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One Team or Two? Investigating Relationship Quality between Auditors and IT Specialists: Implications for Audit Team Identity and the Audit Process

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Abstract

While prior research focuses on the audit team made up of auditors, we focus on the collective audit team made up of auditors and specialists—in our context, information technology (IT) specialists. Complex systems in today's audits and researcher and regulator concerns regarding ineffective coordination and communication between the two specializations motivate better understanding of this collective audit team. We investigate how auditors and IT specialists perceive their relationship and how the audit process unfolds when these relationships are good and when they are difficult. Results of interviews conducted with Big 4 audit and IT practitioners provide evidence that they perceive their relationship quality to depend on the level of mutual value and respect. Auditors assert a one‐team view of the collective audit team that includes IT specialists, but IT specialists feel auditors see them as a separate team and a “necessary evil.” The audit process vastly differs between relationships perceived as difficult and good. In difficult relationships, the two specializations often struggle for status, with limited communication or effort to understand how their work fits together. Our findings imply difficult relationships are at risk for poor integration and unsupported reliance on IT functions, shedding light on recurring threats to audit quality identified by PCAOB inspections. In good relationships, auditors and IT specialists appear motivated to engage in frequent and open communication to help understand, coordinate, and complete the audit. Inferences gleaned from good relationships let us highlight prescriptions for audit firms to improve effectiveness of collective audit teams. This article is protected by copyright. All rights reserved.

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... Our findings underscore the importance of distinguishing not only between non-IT ELMW and ITMW but also types of ITMW as identified in data quality research. deeply rooted within audit team culture (Bauer and Estep, 2019). The potentially high cost of increased specialist auditors use and, more simply, the cost of ever increasingly complex enterprise systems used by auditees and often implemented to remediate control problems pose a potential longer-term effect on audit complexity and associated fees (Li et al., 2012;Hoffman et al., 2018). ...
... In 2010, the PCAOB intensified their focus on internal control audits and an association can be seen between reported deficiencies in the identification of internal control weaknesses (ICW) and subsequent auditor reports on ICW and related audit premiums charged to clients (DeFond and Lennox, 2017). PCAOB (2008PCAOB ( , 2012 inspection reports have highlighted in particular the concern over how firms have addressed IT-related audit issues and notably the ineffective communications between IT audit specialists and core audit teams, an issue recent research indicates is Second, the persistent cost of ITMW should also draw the attention of audit committees and firm management in light of both regulators' (PCAOB, 2008(PCAOB, , 2012 and researchers' (Bauer and Estep, 2019) identification of concerns over communication between audit team core members and IT audit specialists. Bauer and Estep (2019) find that this communication problem is deep rooted in audit team culture and would seemingly have the potential to exacerbate the persistence in ITMW associated remediation costs. ...
... PCAOB (2008PCAOB ( , 2012 inspection reports have highlighted in particular the concern over how firms have addressed IT-related audit issues and notably the ineffective communications between IT audit specialists and core audit teams, an issue recent research indicates is Second, the persistent cost of ITMW should also draw the attention of audit committees and firm management in light of both regulators' (PCAOB, 2008(PCAOB, , 2012 and researchers' (Bauer and Estep, 2019) identification of concerns over communication between audit team core members and IT audit specialists. Bauer and Estep (2019) find that this communication problem is deep rooted in audit team culture and would seemingly have the potential to exacerbate the persistence in ITMW associated remediation costs. Researchers should explore this potential relationship in future research. ...
... Research on auditors' use of valuation and other types of specialists suggests that while auditors rely heavily on and trust specialists, audit teams struggle to integrate specialists into their teams (Boritz et al. 2017;Bauer and Estep 2018). Some studies attribute these struggles to auditors' difficulty in understanding or using specialists' work, while others attribute these struggles to distrust of specialists or beliefs that specialists do not contribute value to the audit (Hux 2017). ...
... Though Bauer and Estep (2018) do not directly examine competition, they find that auditors and IT specialists in difficult working relationships often struggle for power and take a "two team" approach, consistent with competition. Bauer and Estep (2018) also find that auditors and specialists believe a "one team" approach is more effective and more prevalent in good working relationships, suggesting that both groups view the behaviors consistent with competition as counterproductive and that these behaviors primarily occur under limited circumstances (i.e., difficult working relationships). ...
... Though Bauer and Estep (2018) do not directly examine competition, they find that auditors and IT specialists in difficult working relationships often struggle for power and take a "two team" approach, consistent with competition. Bauer and Estep (2018) also find that auditors and specialists believe a "one team" approach is more effective and more prevalent in good working relationships, suggesting that both groups view the behaviors consistent with competition as counterproductive and that these behaviors primarily occur under limited circumstances (i.e., difficult working relationships). ...
Article
Auditors frequently use valuation specialists to help them evaluate fair values, but researchers and regulators know little about how auditors use these specialists. Based on interviews with 28 auditors and 14 valuation specialists, I develop a theoretical framework informed by expert systems and professional competition theories. The interviews suggest that institutional pressures in the fair value environment unevenly impact auditors and specialists, causing tension between auditors' needs for ontological security and jurisdictional claims. This tension leads to one‐sided competition between auditors and specialists and incomplete acceptance of specialists' work. Auditors' competitive behaviors coupled with this incomplete acceptance result in a tendency to make specialists' work conform to auditors' views. Collectively, these findings suggest that auditors use specialists as an institutional mechanism to create comfort, but not insight. This study links expert systems and professional competition theories, and it provides critical insight into some assumptions underlying tenets of each theory. It also informs researchers, regulators, and practitioners interested in understanding and addressing problems related to the use of specialists. This article is protected by copyright. All rights reserved.
... Prior research has examined and identified some of the challenges encountered when auditors use the work of various types of specialists (Boritz, Kochetova-Kozloski, Robinson, and Wong 2017;Griffith 2018;Hux 2017;Joe, Wu, and Zimmerman 2017;Pyzoha, Taylor, and Wu 2017;Bauer and Estep 2018). Several of these studies have focused on auditor reliance on valuation specialists (Griffith 2018;Joe et al. 2017;Pyzoha et al. 2017). ...
