Auditing Section Research Summaries Space

A Database of Auditing Research - Building Bridges with Practice

This is a public Custom Hive  public

Posts

  • Jennifer M Mueller-Phillips
    The Effect of Partner Communications of Fraud Likelihood and...
    research summary posted June 22, 2017 by Jennifer M Mueller-Phillips, tagged 06.08 SAS No. 99 Brainstorming – effectiveness, 08.04 Auditors’ Professional Skepticism, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Title:
    The Effect of Partner Communications of Fraud Likelihood and Skeptical Orientation on Auditors’ Professional Skepticism
    Practical Implications:

    Based on previous studies and preconceived notions, the finding that partners expressing their own views about the low likelihood of fraud had no effect on professional skepticism was surprising. This suggest that partner’s concern of not expressing this opinion to the team because it would lower the overall professional skepticism may be unwarranted. The evidence from this study indicates that partners can raise professional skepticism within the team by communicating management’s view of low likelihood of fraud, however it is not recommended for partners to use this approach every single time. Also, encouraging both outward and internal skeptical orientation can raise professional skepticism as well.

    Citation:

    Harding, N, and K. T. Trotman. 2017. The Effect of Partner Communications of Fraud Likelihood and Skeptical Orientation on Auditors’ Professional Skepticism. Auditing, A Journal of Practice and Theory 36 (21): 111-131.

    Home:

    http://commons.aaahq.org/groups/e5075f0eec/summary

  • Jennifer M Mueller-Phillips
    The Effect of Information Choice on Auditors’ Judgments a...
    research summary posted October 12, 2016 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.05 Diversity of Skill Sets e.g., Tenure and Experience, 06.0 Risk and Risk Management, Including Fraud Risk, 06.09 Litigation Risk, 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind, 11.0 Audit Quality and Quality Control, 11.09 Evaluation of Evidence 
    Title:
    The Effect of Information Choice on Auditors’ Judgments and Confidence
    Practical Implications:

     Implications for the practicing audit community are developed from the findings that less experienced auditors are susceptible to the information choice effect. In situations where litigation risk is low (high) and the auditor has less experience, auditors place greater (lower) significance on information given to them by an external party than information they sought out themselves. More experienced auditors are not subject to the information choice effect. Additionally, more experienced auditors are confident in judgments based on information sought themselves, even in a setting with elevated litigation risk. The results of this study may interest audit clients providing information to auditors, auditors reviewing the work of less (more) experienced colleagues, auditors performing a critical self-review, and regulators reviewing the work of auditors.

    Citation:

     Smith, S. D., W. B. Tayler, and D. F. Prawitt. 2016. The Effect of Information Choice on Auditors' Judgments and Confidence. Accounting Horizons 30 (3): 393–408.

  • 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.

  • Jennifer M Mueller-Phillips
    The Effects of Auditor Rotation, Professional Skepticism,...
    research summary posted September 15, 2015 by Jennifer M Mueller-Phillips, tagged 04.0 Independence and Ethics, 04.07 Audit Firm Rotation, 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Title:
    The Effects of Auditor Rotation, Professional Skepticism, and Interactions with Managers on Audit Quality.
    Practical Implications:

    The results of this study are important for both audit firms and regulators when considering the potential impact of mandatory audit firm rotation. Standard setters appear to increasingly advocate for auditors to utilize a mental frame in which they evaluate management assertions in terms of their level of dishonesty relative to verification their honesty. If this preference is ultimately paired with mandatory audit firm rotation, it could actually have a deleterious effect on audit quality. Conversely, this study finds that audit firm rotation can increase audit quality when auditors frame their mental representations of management’s assertions in terms of verification of their honest representations.

    Citation:

    Bowlin, K. O., J. L. Hobson, and M. D. Piercey. 2015. The Effects of Auditor Rotation, Professional Skepticism, and Interactions with Managers on Audit Quality. The Accounting Review 90 (4): 1363-1393.

  • Jennifer M Mueller-Phillips
    How Do Auditors Weight Informal Contrary Advice? The Joint...
    research summary posted September 14, 2015 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.09 Impact of Consultation on Judgments, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Title:
    How Do Auditors Weight Informal Contrary Advice? The Joint Influence of Advisor Social Bond and Advice Justifiability.
    Practical Implications:

    By treating worse justified advice as though it were better justified advice, auditors are likely to overestimate the defensibility of their conclusions that are based on this advice. It also is worrisome that specialists appear to defensively resist well-justified, contrary advice from stronger social bond advisors. In response to a stronger social bond advisor’s better justified advice, specialists assess advisor competence to be higher and they assess the advice itself to be of higher quality, but they assign relatively low weight to the advice. This inconsistency implies that specialists may have difficulty accepting good advice even when they recognize its high quality.

