audit firms and tax authorities.

    Design/Method/ Approach:

    The authors use a unique and confidential database of 15,392 tax audits performed by the Croatian Tax Administration during the 20022006 period to examine the impact of task complexity, auditor experience, and auditor effort on audit performance. The authors also used annual corporate income tax filings and VAT filings.  

    Findings:

    The authors find that task complexity mitigates the positive relationship between auditor effort and audit performance, consistent with the psychology literature argument that more complex tasks require more cognitive effort and that there is a diminishing marginal impact of effort on performance. They also find that auditor experience enhances the impact of auditor effort on performance. This result is in line with the argument that effort has a positive impact on performance only if the individual has some experience with the task. The results indicate that more experience increases the impact of auditor effort on audit performance more when complexity is high. This suggests that assigning a highly experienced auditor to a more complex task has a bigger marginal impact on performance than assigning a highly experienced auditor to a low complexity task, and consequently maximizes total performance. In other words, the skills of highly experienced auditors are wasted on low complexity tasks.

    Category:
    Audit Team Composition
    Sub-category:
    Diversity of Skill Sets (e.g. Tenure & Experience)
  • The Auditing Section
    An Examination of Auditor Planning Judgments in a Complex...
    research summary posted May 7, 2012 by The Auditing Section, tagged 05.0 Audit Team Composition, 05.01 Use of Specialists e.g., financial instruments, actuaries, valuation, 07.0 Internal Control, 07.01 Scope of Testing 
    Title:
    An Examination of Auditor Planning Judgments in a Complex Accounting Information System Environment
    Practical Implications:

    The results suggest that auditors’ AIS expertise can play a significant role in complex AIS settings and in their ability to compensate for CAS competence deficiencies.  The authors note that it may be prudent for firms to consider the combined capabilities of individuals when assigning auditors and CAS to engagements with complex AIS.

    Citation:

    Brazel, J. F. and C. P. Agoglia. 2007. An examination of auditor planning judgments in a complex accounting information system environment. Contemporary Accounting Research 24 (4): 1059-83.

    Keywords:
    Auditor judgment, risk, risk management, fraud risk
    Purpose of the Study:

    This study examines auditor judgments in a complex accounting information system (AIS) environment. Auditing standards recommend that a computer assurance specialist (CAS) be assigned to assist in the audit of computer-intensive environments. 
    CAS (also known as information systems audit specialists and IT auditors) provide auditors with control-testing evidence relating to their client’s AIS.  Auditors use this information when making control risk assessments and planning substantive audit procedures.  This study examines how the auditors’ own level of AIS expertise and the competence of the CAS affect the assessed control risk and scope of substantive testing.

    Design/Method/ Approach:

    Participants included practicing auditors from four international and two national public accounting firms. Participants were audit seniors with an average of 3.7 years of experience.  The experiment was conducted before 2007.  

    Participants were provided a case that included background information for a hypothetical client, relevant authoritative audit guidance, and prior year workpapers.  After reviewing this information, participants assessed and documented inherent risk. Participants then received information about the CAS competence (high or low) and CAS control tests.  Participants were then asked to evaluate the strength of CAS testing, assess control risk, and plan the substantive audit procedures. 

    Findings:
    • Auditors with high AIS expertise and those assigned low competence CAS tended to assess control risk as higher than their counterparts.
    • Auditors assigned low competence CAS assessed control risk as higher regardless of their own AIS expertise.    
    •  When the competence of the CAS is deficient, auditors with higher AIS expertise compared to auditors with lower AIS expertise are more likely to identify and react to potential AIS-specific risks.
    Category:
    Audit Team Composition, Internal Control
    Sub-category:
    Use of Specialists (e.g. financial instruments – actuaries - valuation), Scope of Testing
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  • The Auditing Section
    An Examination of the Effects of Auditor Rank on...
    research summary posted April 23, 2012 by The Auditing Section, tagged 05.0 Audit Team Composition, 05.05 Diversity of Skill Sets e.g., Tenure and Experience, 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:
    An Examination of the Effects of Auditor Rank on Pre-Negotiation Judgments
    Practical Implications:

    This study provides evidence that there were significant differences in the pre-negotiation judgments of partners and managers. Since an outcome of an auditor-client negotiation of a contentious issue may have a significant impact on financial reporting quality, the findings of the study suggest that the using partners in the negotiation process is likely to lead to improved reporting quality. The results have implications for audit firms in allocating manager and partner time to handle negotiation.