... It is important to examine the effects of social similarity characteristics on the dynamics between auditors and IT specialists because IT specialists are being employed with increasing frequency due to the widespread implementation of complex information systems such as enterprise resource planning (ERP) systems by both small and large companies (Bauer and Estep 2018). Prior literature indicates that IT-related internal controls, which are tested by IT specialists, serve important and pervasive functions in organizations. ...
... Given the negative implications of inadequate or ineffective IT controls and the significant role played by the IT specialist in detecting problems in IT controls, it is no wonder that standard setters presumptively require auditors to consider assigning IT specialists to audit engagements to determine the effect of IT on the audit, to gain an understanding of IT controls, and to design and perform tests of IT controls (AICPA 2012;2006a;2006b;2006c). Curtis, Jenkins, Bedard, and Deis (2009) suggest that it may be advisable to involve IT auditors 3 on audit engagements for client's with highly computerized systems. Despite the important role the IT auditor performs on many engagements, outside of interview based studies by Boritz et al. (2017) and Bauer and Estep (2018), little research has examined issues pertaining to the interaction of financial auditors and IT auditors (Curtis et al. 2009). Examination of the interaction between the financial auditor and the IT specialist is especially warranted due to the unique nature of the IT specialist as a specialist employed within the firm. ...
Article
Due to limitations in IT expertise, auditors frequently rely upon IT specialists during audit engagements. Does social similarity between the auditor and an IT specialist induce social biases that affect the auditor's reliance on the specialist? Using an experiment with 60 auditors, I examine how financial auditors' reliance on IT specialists is affected by two dimensions of social similarity: the IT specialist's spatial distance (in-house office location vs. sourcing from another office) and domain knowledge distinctiveness (distinct vs. overlapping) relative to financial auditors. My findings provide evidence of a possible boundary condition to the widely accepted social identity theory by documenting the interaction of two dimensions of social similarity on auditor behavior. Specifically, when IT specialists possess distinct (overlapping) domain knowledge, auditors place greater (similar) reliance on out-of-office specialists relative to in-house specialists.
... Our findings underscore the importance of distinguishing not only between non-IT ELMW and ITMW but also types of ITMW as identified in data quality research. deeply rooted within audit team culture (Bauer and Estep, 2019). The potentially high cost of increased specialist auditors use and, more simply, the cost of ever increasingly complex enterprise systems used by auditees and often implemented to remediate control problems pose a potential longer-term effect on audit complexity and associated fees (Li et al., 2012;Hoffman et al., 2018). ...
... In 2010, the PCAOB intensified their focus on internal control audits and an association can be seen between reported deficiencies in the identification of internal control weaknesses (ICW) and subsequent auditor reports on ICW and related audit premiums charged to clients (DeFond and Lennox, 2017). PCAOB (2008PCAOB ( , 2012 inspection reports have highlighted in particular the concern over how firms have addressed IT-related audit issues and notably the ineffective communications between IT audit specialists and core audit teams, an issue recent research indicates is Second, the persistent cost of ITMW should also draw the attention of audit committees and firm management in light of both regulators' (PCAOB, 2008(PCAOB, , 2012 and researchers' (Bauer and Estep, 2019) identification of concerns over communication between audit team core members and IT audit specialists. Bauer and Estep (2019) find that this communication problem is deep rooted in audit team culture and would seemingly have the potential to exacerbate the persistence in ITMW associated remediation costs. ...
... PCAOB (2008PCAOB ( , 2012 inspection reports have highlighted in particular the concern over how firms have addressed IT-related audit issues and notably the ineffective communications between IT audit specialists and core audit teams, an issue recent research indicates is Second, the persistent cost of ITMW should also draw the attention of audit committees and firm management in light of both regulators' (PCAOB, 2008(PCAOB, , 2012 and researchers' (Bauer and Estep, 2019) identification of concerns over communication between audit team core members and IT audit specialists. Bauer and Estep (2019) find that this communication problem is deep rooted in audit team culture and would seemingly have the potential to exacerbate the persistence in ITMW associated remediation costs. Researchers should explore this potential relationship in future research. ...
The PCAOB's audit firm inspections drive audit focus and costs. The PCAOB's 2010-initiated increased emphasis on internal control audit work intensified concern over internal control weaknesses (ICW). IT-related material weaknesses (ITMW) have emerged as particularly significant with PCAOB reports (2008, 2012) highlighting on-going deficiencies in IT controls auditing and the 2015 PCAOB brief noting an on-going focus on recurring audit deficiencies. We explore how ICW affect audit fees and how alternative types of ITMW lead to varying degrees of persistence in fee premiums. Using propensity score matched samples, we find fee premiums associated with ITMW linger longer than premiums for non-IT entity-level material weaknesses (ELMW) or firms reporting account-specific material weaknesses. Moreover, we find that audit fee premiums by type of ICW remediated is overall strongest for ITMW linked to data processing integrity. Our findings underscore the importance of distinguishing not only between non-IT ELMW and ITMW but also types of ITMW as identified in data quality research.
... 5 Although the AICPA requires CPA firms to conduct SOC audits, one might ask whether CPA firms have the right expertise for this. To this end, it is worth noting that many audit firms directly educate their staff on technology and employ technology consultants (e.g., Bauer et al. 2019). Deloitte's Cloud Institute, for example, is widely used by its workforce, and Ernst & Young provides its staff an in-house "Tech MBA." 6 Nonetheless, one should not think of auditors as being technologically superior to management. ...
