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    Audit review: The impact of discussion timing and...
    research summary posted May 9, 2012 by The Auditing Section, last edited May 25, 2012 by James L Fuehrmeyer, tagged 11.0 Audit Quality and Quality Control, 11.06 Working Paper Review – Conduct, Biases and Predispositions 
    Audit review: The impact of discussion timing and familiarity
    Practical Implications:

    The results of this study provide practical guidance for firms as management determines the staffing of audit engagements and the timing of the workpaper review.  Managers are able to conduct a more effective review when they are familiar with their subordinates.  This suggests that there are benefits from staffing audits with associates who have prior experience working with the manager on the engagement.  The benefits of familiarity include better team performance (and thus higher quality audits).  The familiarity also allows the manager to better gauge the associate’s ability and competence, which enables the manager to focus on areas of deficiencies, which also increases team performance. 

    The study also provides valuable insight regarding the timing of the workpaper review process.  Managers are able to conduct a more effective review when they complete a preliminary review of the workpapers which is followed by a discussion with the preparer.  
    If the initial review of the workpapers is completed during a conversation with the preparer, it is possible that this format could increase the likelihood of an audit error occurring.  Therefore, the evidence suggests that firms should encourage managers to conduct face-to-face conversations about the workpapers after the manager completed his/her initial review.


    Favere-Marchesi, M. 2006. Audit review: The impact of discussion timing and familiarity. Behavioral Research in Accounting 18 (1): 53-64.

    Audit review, audit teams, audit team composition, auditor judgment, discussion timing, familiarity
    Purpose of the Study:

    Professional oversight controls helpcmaintain audit quality, and one critical control is the review of subordinates’ work by a superior.  The audit review process is an integral part of the quality control mechanism in audit practice and standards.  Traditionally, the review of working papers has been a sequential process; however, the trend in audit practice has been for the process to become more interactive, including face-to-face discussions between the preparer and the reviewer.  Recent audit process reengineering efforts have led to a substantial increased reliance on verbal interactions between team members. 

    The purpose of this paper is to investigate how the quality of the audit review process is affected by two factors: 

    • The timing of reviewer’s face-to-face discussion with a preparer may affect audit team performance.  Reviewers could engage in discussions with preparers concurrently (i.e., at the same time as the review) or post-review (i.e., after completing review of the workpapers). 
    • Reviewer’s familiarity with preparers may also affect the audit team performance.  This paper further considers how prior positive involvement between the preparer and reviewer affects the quality of the review process.
    Design/Method/ Approach:

    The authors conduct this study prior to 2006, and the experimented involved teams of two auditors (a manager and a senior) from Big 4 firms completing a simulated audit task.  The senior is asked to complete a preliminary analytical review task from a simulated audit of a manufacturing company.  He/she is asked to review sets of financial ratios (current year unaudited and prior year audited) and identify potential causes (including any possible material errors) for any unexpected fluctuations.  The manager is then asked to review the work of the senior and evaluate which of the senior’s proposed causes could explain the observed fluctuation.  The  managers were also asked to identify any other possible errors which were not included on the senior’s list that could explain the observed ratio fluctuations.  Both the senior associate and the manager discussed the results of the manager’s review.  However, the timing of the discussion was varied each of the times.  For some teams, the review and discussion occurred simultaneously, but for others, the discussion occurred after the review was completed.  At the end of the experiment, the researcher counted the total number of correct reasons for the fluctuations that were identified by the subjects.

    • The authors find that teams with a post-review discussion identify a greater number of plausible causes for the fluctuation than teams discussing the workpapers concurrently with the review. 
    • The authors find that familiar audit teams identify a greater number of plausible causes than unfamiliar teams.
    Audit Quality & Quality Control
    Working Paper Review – Conduct - Biases & Predispositions
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