    Citation:

    Trotman, K. T., A. M. Wright, and S.Wright. (2009). An Examination of the Effects of Auditor Rank on Pre-Negotiation Judgments. Auditing: A Journal of Practice & Theory 28(1): 191-203

    Purpose of the Study:

    Negotiations are pervasive in the auditing environment.  In general, audit firms have choices over what level of staff are involved in the process of negotiation. An important issue is that differences may exist between partner and manager negotiation judgments and strategies. This study focuses on the expectations and assessments that partners and managers take into the negotiation process, specifically the pre-negotiation stage. The authors use negotiation theory as well as other general psychology findings to investigate how rank (partner versus manager) affects the pre-negotiation judgments made by auditors.  The authors suggest and test the following assertions:

    • Partners take a tougher stand than managers in pre-negotiation judgments.
    •  Partners have greater confidence in their ability to negotiate and therefore receive a resolution that is closer to their initial position.
    • Partners’ rank, which reflects both additional experience and power (as compared to the manager), will lead them to believe they are in a better position to negotiate outcomes closer to their initial position.
    Design/Method/ Approach:

    The research evidence was collected prior to September 2007. The authors used responses collected from a computerized case about inventory write-downs, administered to partners and managers at three Big 4 firms in Australia and the U.S.

    Findings:
    • Compared to managers, partners appear to take a tougher stand in the negotiation: they expect a larger initial write-down and require a higher minimum write-down that they would accept.
    • Partners’ estimates of the maximum inventory write-down that a CFO would accept were significantly higher than managers’ estimates.
    • Partners believed they can negotiate a larger amount above the minimum adjustment than managers.
    • There were no differences in negotiation persuasion knowledge between partners and managers.
    Category:
    Audit Team Composition, Auditor Judgment, Audit Quality & Quality Control
    Sub-category:
    Diversity of Skill Sets (e.g. Tenure & Experience), Prior Dispositions/Biases/Auditor state of mind, Training & General Experience
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  • Jennifer M Mueller-Phillips
    Antecedents and Consequences of Perceived Gender...
    research summary posted September 17, 2015 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale, 05.10 Impact of Diversity - e.g., gender - on Group Decision Making 
    Title:
    Antecedents and Consequences of Perceived Gender Discrimination in the Audit Profession.
    Practical Implications:

    The authors’ findings provide public accounting firms with critical factors that can enhance gender equality. Specifically, the findings indicate that (1) firms that offer more support from organizational leaders, (2) firms that provide higher levels of support for alternative work arrangement initiatives, and (3) firms that provide stronger ethical climates are each negatively associated with perceived gender discrimination, suggesting that organizational climate factors have a strong impact on female auditors’ perceptions of gender equality. The findings suggest that female accounting professionals must reach high-status positions within the organizational structure to substantively influence perceptions of gender equality. Public accounting firms should encourage formal and informal mentoring relationships targeting female auditors. 

    Citation:

    Dalton, D. W., J. R. Cohen, N. L. Harp, and J. J. McMillan. 2014. Antecedents and Consequences of Perceived Gender Discrimination in the Audit Profession. Auditing: A Journal of Practice & Theory 33 (3): 1-32.

    Keywords:
    alternative work arrangements, audit profession, ethical climate, female partners, gender discrimination, organizational citizenship behavior, turnover intentions
    Purpose of the Study:

    The purpose of this study is to examine the effects of workgroup composition factors and organizational climate factors on perceived gender discrimination, along with the impact of perceived gender discrimination on several critical organizational outcomes. The authors test a theoretical model of perceived gender discrimination in order to;

    1. Advance theory development within gender-based research in accounting, 
    2. Stimulate future research related to gender equality in the audit profession,
    3. Provide public accounting firms with critical insights regarding the factors that contribute to gender inequality, and
    4. Highlight adverse organizational outcomes associated with gender discrimination in the audit profession.

    Turnover of female auditors leads to a loss of expertise, which, in turn, can reduce audit quality, leading to adverse organizational outcomes. In addition, recent evidence suggests that female audit partners more effectively constrain earnings management by their clients; however, female auditors are more likely than male auditors to leave public accounting prior to reaching the partner level. Therefore, gaining a better understanding of how perceptions of gender equality impact female auditors’ turnover intentions is particularly important. Existing research suggests that organizations that promote gender equality and gender diversity engender high-quality teamwork environments that foster creativity and innovation, resulting in higher levels of organizational performance. Therefore, given the relative importance of high-quality teamwork environments in the audit profession, the authors seek to gain a better understanding of the factors that impact perceptions of gender equality in the audit profession.

    Design/Method/ Approach:

    This paper tests a model of perceived gender discrimination in the audit profession. The authors obtained mailing lists of female CPAs from the Boards of Accountancy in Ohio, Oklahoma, Oregon, Tennessee, and Washington. Using both email and mail requests, the authors gathered a sample of 234 female auditors employed in public accounting firms. From the mail requests, the authors received a 17.1 percent response rate. From the email requests, the authors received an 8.1 percent response rate.