... Due to the demand for audits arising from diverse companies and stakeholders, audit firms possess a variety of specializations and expertise, directly educate their staff in technology, and employ technology consultants (e.g., Bauer et al. 2019;Deloitte 2020;Johnson and Lys 1990;Minutti-Meza 2013). As a result, there is reason to believe that audit firms can acquire the technical expertise required to perform SOC audits, but exactly what controls these audits evaluate in practice is an open question. ...
Article
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Firms routinely manage their financial reporting systems on external cloud platforms that are susceptible to cyberattacks and data integrity issues. Therefore, the AICPA developed a special type of voluntary audit called a “Service Organization Control” audit (SOC audit) that evaluates this risk. This study conducts one of the first systematic analyses of the benefits and costs of these voluntary audits. Using hand-collected data from public firms, I find that (1) 29% of firms in the S&P 500 (representing $10.9 trillion in market value) receive these audits; (2) business-model exposure to technology predicts a firm’s decision to receive these audits; (3) the scope of these audits includes internal controls over data integrity; and (4) these audits are one of the largest predictors of the variation in audit-related fees, amounting to a $900,000 average annual increase in these fees at the firm level (by comparison, tax preparation fees average about $1.3 million). SOC audits are thus an important and concrete example of the broader social and governance mandates of new stakeholder-focused reporting frameworks, such as the SASB’s Conceptual Framework.
... As mentioned above, the lack of professionals with ADA skills in audit firms is perceived as an inhibiting factor for the adoption of ADA. However, it is a common practice of audit firms to employ IT specialists (Bauer and Estep, 2014;Bauer et al., 2019;Boritz et al., 2017;Otero, 2015). The professional standards require auditors to refer to domain specialists if they do not possess the required expertise outside of accounting and auditing to obtain sufficiently appropriate audit evidence (IAASB, 2009). ...
... The required IT expertise and, therefore, the necessity for IT auditors, increases with the complexity of the client's IT environment (Curtis et al., 2009). They are mainly called upon for the testing of IT-related controls as part of the risk assessment, but they are also increasingly involved across different aspects of financial statement audits (Bauer and Estep, 2014;Bauer et al., 2019;Boritz et al., 2017;Otero, 2015). IT auditors are usually required to have a solid understanding of ERP systems, which enables them to better identify risks and select relevant controls in IT processes than financial auditors (Hoitash et al., 2008;Hunton et al., 2004;Tucker, 2001). ...
Article
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Audit firms are increasingly engaging with advanced data analytics to improve the efficiency and effectiveness of external audits through the automation of audit work and obtaining a better understanding of the client's business risk and thus their own audit risk. This paper examines the process by which audit firms adopt advanced data analytics, which has been left unaddressed by previous research. We derive a process theory from expert interviews which describes the activities within the process and the organizational units involved. It further describes how the adoption process is affected by technological, organizational and environmental contextual factors. Our research contributes to the extent body of research on technology adoption in auditing by using a previously unused theoretical perspective, and contextualizing known factors of technology adoption. The findings presented in this paper emphasize the importance of technological capabilities of audit firms for the adoption of advanced data analytics; technological capabilities within audit teams can be leveraged to support both the ideation of possible use cases for advanced data analytics, as well as the diffusion of solutions into practice.
... First, it is possible that some technology is mostly used by specialists. Audit teams are often complemented by such experts, in particular those with an IT background (Bauer et al., 2019). If technology is applied by such specialists, the related IT importance could be assessed as high, whereas the corresponding IT expertise of auditors is low. ...
... However, this seems to be a broad approach that contradicts our perception of a digital technique (McKee, 2000). We understand IT specialists as an integral part of professional judgment (Bauer et al., 2019), but not as a tool itself. Therefore, our focus is on hardware and software innovations. ...
Article
Innovative information technology (IT) could help to improve the effectiveness and efficiency of audits. Accordingly, we investigate the future importance, and current auditor expertise, regarding 18 technologies identified from a comprehensive literature review and interviews with Big 4 audit technology experts. We then surveyed German auditors and received 433 usable responses. Respondents perceive most of the analyzed IT as relevant in the next three to five years. Online meeting solutions and data mining have the highest importance rating. By contrast, self-assessed current personal knowledge of most IT is low. Complementary regression analyses reveal that female auditors and Big 4 auditors perceive IT as more important, and younger auditors and Big 4 auditors assess their own knowledge as higher. Comparing importance and knowledge ratings, we find a serious importance-knowledge gap for all considered IT. Intensive educational efforts seem to be essential in order to close this gap.
... Another way would be to engage IT specialists to join the audit team. Bauer and Estep (2019) explore the relationship between IT specialists and audit teams to find that the quality of the relationship between these parties can impact the quality of the audit evidence gathered. Hirsch (2020) studies the spatial distance and domain knowledge distinctiveness between auditors and IT specialists to suggest that auditors will rely differently on IT specialists whether they possess similar or different knowledge levels, and whether or not the specialists are inhouse. ...
... You have your audit team and your IT team, and the knowledge is separate. (Interviewee #11) A challenge remains in ensuring that auditors and IT professionals work together effectively, as poor integration between these professionals can undermine audit outcomes (Bauer and Estep 2019;Hirsch 2020). As someone who is not an expert in blockchain, Interviewee #11 worries that she would be dependent on these subject matter experts and that she might not be able to develop the necessary expertise to obtain a sufficient and appropriate knowledge of the business to challenge the specialists' conclusions, as the auditing standards require. ...
Article
Presently, auditing firms are hesitant to accept mandates from companies that hold a significant amount of cryptoassets, primarily because the blockchain sector introduces novel, technically sophisticated and risky propositions that auditors are unequipped to handle. Abrupt recusals by auditors operating in this sector have led to several enterprises being placed on cease trade by securities regulators for failure to produce audited financial statements on time, thus impeding these companies from raising capital and bringing new investment to fund innovation in this space. Through an iterative process of interviews with senior accounting professionals, structured brainstorming among a multidisciplinary team of accountants and blockchain experts, and a focus group with experienced auditors, we critically analyze the purported roadblocks to auditing blockchain firms and map them to traditional auditing practices. We urge auditors to reconsider their resistance to the blockchain sector by demonstrating that providing an audit opinion is challenging but not insurmountable.
