With the advancements in technology and the recent trends in how audit teams communicate, audit firms increasingly develop and rely on computer-mediated communications and online platforms in the conduct of audits. We examine the effects of two different electronic interacting brainstorming platforms, structured (idea inputs organized into trees and shown by categories/ topics) and non-structured (idea inputs in chronological sequence), on audit team brainstorming performance. While the psychology literature suggests potential benefits from the structured brainstorming platforms, we find that, in a fraud hypothesis generation task, a structured brainstorming platform does not improve audit team fraud brainstorming performance (either quantity or quality of fraud hypotheses generated). Further, we find that a structured brainstorming platform reduces the differences in brainstorming performance and mental simulations between managers and seniors. This is because a structured brainstorming platform reduces managers’ performance, although it has no negative effects on seniors’ performance.
{"title":"The Impact of a Structured Electronic Interacting Brainstorming Platform","authors":"Wei Chen, K. Trotman, X. Zhang","doi":"10.2308/ajpt-2020-036","DOIUrl":"https://doi.org/10.2308/ajpt-2020-036","url":null,"abstract":"With the advancements in technology and the recent trends in how audit teams communicate, audit firms increasingly develop and rely on computer-mediated communications and online platforms in the conduct of audits. We examine the effects of two different electronic interacting brainstorming platforms, structured (idea inputs organized into trees and shown by categories/ topics) and non-structured (idea inputs in chronological sequence), on audit team brainstorming performance. While the psychology literature suggests potential benefits from the structured brainstorming platforms, we find that, in a fraud hypothesis generation task, a structured brainstorming platform does not improve audit team fraud brainstorming performance (either quantity or quality of fraud hypotheses generated). Further, we find that a structured brainstorming platform reduces the differences in brainstorming performance and mental simulations between managers and seniors. This is because a structured brainstorming platform reduces managers’ performance, although it has no negative effects on seniors’ performance.","PeriodicalId":48142,"journal":{"name":"Auditing-A Journal of Practice & Theory","volume":"37 1","pages":""},"PeriodicalIF":2.8,"publicationDate":"2021-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78550374","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The "organization capital" of a firm consists of its internal investments in its business units, processes, know how, employee skills, and information systems. We investigate whether a firm's investments in auditor-provided non-audit services (NAS) can supplement its own internal investment in organization capital, resulting in improved operating performance. We find that investments in NAS are positively related to a firm's subsequent operating performance consistent with NAS augmenting a firm's organization capital. Firms with low organization capital in general, high complexity, or disruption due to acquisitions benefit the most from purchasing NAS from their auditor. We also show that firms engaging auditors with a high level of expertise manifest higher levels of future operating performance. We find no evidence that the improvement in operating performance subsequent to NAS investment is due to earnings management or lower audit quality.
{"title":"Investments in Auditor-provided Non-audit Services and Future Operating Performance","authors":"Will Ciconte, W. Knechel, Michael A. Mayberry","doi":"10.2308/ajpt-19-050","DOIUrl":"https://doi.org/10.2308/ajpt-19-050","url":null,"abstract":"The \"organization capital\" of a firm consists of its internal investments in its business units, processes, know how, employee skills, and information systems. We investigate whether a firm's investments in auditor-provided non-audit services (NAS) can supplement its own internal investment in organization capital, resulting in improved operating performance. We find that investments in NAS are positively related to a firm's subsequent operating performance consistent with NAS augmenting a firm's organization capital. Firms with low organization capital in general, high complexity, or disruption due to acquisitions benefit the most from purchasing NAS from their auditor. We also show that firms engaging auditors with a high level of expertise manifest higher levels of future operating performance. We find no evidence that the improvement in operating performance subsequent to NAS investment is due to earnings management or lower audit quality.","PeriodicalId":48142,"journal":{"name":"Auditing-A Journal of Practice & Theory","volume":"24 1","pages":""},"PeriodicalIF":2.8,"publicationDate":"2021-08-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89753743","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-07-20DOI: 10.2308/1558-7991-40.3.i
{"title":"Covers and Front Matter","authors":"","doi":"10.2308/1558-7991-40.3.i","DOIUrl":"https://doi.org/10.2308/1558-7991-40.3.i","url":null,"abstract":"","PeriodicalId":48142,"journal":{"name":"Auditing-A Journal of Practice & Theory","volume":"143 1","pages":""},"PeriodicalIF":2.8,"publicationDate":"2021-07-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77963205","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Shana M. Clor-Proell, Kathryn Kadous, Chad A. Proell
Lower-level auditors are likely to encounter client information that may reflect important audit issues. The audit team cannot address these issues unless they are communicated upward. However, research indicates that lower-level auditors sometimes withhold issues, threatening audit effectiveness. We use a multi-method grounded theory approach to expand our understanding of the factors associated with auditors’ decision to speak up about potential audit issues. We use an experiential questionnaire to draw out participants’ real-life experiences with the decision to speak up or remain silent in the field (i.e., the “voice” decision). We summarize this work in a framework of audit voice determinants and a theoretical model of audit voice. We then use the determinants framework and the developed theory to conduct an experiment as an exemplar for how our work can be useful in generating future research.