    Findings:

    The results indicate that female auditors report lower levels of gender discrimination when employed:

    1. In firms with more female partners,
    2. In firms with stronger ethical climates,
    3. In firms that are more supportive of alternative work arrangements, and
    4. In firms that provide higher levels of top management support for the personal well-being of their employees.
    • The findings indicate that while female coworker compositions do not impact female auditors’ perceptions of gender discrimination, female partner compositions can, in fact, increase perceptions of gender equality.
    • These results suggest that it is not sufficient for firms to simply hire/retain more females at the staff, senior, and manager levels; instead, the proportion of female auditors in partner positions within the organizational structure must increase to substantively enhance perceptions of gender equality.
    • The results indicate that public accounting firms can impact perceptions of gender equality by cultivating specific organizational climates.
    • The authors find that perceived gender discrimination is directly associated with higher turnover intentions, thereby providing additional motivation for the promotion of gender equality within the audit profession.
    Category:
    Audit Team Composition
    Sub-category:
    Impact of Diversity (e.g. gender) on Group Decision Making, Staff Hiring - Turnover & Morale
  • Jennifer M Mueller-Phillips
    Are All Industry Specialist Auditors the Same?
    research summary posted October 13, 2015 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.01 Use of Specialists e.g., financial instruments, actuaries, valuation, 10.0 Engagement Management, 10.06 Audit Fees and Fee Negotiations, 11.0 Audit Quality and Quality Control 
    Title:
    Are All Industry Specialist Auditors the Same?
    Practical Implications:

    The results have implications on two fronts. First, the findings indicate that auditors pursue different production and pricing strategies in different segments of the market, suggesting that the Big 4 audit firms respond to the competitive pressures in each submarket. Second, the evidence raises questions about the construct validity of market share-based measures of industry specialization, which have been used extensively in the literature. The evidence suggests that auditors who obtain a large market share by auditing a large proportion of the industry sector may actually do so by producing lower quality, lower cost audits. As such, these auditors are not acting as true specialists in the sense of using specialized training and knowledge to raise the quality of the audit performed.

    Citation:

    Cahan, S. F., D. C. Jeter, and V. Naiker. 2011. Are All Industry Specialist Auditors the Same? Auditing: A Journal of Practice & Theory 30 (4): 191-222.

    Keywords:
    audit fees, audit quality, auditor market share, industry specialization, market segmentation, product differentiation
    Purpose of the Study:

    Auditor industry specialization continues to attract considerable attention in the literature. This may reflect the importance that clients place on industry specialization, e.g., 80 percent of companies viewed industry expertise or specialization as being an important factor in choosing an auditor. Most commonly, archival studies identify industry specialist auditors using a market share-based measure where a significant share, or an industry leading share, of the industry’s audit fees is used to designate specialists. However, a market share-based measure is problematic because market share depends jointly on the proportion of clients audited and the average size of those clients. For example, it is possible to attain a large industry market share by auditing a few relatively large clients in an industry or many relatively small ones. The question the authors examine is as follows: Are industry specialists who obtain a high market share in disparate ways similar in terms of product (audit) quality and price (audit fees)?

    Design/Method/ Approach:

    The authors begin with all client-years from 2003 through 2007 with requisite data available from Compustat and Audit Analytics. For the audit fee sample, the data requirement to compute the control variables results in a final sample of 9,565 client-year observations. For the discretionary accruals model, the additional data requirements needed to estimate discretionary accruals and the control variables for Equation (3) result in a final sample of 9,396 client-year observations. Sixty-one industries are represented by observations in both the audit fee and discretionary accruals samples. 

    Findings:

    The authors find evidence of higher (lower) audit quality when the auditor attains a high market share by auditing a lower (higher) proportion of clients in the industry. Combined, the findings suggest that industry specialists who gain market share by auditing a small proportion of clients in an industry pursue a product differentiation strategy, offering a higher quality, but more costly, audit. On the other hand, those specialists who gain market share by auditing a large proportion of clients follow a cost minimization strategy, competing on price and sacrificing quality. The authors do not find any evidence that the Big 4 operates as a tight oligopoly either in the overall audit market or within industry markets, whether defined at the national or local level. In summary, the results suggest that not all industry specialists are the same.

    Category:
    Audit Quality & Quality Control, Audit Team Composition, Engagement Management
    Sub-category:
    Audit Fees & Fee Negotiations, Use of Specialists (e.g. financial instruments – actuaries - valuation)

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