... Asare and Wright (2018) emphasize the influence of senior team leaders who develop a "culture of consultation" based on communication, relationships, and sharing of real-world experiences. Bauer et al. (2019) find that leadership's support improves relationships between auditors and specialists, and perceptions of the firm's culture as "one team" results in improved communication and coordination. In contrast, Smith-Lacroix et al. (2012), Griffith (2020), and Asare and Wright (2018) argue that use of specialists could increase costs and delays, straining the auditor-auditee relationship. ...
... This is of particular interest as some research identifies cultural differences between audit and other service lines (e.g. systems consultancy; Bauer et al., 2019). ...
... Even earlier than that, Merhout and Havelka (2008) showed that one of the factors affecting the quality of audits is the simultaneous cooperation between the different departments of the firm, the audited department and top management, as it allows for a better flow of information. Bauer and Estep (2018) emphasised that internal auditors must work with IT experts. The results of their research showed that, when relations between the two parties are good, the audit is effective, as knowledge is shared and debugging is timelier. ...
... The regression also showed that the variable 'collaboration' is not statistically significant and therefore does not affect the security of online services. This result is inconsistent with the studies by Bauer and Estep (2018), Steinbart et al. (2018), Caputo et al. (2018) and Fjellström et al. (2020), who argued that collaboration leads to knowledge sharing and that more violations are detected before they cause financial or other loss to the business. It is evident that similarly to findings regarding 'technical knowledge', auditors perceive cyber auditing as a separate field from their line of work. ...
... Several parts of the audit process include planning the audit, completing a client risk assessment, executing internal control tests, gathering evidence, and sharing information with appropriate parties (Appelbaum et al., 2017;Zraqat et al., 2021). Auditor jobs have become increasingly sophisticated in recent years, with auditors now risk assessments (Bauer & Estep, 2019). They must gain an overview of the client's risks as well as objective methods to gather adequate information to offer a professional opinion on management's financial statement declarations (Zureigat, 2014;Ji et al., 2020;Salijeni et al., 2021), Data analytics simply refers to the processing of data provided to the auditor to generate useful information that aids the auditor in decision-making, resulting in an improvement in the audit's quality and efficiency (Salijeni et al., 2019). ...
... As a result, BDA has an impact on the auditor's acceptance of the audit assignment. This finding is consistent with the literature (Bauer & Estep, 2019;Salijeni et al., 2019Salijeni et al., , 2021Manita et al. 2020). ...
Article
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The goal of this study was to see how big data analytics (BDA) affected external audit procedures in the Middle East. The measurement model and structural model of this investigation were evaluated using PLS-SEM (3.3.3). The study sample members were (361) auditors who work in auditing companies in Kuwait, Saudi Arabia, the United Arab Emirates, Jordan, Bahrain, Egypt, Lebanon, and Iraq. A questionnaire was chosen to the study sample members electronically, and the study sample members were (5093) auditors who work in auditing companies in Kuwait, Saudi Arabia, the United Arab Emirates, Jordan, Bahrain, Egypt, Lebanon, and Iraq. To choose the sample, the researchers used a stratified random sampling procedure. The findings show that BDA has an impact on audit procedures at all phases of the auditing process, where it contributes to information delivery that helps auditors understand the client's internal and external environments, which in turn influences the choice to accept the audit assignment. Furthermore, by providing essential information, BDA enables auditors to simply run analytical procedures, estimate client risks, and understand and evaluate the internal control system. As a result, auditors must develop their abilities in the BDA field, as it adds to the creation of additional value for both auditors and their clients.
... Even earlier than that, Merhout and Havelka (2008) showed that one of the factors affecting the quality of audits is the simultaneous cooperation between the different departments of the firm, the audited department and top management, as it allows for a better flow of information. Bauer and Estep (2018) emphasised that internal auditors must work with IT experts. The results of their research showed that, when relations between the two parties are good, the audit is effective, as knowledge is shared and debugging is timelier. ...
... The regression also showed that the variable 'collaboration' is not statistically significant and therefore does not affect the security of online services. This result is inconsistent with the studies by Bauer and Estep (2018), Steinbart et al. (2018), Caputo et al. (2018) and Fjellström et al. (2020), who argued that collaboration leads to knowledge sharing and that more violations are detected before they cause financial or other loss to the business. It is evident that similarly to findings regarding 'technical knowledge', auditors perceive cyber auditing as a separate field from their line of work. ...
... However, the increased reliance on these cloudbased platforms created an emerging risk-cybersecurity. To address these risks in their firms and the risk posed to their clients, auditors readily rely on experts with backgrounds in computer science, engineering, and related fields (e.g., Bauer et al., 2019). ...
This study reviews literature examining digital transformation in the external audit setting. Our review will inform the standard-setting initiatives of the International Auditing and Assurance Standards Board (IAASB) related to the use of technology in auditing. We identified 36 articles on digital transformation in the external audit published between 2000 and 2021 across 20 journals ranked A*, A, B, and C on the Australian Business Deans Council (ABDC) 2021 Journal Quality List. We also identified 18 advanced working papers. These articles cover conceptual frameworks and archival, experimental, interviews, case studies, and survey research methods. Fifty percent of the published articles appear in A* or A journals, of which nine were published in one of the premier six accounting research journals (i.e., A*) since 2020. This trend is a promising sign that there appears to be increasing interest in publishing digital transformation-related research in these general interest journals. We use the Bonner judgment and decision-making framework, coupled with the four primary data analytic tools, to organize and evaluate the literature. This study examines descriptive and diagnostic analytics; more complex techniques, such as predictive and prescriptive, are not as prevalent. Further, existing research insufficiently addresses how data analytic tools impact auditor judgment and decision-making, providing multiple future inquiry lines.