{"title":"The Sounds of Silence: A Framework, Theory, and Empirical Evidence of Audit Team Voice","authors":"Shana M. Clor-Proell, Kathryn Kadous, Chad A. Proell","doi":"10.2308/ajpt-2021-015","DOIUrl":"https://doi.org/10.2308/ajpt-2021-015","url":null,"abstract":"Lower-level auditors are likely to encounter client information that may reflect important audit issues. The audit team cannot address these issues unless they are communicated upward. However, research indicates that lower-level auditors sometimes withhold issues, threatening audit effectiveness. We use a multi-method grounded theory approach to expand our understanding of the factors associated with auditors’ decision to speak up about potential audit issues. We use an experiential questionnaire to draw out participants’ real-life experiences with the decision to speak up or remain silent in the field (i.e., the “voice” decision). We summarize this work in a framework of audit voice determinants and a theoretical model of audit voice. We then use the determinants framework and the developed theory to conduct an experiment as an exemplar for how our work can be useful in generating future research.","PeriodicalId":48142,"journal":{"name":"Auditing-A Journal of Practice & Theory","volume":"70 1","pages":""},"PeriodicalIF":2.8,"publicationDate":"2021-06-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90474620","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Interview-based research is growing in prominence in auditing, yet many researchers are self-trained in this method, leading the novice interview researcher to encounter a number of roadblocks along the way. The overarching goal of our study is to add to the methodological resources available on the interview method by providing a compilation of challenges that novice interview researchers have experienced, along with suggested methods to cope with these challenges (i.e., how to overcome these challenges, what to do differently, and advice on navigating the interview method). With this new perspective, our paper serves as a resource to prospective interview-based researchers so they can enter the field better informed about possible roadblocks they might encounter along the way and methods to cope with these challenges. In turn, we hope to contribute to the production of more insightful and efficient interview-based research.
{"title":"Lessons Learned: Challenges When Conducting Interview-based Research in Auditing and Methods of Coping","authors":"M. Dodgson, Andrew J. Trotman","doi":"10.2308/AJPT-19-098","DOIUrl":"https://doi.org/10.2308/AJPT-19-098","url":null,"abstract":"Interview-based research is growing in prominence in auditing, yet many researchers are self-trained in this method, leading the novice interview researcher to encounter a number of roadblocks along the way. The overarching goal of our study is to add to the methodological resources available on the interview method by providing a compilation of challenges that novice interview researchers have experienced, along with suggested methods to cope with these challenges (i.e., how to overcome these challenges, what to do differently, and advice on navigating the interview method). With this new perspective, our paper serves as a resource to prospective interview-based researchers so they can enter the field better informed about possible roadblocks they might encounter along the way and methods to cope with these challenges. In turn, we hope to contribute to the production of more insightful and efficient interview-based research.","PeriodicalId":48142,"journal":{"name":"Auditing-A Journal of Practice & Theory","volume":"1 1","pages":""},"PeriodicalIF":2.8,"publicationDate":"2021-06-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90532051","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Nathan R. Berglund, Michelle A. Draeger, Mikhail Sterin
Audit committee members must be independent of management to protect shareholder interests. While current regulations restrict audit committee members from holding management positions (i.e., affiliations), studies find that management’s preferences continue to impact audit committee decisions. This motivates analysis of independence threats beyond affiliations. We apply the American Institute of Certified Public Accountants’ conceptual approach to independence and examine the threat of management’s undue influence over audit committee members. Examining the relative tenure of executives and audit committee members, we find that greater management influence is associated with a lower propensity of the auditor to issue a modified going concern opinion to a distressed client. We also find that greater management influence is associated with increased opinion shopping behavior. These findings are consistent with an undue influence threat to audit committee independence. Our results extend the academic literature and inform regulatory concerns on audit committee independence.
