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    Audit Reviewers’ Evaluation of Subordinates’ Work Qua...
    research summary posted May 2, 2012 by The Auditing Section, last edited May 25, 2012, tagged 09.0 Auditor Judgment, 09.11 Auditor judgment in the workpaper review process, 11.0 Audit Quality and Quality Control, 11.06 Working Paper Review – Conduct, Biases and Predispositions 
    Audit Reviewers’ Evaluation of Subordinates’ Work Quality
    Practical Implications:

    The results of this study are important for audit firms to consider when designing their audit review process.  The evidence indicates that reviewers’ personal biases do impact the way they review subordinate’s workpapers.  Furthermore, it indicates that reviewers that place great importance on preparer/reviewer alignment may sign-off on preparer workpapers that are of lower quality with respect to judgment/conclusion decisions.  An additional concern is that biases may have the potential to cause preparers to focus more on satisfying the reviewer’s preferences and beliefs opposed to performing the necessary procedures and documentation to satisfy auditing and accounting standards.  The study suggests the importance of proper training on the review process and how biases may impact conclusions. 


    Tan, H. and P. G. Shankar. 2010. Audit reviewers’ evaluation of subordinates’ work quality. Auditing: A Journal of Practice and Theory 29 (1): 251-266

    Performance evaluation, audit review process, opinion congruence, justification strength, rater characteristics, impression management, review bias
    Purpose of the Study:

    The audit workpaper review process is an essential component of the audit as it enhances audit quality and ensures that the judgments and decisions made by the audit team are reasonable and consistent with applicable auditing and accounting standards.  However, reviewers are subject to personal biases and preferences for accounting positions, which has the potential to impact the overall effectiveness of the workpaper review process.  This paper addresses this concern by investigating whether reviewer’s evaluations of preparers’ work quality are influenced by three factors: 

    • The reviewer’s initial opinion regarding the audit task performed by the preparer
    • The strength of the justification underlying the preparers’ conclusions with respect to the audit task
    • The importance that the subordinates’ work is aligned with the superiors’ preferences and pre-conceived opinion with respect to the audit task 

    The authors motivate their expectations based on the psychology literature discussing “opinion congruence.”  The opinion congruence effect results when an individual’s prior/initial beliefs influence their evaluations of argument quality.  This has the potential to impact audit reviewers as their review comments/decisions may not be based on assessing the justifications for the conclusions reached by the preparer (and client), but on their own prior beliefs regarding audit procedures and accounting positions. 

    Design/Method/ Approach:

    The research evidence is collected in the mid-2000s time period.  The authors use a group of audit seniors and audit managers from all Big 4 firms to complete a simulated task involving auditing the allowance for doubtful accounts for a computer sound card manufacturer.  Participants are assigned the role of reviewer where they had to assign a “quality” rating to memos written by the in-charge on the simulated audit engagement. 

    • The authors find that reviewers assign higher quality ratings for those memos that were consistent with their decision for the treatment of the allowance account. 
    • The authors find that the quality rating is higher (holding opinion congruence constant) when the preparers’ conclusions are well justified (i.e. have stronger justification). 
    • The authors find that when the reviewer places great importance on ensuring the subordinate conducts the work consistent with their beliefs/expectations, assigned ratings were greater for memos aligned with their opinion for the accounting treatment even when the justifications were very weak.
    Auditor Judgment, Audit Quality & Quality Control
    Auditor judgment in the workpaper review process, Working Paper Review – Conduct - Biases & Predispositions
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