... Further, these visualization dashboards also provide means to enhance the visibility of audit workflow, thereby making it easier for auditors to convey the narrative of audit quality. Third, we also show how the relational affordances of BDA reshape the nature of work interactions and flows, most notably between auditing and the firms' other functions as well as between auditors and specialists such as data analysts working on audit engagements (Bauer & Estep, 2019). Non-audit functions such as data assurance not only supply analytical tools and specialists to maintain the operation of BDA-driven audits, they also serve as an umbrella which harbours key decisions about which technological ideas and tools to test out and use in the course of audit work. ...
Article
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This study focuses on the recent development in audit technologies, i.e. the rise of Big Data and Analytics (BDA) tools, and how auditors make use of them in audits. While prior audit studies have acknowledged that audit technologies shape and re-construct the market for audit services, they have not devoted much attention to the performative nature of such technologies and how their properties may shape the dynamics of technological change. Drawing on sociomateriality literature as well as observations, documentary materials and 25 semi-structured interviews with individuals directly engaging with BDA, this study explores how BDA users interact with particular properties of the technology in the course of an audit. We then consider how these interactions reconfigure aspects of the audit process and change the relational dynamics within audit firms. In particular, our findings suggest that properties of BDA such as scripts have afforded large-scale automation of audit routines, generating opportunities for expanding the evidential scope and depth of audit work. Further, we also show how the visualization dashboards have contributed to auditors’ ability to communicate and justify their claims and judgements. Finally, we demonstrate that BDA has reshaped the nature of work relationships and flows between audit firms’ different functions and service lines.
... An audit partner is responsible for making decisions not only about how the audit is conducted but also for reviewing the audit team's work, including that of the IT specialists. Therefore, the audit partner's decision to involve an IT specialist on an audit engagement depends on the partner's own ability to supervise and interact with the IT specialist (Hux 2017;Bauer et al. 2019). Moreover, prior literature suggests that auditors who have less knowledge and experience in IT fail to identify significant audit risks related to digitalized systems, and therefore, they refrain from involving IT experts even if it were warranted (Brazel and Agoglia 2007). ...
Article
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.
Purpose The paper reports on a study that investigated the (potential) impact of client use of blockchain technology on financial statement audits of Australian accounting firms. Design/methodology/approach Data were primarily collected from semi-structured interviews with a range of stakeholders including audit partners from first- and second-tier accounting firms in Australia. The interviews focused on the perceived (potential) impact of blockchain on the stages of obtain (retain) engagement, engagement planning, risk assessment, audit evidence and reporting of financial statement audits of clients that use blockchain technology. Perceptions of changes to financial statement audits were interpreted using the logics of professionalism and commercialism. Findings Australian accounting firms have either obtained or considered engagements with clients with a cryptocurrency business or that use a blockchain platform although they are a small group. There is a view that blockchain technology is distinctive and therefore poses risks not encountered before in audit engagements. These risks would most likely shift how firms plan, design audit methodologies and execute financial statement audits. The study showed that the logics of professionalism and commercialism are not conflicting but instead complementary. They present both opportunities and challenges for firms to apply and develop audit expertise in an emerging area in audit. Research limitations/implications Being an exploratory study, the findings are tentative. A case study of an audit engagement with a cryptocurrency business will add to a nuanced understanding of the challenges posed to financial statement audits by blockchain technology. Originality/value This study is novel because of its focus on the impact of an evolving technology on the stages of financial statement audits.
Article
SYNOPSIS During the time surrounding the Sarbanes-Oxley Act of 2002, the Big 4 firms either spun-off or downsized their consulting practices. However, in recent years, consulting service lines of the large accounting firms have seen a dramatic resurgence and growth. Regulators have taken notice of, and expressed concern over, this renewed focus on consulting. The accounting firms claim that such services enhance audit quality, mainly due to the prominent role of non-accounting specialists in today's external audit function. This study examines whether the availability of non-CPAs in U.S. Big 4 firm offices is associated with audit quality. We find that greater access to non-CPAs in the office is associated with higher audit quality and conclude that office audit quality is not just a function of audit-specific human resources but also the availability of non-CPAs to support audit engagement teams. JEL Classifications: M41; M42. Data Availability: All data are publicly available from sources identified in the study.
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Prior research indicates that most audit legal disputes settle. There is, however, little evidence of the factors that drive the settlement norm and its exceptions in audit legal disputes. To better understand these factors, we rely on theory related to how professionals manage risks and, as a result, how professions defend jurisdictional claims (e.g., Abbott 1988; Power 2004). We use this theoretical lens to help motivate four research questions that we probe by interviewing 27 prominent attorneys experienced in audit litigation. Consistent with our lens, our interview data indicate that attorneys manage their risks, including the risk of reputational loss, by settling based on their expectations of trial verdicts. Unlike trials, settlements simultaneously enable attorneys on both sides to limit costs and avoid catastrophic jury verdicts and, by doing so, claim “wins” for their clients. Attorneys also stress that they settle many audit disputes without any legal filings. Thus, a large subset of disputes is invisible to the public and researchers. Attorneys characterize trials as exceptions to the settlement norm that emerge due to abnormal conditions sometimes present in disputes. However, trial verdicts in these abnormal conditions help attorneys justify the use of settlements to clients, as attorneys stress that by settling they can avoid the dreaded possibility of extreme unfavorable verdicts. We conclude that as individual attorneys manage their risks, especially the risk of reputational loss, their profession maintains its public image and thereby defends its jurisdictional claims. Among the many questions we pose for future research is whether the settlement norm reduces society's ability to monitor the audit profession and, more generally, whether this norm's benefits outweigh its drawbacks. This article is protected by copyright. All rights reserved.