{"title":"Management’s Undue Influence over Audit Committee Members: Evidence from Auditor Reporting and Opinion Shopping","authors":"Nathan R. Berglund, Michelle A. Draeger, Mikhail Sterin","doi":"10.2308/AJPT-2020-054","DOIUrl":"https://doi.org/10.2308/AJPT-2020-054","url":null,"abstract":"Audit committee members must be independent of management to protect shareholder interests. While current regulations restrict audit committee members from holding management positions (i.e., affiliations), studies find that management’s preferences continue to impact audit committee decisions. This motivates analysis of independence threats beyond affiliations. We apply the American Institute of Certified Public Accountants’ conceptual approach to independence and examine the threat of management’s undue influence over audit committee members. Examining the relative tenure of executives and audit committee members, we find that greater management influence is associated with a lower propensity of the auditor to issue a modified going concern opinion to a distressed client. We also find that greater management influence is associated with increased opinion shopping behavior. These findings are consistent with an undue influence threat to audit committee independence. Our results extend the academic literature and inform regulatory concerns on audit committee independence.","PeriodicalId":48142,"journal":{"name":"Auditing-A Journal of Practice & Theory","volume":"83 1","pages":""},"PeriodicalIF":2.8,"publicationDate":"2021-06-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85973814","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Steven M. Glover, James C. Hansen, Timothy A. Seidel
Archival research in accounting often relies on the audit report date to capture the constructs of audit efficiency, audit timeliness, audit effort, or audit completion. Auditors' view of what constitutes sufficient appropriate evidence to support the audit opinion, and consequently the date of the audit report, previously coincided with the substantial completion of audit fieldwork, which would be days or weeks before a 10-K filing. However, this view has shifted to coincide with the timing of the public issuance of clients' financial statements (i.e., the 10-K filing date) following several regulatory actions, audit practice changes, and professional standard setting changes occurring since the turn of the century. In this study, we present evidence of this shift in auditor perspective and discuss implications for academic research and standard setting.
{"title":"How has the Change in the Way Auditors Determine the Audit Report Date Changed the Meaning of the Audit Report Date? Implications for Academic Research","authors":"Steven M. Glover, James C. Hansen, Timothy A. Seidel","doi":"10.2308/AJPT-19-014","DOIUrl":"https://doi.org/10.2308/AJPT-19-014","url":null,"abstract":"Archival research in accounting often relies on the audit report date to capture the constructs of audit efficiency, audit timeliness, audit effort, or audit completion. Auditors' view of what constitutes sufficient appropriate evidence to support the audit opinion, and consequently the date of the audit report, previously coincided with the substantial completion of audit fieldwork, which would be days or weeks before a 10-K filing. However, this view has shifted to coincide with the timing of the public issuance of clients' financial statements (i.e., the 10-K filing date) following several regulatory actions, audit practice changes, and professional standard setting changes occurring since the turn of the century. In this study, we present evidence of this shift in auditor perspective and discuss implications for academic research and standard setting.","PeriodicalId":48142,"journal":{"name":"Auditing-A Journal of Practice & Theory","volume":"8 1","pages":""},"PeriodicalIF":2.8,"publicationDate":"2021-06-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89504213","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The COVID-19 pandemic has fundamentally changed the ways auditors work and interact with team members and others in the financial reporting process. In particular, there has been a move away from face-to-face interactions to the use of virtual teams, with strong indications many of these changes will remain post-pandemic. We examine the impacts of the pandemic on group judgment and decision making (JDM) research in auditing by reviewing research on auditor interactions with respect to the review process (including coaching), fraud brainstorming, consultations within audit firms, and parties outside the audit firm such as client management and the audit committee. Through the pandemic lens and for each auditor interaction, we consider new research questions for audit JDM researchers to investigate and new ways of addressing existing research questions given these fundamental changes. We also identify potential impacts on research methods used to address these questions during the pandemic and beyond.
