This study contributes to the literature in a number of important ways. First, the authors present evidence that managers still tacitly encourage underreporting by their engagement team, even in a setting without explicit mention of time budgets as a performance metric. Thus, while explicit incentives may have reduced, it appears likely that implicit manager incentives to underreport persist. Second, the results suggest that managers’ tacit encouragement of underreporting is contrary to what the “principals” of the firm appear to want. Further, the authors find a positive association between partners’ beliefs about how likely it is the senior reported all hours worked and their preference for the senior. Third, the agency framework perspective on the phenomenon of underreporting suggests that agency theory can assist researchers, regulators, and practitioners wishing to understand and curb the behavior.

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

http://www.auditingresearchsummaries.org

The results of this study suggest that public accounting firms that highlight the need for auditors to get creative and think outside the box, and presumably provide incentives for the auditors to do so may be enabling themselves with the potential to provide superior performance in the face of impending time constraints. Given the many forms of time constraints that exist in the auditing profession, thinking outside the box to create a strategic and efficient allocation of time could greatly improve the work of auditors today.

For more information on this study, please contact Kin-Yew Low.
 

Low, K., and Tan, H. 2011. Does time constraint lead to poorer audit performance? Effects of forewarning of impending time constraints and instructions. Auditing: A Journal of Practice and Theory 30 (4): 173-190.

http://www.auditingresearchsummaries.org

It is important for auditors to understand that extending an audit not only creates the opportunity to collect additional evidence but also increased the time pressure on auditors. Audit firms should consider how to mitigate the time pressure associated with long audit. Further, audit committees should understand the trade-off involved in pressuring the auditors to meet filing deadlines and the effect on audit quality. Finally, regulators should be attentive to the consequences future regulation can have with time pressures on auditors and reduced filing times

For more information on this study, please contact Dr. David Hurtt.

Alan I. Blankley, David N. Hurtt, and Jason E. MacGregor. 2014. The Relationship between Audit Report Lags and Future Restatements. Auditing: A Journal of Practice & Theory 33 (2): 27-57.

http://www.auditingresearchsummaries.org