Article
Purpose As technology integration in auditing continues to grow, it is important to understand how auditors perceive connections between use of generalized audit software (GAS) and audit benefits. Design/methodology/approach The DeLone and McLean information systems success model (2003) is adapted with audit-related uses of GAS as antecedents to information quality. Survey data on 188 current users of GAS, who are financial and IT auditors, is analyzed with partial least squares method. Findings For financial auditors, detecting material misstatements antecedent is the only significant indicator of information quality for GAS. For IT auditors, detecting control deficiencies and fraud significantly impacts information quality. Information quality influences use for both auditors; however, it only influences satisfaction with GAS for financial auditors. System quality impacts GAS satisfaction for only IT auditors and has no impact on GAS use for either type of auditor. Service quality influences use of GAS for financial, but not IT auditors. For both groups, service quality has no impact on satisfaction with GAS, and GAS use and satisfaction with GAS positively increases their perceptions of audit benefits. Originality/value Financial and IT auditors who use GAS are both focused on matching GAS use with their primary audit objectives. Results suggest that as GAS use increases, system quality may be important to satisfaction. Training should first focus on the usefulness of GAS to the audit to increase extent of use. Lastly, the more auditors use GAS and are satisfied with it, the greater their perception GAS contributing directly to benefit the audit.
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In this study, we examine auditors' claims of professional disempowerment and strategic responses to Canadian Public Accountability Board (CPAB) inspections in Canada. Our research is based primarily on 27 semistructured interviews with audit partners (23) and managers (4) of large accounting firms. Drawing on key insights from institutional theory, we show that the tensions between inspectors and auditors reflect an intraprofessional tug-of-war between two competing but legitimate logics of professionalism. More specifically, our findings indicate that CPAB inspections have given rise to a mechanical logic of audit professionalism that is driven by the efforts of inspectors to promote a generalizable theoretical ideal of auditing that revolves around best practices and attention to technical minutiae. This mechanical logic competes with a clinical logic of audit professionalism that is driven by the efforts of audit partners and managers to promote a more relativistic, applied form of expert knowledge. To manage this dynamic of intra-institutional complexity, quality experts (QEs) have emerged in firms' organizational structures as ambidextrous third parties—that is, professionals who master both logics and are capable of bridging the institutional divide by influencing the relationships between inspectors and auditors through a variety of brokering strategies). By considering inspectors as insiders rather than outsiders to the profession, we argue that auditors' claims of professional disempowerment should be interpreted carefully and critically. We also suggest that the professional autonomy and judgment of engagement partners and managers has been displaced significantly within firm boundaries into the hands of QEs. Our analysis offers a richer conceptualization of institutional ambidexterity by examining it as a relational process of social influence rather than as a set of individual characteristics. This article is protected by copyright. All rights reserved.
Article
Auditors often rely on the assistance of specialists from such fields as tax, information technology, valuation, and forensic accounting. Integration of the work of specialists with the work of audit team members is a challenge for both groups. This interview-based study of 34 practitioners from six accounting firms, including 12 auditors (partners and managers) and 22 specialists (tax, IT, valuation, forensic) examines auditors' and specialists' views about the current state of specialist use on audits. The regulatory environment creates pressure for financial statement auditors to use specialists on audits; however, financial statement auditors often seek to limit specialist involvement. Both auditors and specialists are dissatisfied with the current situation, but for different reasons. Auditors are concerned about budget overruns, delays, and harm to client relationships by (overly) meticulous specialists. Specialists are concerned about auditors limiting the scope of specialist involvement, and its effect on audit quality. JEL Classifications: M4; M40; M42.
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The Big 4 have acquired numerous consulting firms since the late 2000s, and regulators are concerned that a focus on consulting practices could negatively affect audit quality through audit firm culture. Audit firms counter by arguing that expertise gained through consulting can improve knowledge brought to audits. Using a difference-in-differences design, restatements as an audit quality proxy, and enterprise resource planning- (non-enterprise resource planning-) related acquisitions as a proxy for audit- (non-audit-) related acquisitions, we find nuanced support for both positions, depending on acquisition type. Audit quality increases (decreases) at the local office level after the acquisition of consulting firms that provide services that relate (do not relate) to the audit. Semi-structured interviews of 17 highly-experienced audit practitioners suggest that consulting firm acquisitions positively (negatively) affect audit quality through expertise transfer (shifting the culture towards commercialism) when acquisitions are (are not) audit-related. Thus, the effect of consulting firm acquisitions on audit quality appears to depend on how closely the acquired services are related to the audit.
Article
SYNOPSIS Audit subordinates typically work with multiple supervisors who are likely to vary in their level of coaching quality (CQ). While prior research suggests a low CQ supervisor could negatively affect a subordinate's work attitudes, theory indicates that the presence of other positive coaching experiences may buffer against the negative influence of a low CQ supervisor. We investigate by asking participants to provide information on their coaching experiences with three supervisors. We then examine how perceptions of supervisors' CQ interact to affect subordinates' work attitudes. We find that the effect of a perceived low CQ supervisor on organizational commitment and turnover intention is mitigated when the CQ of another supervisor is high or when a relatively high CQ supervisor is also a mentor. Investigating factors that inhibit CQ, we find that supervisors' lack of capability explains variation in lower CQ supervisors, whereas lack of presence explains variation for higher CQ supervisors. Data Availability: Contact the authors. JEL Classifications: L2; M40; M42; M51; M53.
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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.
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While prior research has examined the impact of ethical leadership on subordinates' whistleblowing intentions, a leader's specific characteristics, such as emotional intelligence and group prototypicality, are underexplored. As with leadership style, they can play an important role in creating a control environment that facilitates fraud prevention, detection, and deterrence. This study examines the effects of perceived leader emotional intelligence and group prototypicality on the subordinate's intention to blow the whistle to the leader. Results indicate that a subordinate is more likely to blow the whistle when the leader is perceived as having high emotional intelligence or group prototypicality. Both relationships are mediated by the subordinate's trust in the leader. Moreover, the mediating effect of the subordinate's trust in the leader on the relationship between perceived leader emotional intelligence and subordinate whistleblowing intentions is stronger when the leader's group prototypicality is high. Academic and practical implications are discussed in the paper. Data Availability: Data are available upon request.