{"title":"Group Judgment and Decision Making in Auditing: Research in the Time of COVID-19 and Beyond","authors":"Tim D. Bauer, Kerry A. Humphreys, K. Trotman","doi":"10.2308/AJPT-2020-147","DOIUrl":"https://doi.org/10.2308/AJPT-2020-147","url":null,"abstract":"The COVID-19 pandemic has fundamentally changed the ways auditors work and interact with team members and others in the financial reporting process. In particular, there has been a move away from face-to-face interactions to the use of virtual teams, with strong indications many of these changes will remain post-pandemic. We examine the impacts of the pandemic on group judgment and decision making (JDM) research in auditing by reviewing research on auditor interactions with respect to the review process (including coaching), fraud brainstorming, consultations within audit firms, and parties outside the audit firm such as client management and the audit committee. Through the pandemic lens and for each auditor interaction, we consider new research questions for audit JDM researchers to investigate and new ways of addressing existing research questions given these fundamental changes. We also identify potential impacts on research methods used to address these questions during the pandemic and beyond.","PeriodicalId":48142,"journal":{"name":"Auditing-A Journal of Practice & Theory","volume":"21 1","pages":""},"PeriodicalIF":2.8,"publicationDate":"2021-05-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80938367","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using audit hours and hourly audit fees for a large sample of public and private companies, we examine how auditors respond to auditor business risk. We find that auditors work more hours and charge higher hourly fees when auditing public companies than when auditing private companies. A difference-in-differences time-series comparison of the pre- and post-initial public offering (IPO) periods also indicates that both audit hours and hourly audit fees are higher for the post-IPO period than for the pre-IPO period of the company. This suggests that auditors respond to an increase in auditor business risk by increasing audit effort and charging a risk premium for the residual risk that additional effort alone does not fully address.
{"title":"Auditors' Response to Auditor Business Risk: An Analysis Using Public and Private Companies","authors":"Gil S. Bae, S. Choi, Jae Eun Lee","doi":"10.2308/AJPT-19-102","DOIUrl":"https://doi.org/10.2308/AJPT-19-102","url":null,"abstract":"Using audit hours and hourly audit fees for a large sample of public and private companies, we examine how auditors respond to auditor business risk. We find that auditors work more hours and charge higher hourly fees when auditing public companies than when auditing private companies. A difference-in-differences time-series comparison of the pre- and post-initial public offering (IPO) periods also indicates that both audit hours and hourly audit fees are higher for the post-IPO period than for the pre-IPO period of the company. This suggests that auditors respond to an increase in auditor business risk by increasing audit effort and charging a risk premium for the residual risk that additional effort alone does not fully address.","PeriodicalId":48142,"journal":{"name":"Auditing-A Journal of Practice & Theory","volume":"71 1","pages":""},"PeriodicalIF":2.8,"publicationDate":"2021-05-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73004243","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigate whether individual auditors increase their audit efforts for other clients after auditing a client with a major environmental accident using a mixed-methods. Results from archival and survey data show that (1) auditors work harder, as proxied by abnormal audit fees and audit report lags, after the environmental accident experience; and (2) the effects of environmental accident experience on auditing efforts are (i) moderated by situational factors (industry pollution level and regional environmental regulation) and individual factors (auditor age and position), and (ii) mediated by auditor risk awareness. Our further analyses on the influence of Auditing Standard No. 1631, The Consideration of Environmental Matters in the Audit of Financial Statements, show that auditors’ knowledge of this standard strengthens the effects of environmental accident experience on audit efforts although the standard per se has little impact on audit behavior. Together, this study offers a psychological account for audit behavior.
{"title":"Once Bitten, Twice Shy: The Effect of Experiencing a Client with an Environmental Accident on Audit Effort","authors":"Hongtao Shen, Huiying Wu, Xiting Wu, Jiaxing You","doi":"10.2308/AJPT-2020-005","DOIUrl":"https://doi.org/10.2308/AJPT-2020-005","url":null,"abstract":"We investigate whether individual auditors increase their audit efforts for other clients after auditing a client with a major environmental accident using a mixed-methods. Results from archival and survey data show that (1) auditors work harder, as proxied by abnormal audit fees and audit report lags, after the environmental accident experience; and (2) the effects of environmental accident experience on auditing efforts are (i) moderated by situational factors (industry pollution level and regional environmental regulation) and individual factors (auditor age and position), and (ii) mediated by auditor risk awareness. Our further analyses on the influence of Auditing Standard No. 1631, The Consideration of Environmental Matters in the Audit of Financial Statements, show that auditors’ knowledge of this standard strengthens the effects of environmental accident experience on audit efforts although the standard per se has little impact on audit behavior. Together, this study offers a psychological account for audit behavior.","PeriodicalId":48142,"journal":{"name":"Auditing-A Journal of Practice & Theory","volume":"57 1","pages":""},"PeriodicalIF":2.8,"publicationDate":"2021-04-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78012031","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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