    Citation:

    Kadous, K., J. Leiby, and M. E. Peecher. 2013. How Do Auditors Weight Informal Contrary Advice? The Joint Influence of Advisor Social Bond and Advice Justifiability. Accounting Review 88 (6): 2061-2087.

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


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

    Citation:

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

  • Jennifer M Mueller-Phillips
    The Effects of Client Identity Strength and Professional...
    research summary posted February 17, 2015 by Jennifer M Mueller-Phillips, tagged 04.0 Independence and Ethics, 04.07 Audit Firm Rotation, 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Title:
    The Effects of Client Identity Strength and Professional Identity Salience on Auditor Judgments
    Practical Implications:

    The results of this study provide an improved understanding of the joint effects of identity strength and salience on auditor judgments. Even in a setting with no prior auditor-client history, auditors who more strongly identify with the clients (i.e., share common values) agree more with the client. This is informative to debates about auditor rotation and independence, as it highlights short-tenure independence threats that rotation is unlikely to mitigate. Fortunately, the results also suggest heightening professional identity salience is a cost-effective alternative to auditor rotation to maintain auditor independence, even when auditor tenure is short.

    For more information on this study, please contact Tim Bauer.

    Citation:

    Bauer, T. D. 2015. The effects of client identity strength and professional identity salience on auditor judgments. The Accounting Review 90 (1): 95-114.

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

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

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

    Citation:

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

  • Jennifer M Mueller-Phillips
    Research on Auditor Professional Skepticism: Literature...
    research summary posted November 17, 2014 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, 11.09 Evaluation of Evidence 
    Title:
    Research on Auditor Professional Skepticism: Literature Synthesis and Opportunities for Future Research
    Practical Implications:

    We find that while research studies provide insights into both the antecedents to skeptical judgments and actions, the majority of research efforts to date have focused on the antecedents to skeptical judgments and on auditor characteristics in particular. In addition, in order to understand how skeptical judgment translates into skeptical action, additional research on skeptical action is needed. Also, given the growth of multicultural audit teams, it is necessary to examine whether an auditor’s culture matters and whether it negatively impacts efforts by multinational accounting firms to deliver the same services throughout the world.

    To enhance professional skepticism, auditors should be encouraged to assess strategic and business-related risks, as well as risks of material misstatement in financial statements, in order to develop the expertise necessary to engage in skeptical judgments. Additionally, a demonstrated decrease in skepticism as one moves up through the firm hierarchy, can be addressed through training and education, as well as task specific experience, or expertise. In addition, future research could focus more on how the environment of audit firms can motivate auditors to exhibit more skeptical judgment and action.

    For more information on this study, please contact R. Kathy Hurtt.

    Citation:

    Hurtt, R.K., H. Brown-Liburd, C. E. Earley, and G. Krishnamoorthy. 2013. Research on Auditor Professional Skepticism: Literature Synthesis and Opportunities for Future Research. Auditing: A Journal of Practice & Theory 32 (Supplement 1): 45-97.

  • Jennifer M Mueller-Phillips
    Auditors’ Levels of Dispositional Need for Closure and E...
    research summary posted November 12, 2014 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Title:
    Auditors’ Levels of Dispositional Need for Closure and Effects on Hypothesis Generation and Confidence
    Practical Implications:

    This study provides evidence about DNFC, a stable personality characteristic that affects the judgment and decision making process and may also affect attrition of auditors. Evidence indicates that although higher-DNFC individuals are attracted to the profession, the lower-DNFC individuals may remain as auditors longer and be promoted to the level of partner. Therefore, early identification of a characteristic that may contribute to a rise to the rank of partner might be useful for accounting firms and allow for better training of future leaders.

    The evidence also indicates that auditors higher in DNFC tend to truncate the hypothesis-generation task sooner, producing fewer causal hypotheses and demonstrating lower hypothesis quality. Further, those same auditors express greater confidence that they have identified the true hypothesis—a combination that bodes poorly for the ultimate correct assessment of causality. However, assessment of an individual auditor’s DNFC could be helpful in tailoring audit programs to overcome limitations related to information-processing characteristics. This information may also be useful in forming audit teams (for example, pairing a low-DNFC individual with a high-DNFC individual) and in customizing auditor training (perhaps helping high/low-DNFC auditors learn compensating techniques).

     

    For more information on this study, please contact Dr. Charles Bailey at the University of Memphis, cbailey2@memphis.edu

    Citation:

    Bailey, C., C. Daily, and T. Phillips, Jr. 2011. Auditors’ Levels of Dispositional Need for Closure and Effects on Hypothesis Generation and Confidence. Behavioral Research in Accounting 23 (2): 27-50

Filter by Type

Filter by Tag