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Auditing in ventures may provide the necessary financial reporting bulwark, however, auditing also has direct and indirect costs that may be less efficacious in a venture with limited routines and capabilities, and could take an entrepreneur’s attention away from venture goals. We draw on a quasi-natural experiment in Sweden, where from 2011 small private firms meeting threshold criteria were exempt from audit. The law resulted in three groups of ventures – (i) those who were above the threshold criteria and continued with an audit, and among those who were exempt some chose to (ii) voluntarily audit or (iii) opted-out of the audit. Starting with ventures established in 2007 (about three years before the passage of the law), and drawing records of the Swedish Companies Registration Office, our results show that while opting out of audit slightly improves the odds of survival, it has detrimental effects when sales volatility or return on assets are high. Those voluntary auditing can realize a higher debt ratio, but also face a decline in sales and net profit. The findings have implications for entrepreneurs in particular and policymakers considering initiation or repealing of audit requirements for ventures.
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I investigate how auditors integrate information technology (IT) specialist input into internal control over financial reporting (ICFR) issue classifications. Given the ill-structured nature of evaluating ICFR issues and the impact of these issues on audit quality, combining knowledge from different perspectives is likely beneficial. Drawing on social identity theory, I predict and find that a weaker one-team identity between auditors and IT specialists yields benefits. Auditors with a weaker versus stronger team identity place more weight on IT specialist input for IT-related issues and differentially weight higher and lower quality input for non-IT issues. I also find that more severe ICFR issues drive the predicted results. My study provides insight into how team identity influences auditor integration of input from specialists. The implications of my study are of interest to researchers, regulators, and practitioners, especially as recent firm initiatives encourage a one-team view for auditors and IT specialists.
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Purpose This study aims to investigate the impact of external auditor–cloud specialist engagement on cloud auditing challenges from the perspective of auditors from the Association of Certified Public Accountants in a developing country as an example of Middle East emerging economies. Design/methodology/approach A quantitative research design was used to assess the influence of external auditor–cloud specialist engagement on three main cloud auditing challenges (i.e. technology security, regulatory standards and strategy). Data collection was conducted through field and online surveys. A total of 201 (181 male and 20 female) auditors made up a sample of a developing country’s economy. In addition, structural equation modelling was performed to test the proposed hypotheses of the study’s conceptual model. Findings The study found a significant effect of external auditor–cloud specialist engagement on overcoming the challenges of cloud auditing. Results showed that using IT specialists helps overcome strategic challenges more than other kinds of challenges, such as technology security and organisational standards. Practical implications The findings suggest that efforts to promote cloud auditing in organisations may succeed if the focus is on overcoming cloud auditing challenges and highlighting the external auditor–cloud specialist engagement to enhance job performance. Originality/value This study is one of the few studies that analyse the impact of external auditor–cloud specialist engagement on cloud auditing challenges by adopting a quantitative approach from the perspective of auditors from the Iraqi Association of Certified Public Accountants.
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SYNOPSIS The Big 4 accounting firms have expanded their legal service arms to historic proportions over the last decade, employing thousands of lawyers around the world. Although most of the Big 4's revenue from legal services is presently generated outside the U.S., they are now making inroads into the U.S. legal market, and rule changes are being considered that would further allow the Big 4 to offer legal services in the U.S. This essay summarizes the current status of Big 4 firms as legal service providers, discusses potential implications of legal offerings for their U.S. audit practices, and suggests directions for future research. Our proposed research questions are informed by several literatures, interviews with former Big 4 partners and practicing attorneys, and a survey of the general public. They center on the fundamental difference between audit and law practices, brand equity considerations, and culture changes within the Big 4.
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We conduct an experiment to examine the effects of multi-level group identification on intergroup helping behavior. We predict and find that stronger identification with a sub-group and a superordinate group – separately and interactively – increase helping behavior. We provide evidence that the relationships between stronger identification and helping behavior operate in part through increased salience of superordinate group boundaries, perceived potential benefits to one’s own group of intergroup helping, and positive affect. Collectively, our findings illustrate the importance of understanding how individuals identify with the different groups naturally present in organizations, and highlight how identification can be used as an informal control to motivate important organizational behaviors. Such an understanding can help firms determine the best organizational hierarchy, develop communication and control strategies to build identification at appropriate levels, and establish evaluation and compensation systems that measure and reward outcomes in a manner that accounts for these group effects.
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Junior auditors collect the bulk of audit evidence, yet they do not always speak up to communicate potentially important audit issues. Such inappropriate “voice” decisions can endanger audit quality. We examine whether and how staff auditors influence each other in making voice decisions. First, a survey provides descriptive evidence that staff auditors consult their peers for advice on whether to speak up. Next, two experiments provide evidence that voice advice among peers at the staff level can be problematic. We find that staff auditors consistently underestimate the importance of raising issues compared to their supervisors, and they rely on social cues that are not diagnostic of issue importance in giving voice advice to peers. Finally, we predict and find that staff auditors tend to follow peer advice when it confirms their initial stance, and that an expectation of high (versus low) quality supervisor feedback increases their willingness to speak up. Most importantly, we find that contradictory peer advice only influences staff auditors’ willingness to speak up when leadership feedback is not expected to be of high quality. Together these results indicate that staff auditors seek out and follow voice advice from their peers, but appropriate leadership feedback practices can mitigate the negative impact of peer advice on upward communication.
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The ability to develop bots to automate tasks and processes using robotic process automation (RPA) is receiving significant attention in accounting. Auditors often struggle to know what tasks to automate and how to prioritize bot development. Drawing upon socio-technical systems theory and using a design science methodology, we develop and validate a three-step evaluation framework to assist auditors as they decide what activities to automate. We validate this framework using interviews, surveys of experienced internal and external auditors, and two case studies. By developing and validating our framework through the lens of socio-technical systems theory, we also provide several insights that help explain the mixed findings in prior research regarding the effectiveness and adoption of emerging technologies in audit. The implications of our study yield many opportunities for future research in the areas of RPA and emerging technologies in audit. This article is protected by copyright. All rights reserved.
