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    Audit Partner Perceptions of Post-Audit Review Mechanisms:...
    research summary posted April 28, 2014 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.12 Impact of potential post-audit review - e.g., PCAOB, internal firm inspections, 11.0 Audit Quality and Quality Control, 11.11 Impact of Firm and External Inspection Programs 
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    Title:
    Audit Partner Perceptions of Post-Audit Review Mechanisms: An Examination of Internal Quality Reviews and PCAOB Inspections
    Practical Implications:

    The results of this study make several contributions. It is beneficial to researchers interested in furthering our understanding of the effects and effectiveness of IQRs and PCAOB inspections, as well as to practitioners and regulators. While many opportunities for further research exist, results indicating a large portion of partners try to predict the engagements that will be selected for either PAR can serve as a foundation to investigate further the effects of PAR salience on audit planning and reporting decisions.

    For more information on this study, please contact Richard W. Houston
     

    Citation:

    Houston, R. W., and C. M. Stefaniak. 2013. Audit Partner Perceptions of Post-Audit Review Mechanisms: An Examination of Internal Quality Reviews and PCAOB Inspections. Accounting Horizons 27 (1).

    Keywords:
    audit quality; internal quality reviews; PCAOB inspections
    Purpose of the Study:

    Tis study attempts to examine audit partner perceptions of the two primary post-audit review (PAR) mechanisms intended to help maintain and improve the quality of public company audits (PCAOB inspections and firms’ internal quality reviews [IQRs]). Using a survey of audit partners, the authors investigate and compare partners’ perceptions of each review’s predictability, conduct, inspector qualifications and behavior, and effects. This study extends upon prior research by reporting perceptions of experienced partners from large firms, providing detailed evidence concerning IQRs, and examining partners’ perceptions of both PCAOB inspections and IQRs. Finally, the authors are also the first to study PAR perceptions to consider the effects of partner experience, complementing research suggesting that partner experience affects audit performance. 
     
     

    Design/Method/ Approach:

    To learn more about PCAOB inspections and IQRs, the authors investigate and compare partners’ perceptions of each PAR. The research questions concern perceptions of each PAR’s (1) predictability, (2) conduct, (3) inspector qualifications and behavior, and (4) effects, as well as whether results differ based on partner experience. To examine the research questions, the authors distributed a survey to large-firm audit partners. Survey participants were obtained via a mailing list obtained through the AICPA. The list included U.S. professionals who were (1) partners, shareholders, or owners; (2) audit focused; (3) employed by U.S. public accounting firms with over 100 employees. The packets were mailed to 1,400 auditors who met the above criteria. 125 partners responded resulting in approximately a 9 percent response rate.

    Findings:
    • Partners can or try to predict the engagements that will be selected for either an IQR or PCAOB inspections.
    • While partner believe they can more easily predict the specific year of an IQR, no difference was found in their abilities to select which specific engagements will be selected for IQRs or PCAOB inspections.
    • Partners perceive both PARs to be very detailed.
    • Partners believe that IQRs are more likely to cover all audit areas and that IQR reviewers have a better understanding of their firms’ audit methodologies than do PCAOB inspectors.
    • Partners believe that both IQRs and PCAOB inspections affect their professional reputation.
    • IQRs provide more timely feedback than do PCAOB inspections, and partners perceive IQR feedback to be more beneficial.
       
    Category:
    Audit Quality & Quality Control, Auditor Judgment
    Sub-category:
    Impact of Firm & External Inspection Programs, Impact of potential post-audit review (e.g. PCAOB - internal firm inspections)