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This paper synthesizes research related to audit firm climate and culture. Organizational climate and culture are important to any organization but are particularly important in auditing because of the unique tension among being a regulated profession, a for-profit organization, and performing independent audits on behalf of the public interest. This paper's objectives include introducing the constructs of organizational climate and culture and their application to audit research, reviewing the audit literature to synthesize climate and culture findings, and suggesting future research opportunities. We find that the audit literature on firm climate and culture is vast but fragmented. We identify and discuss seven climate and culture themes (organizational control, leadership, ethical, regulatory, professionalism, commercialism, and socialization) rooted within audit firms and studied by audit academics. Beyond informing academics, our paper has implications for audit practitioners and regulators as they seek to manage auditors' behavior and audit quality through quality control initiatives.
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This paper synthesizes research on audit firm culture (AFC) over the past decade, reviewing recent developments in research on factors instilling culture in audit firms, and how culture influences audit quality and auditors’ work attitudes. We develop and apply a three-phase model based on prior research and professional guidance (IAASB, 2014), which maps cultural embedding mechanisms (EMs, visible manifestations and organizational conditions to establish culture), perceptions of existing culture, and consequences of culture. Our synthesis shows that the culture of an audit firm is most oriented toward quality if leadership emphasizes professionalism over commercialism, promotes ethical judgments, and facilitates learning through systems, integration of specialists, and interpersonal interactions among auditors. The research cited shows strong influence on AFC of tone at the top set by leadership, as well as incentives in performance/reward systems. Studies we review generally imply continued concern for the influence of commercialism on AFC, but future research should investigate whether recent forces (i.e. pressure from regulators and efforts by the firms) have caused a cultural shift toward professionalism. We close by suggesting opportunities for future research that can strengthen understanding how AFC can be better managed by firms.
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The audit of the financial statement income tax accounts is ultimately the responsibility of the audit engagement team; however, tax professionals are often involved because of their knowledge of the tax functional area. Auditors are expected to exercise professional skepticism and independence when performing audits, while tax professionals are expected to be advocates for their tax clients. This study investigates whether the auditor and/or tax professionals' typical role influences how they evaluate evidence on an audit engagement, especially when provided evidence by individuals with whom they are closely affiliated. Results of an experiment with experienced auditors and tax professionals suggest that despite differing in their trait skepticism and client advocacy attitudes, tax professionals and auditors make similar judgments when in the role of an audit engagement team member. We also find evidence that both auditors and tax professionals are more persuaded by individuals with whom they have a closer affiliation. Data Availability: Data are available from the corresponding author.
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Audit teams increasingly rely on specialists, yet auditors sometimes inadequately take specialists’ work into consideration when making their judgments. We approach this problem by considering how to improve specialists’ judgments and communication to the audit team. Specifically, in an experiment with MBA students placed in the role of a specialist within a team, we examine how psychological ownership — the feeling that something is one’s own — affects these specialists’ judgments and communication with their team leader. We find that specialists with higher psychological ownership make higher quality judgments, as evidenced by identifying issues seeded within the case more often, and communicating those issues more proactively. Moreover, psychological ownership affects specialists’ responses to subsequent suggestions from the team leader, which vary in justification strength, indicating that higher ownership may prevent specialists from being unduly influenced by the audit team’s preferences. We contribute to research in auditing and psychology by demonstrating that psychological ownership influences communication choices through its effect on cognition and judgment. We contribute to auditing research and practice by approaching the issue of auditors’ inadequate use of specialists’ work through a focus on the behavior of specialists, rather than auditors.
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Organizational success increasingly depends on leaders’ abilities to address competing demands simultaneously. Scholars have applied both institutional theory and paradox theory to better understand the nature and responses to these competing demands. These two lenses diverge in their understanding and responses to tensions. Institutional theory depicts competing demands emerging from divergent field-level pressures and stresses their contradictory and oppositional nature. Organizational responses vary from making tradeoffs and choosing pressures with which to conform to seeking strategies for engaging both and managing conflict. Paradox theory locates competing demands as inherent with organizational systems, surfaced through environmental conditions, individual sensemaking, or relational dialogue. According to these scholars, paradoxes are contradictory, interdependent, and persist over time, demanding strategies for engaging and accommodating tensions but not resolving them. In this essay, we highlight these distinctions and argue that drawing from both of these lenses will results in rich, generative theorizing to better address key challenges in the world. We identify specific areas where future research can benefit from such integration.
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There is an ever-increasing volume of studies investigating institutional logics, and yet qualitative methods for studying this phenomenon are not clear. In this essay, we examine how qualitative scholars convince their readers that they are actually studying institutional logics. We identify three different, but non-exclusive techniques that have been employed: pattern deducing, pattern matching, and pattern inducing. For each of these approaches, we explain the ontological assumptions, methodological techniques, challenges, and benefits. In addition, we provide examples of how specific studies have analyzed and presented qualitative data to improve theory about institutional logics.
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How organizations cope with multiple and sometimes conflicting institutional demands is an increasingly familiar yet little understood question. This paper examines how four French business schools responded to demands that they internationalize their management education whilst retaining their traditional identities. We trace the role played by field-level actors in pushing and articulating competing logics and the importance of institutional and organizational identity in how organizations respond. By highlighting the role of identity aspirations we show that what matters is not how an organization sees itself-i.e., what it is-but how it wants to see itself-i.e., what it wishes to become. Finally, we unpack and explain why status differences across organizations affect the nature of the opportunities that are perceived and the scale and format of the responses that are implemented.
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This paper examines the role of accounting calculations in the process of reorganizing the manufacturing capabilities of a vertically integrated global retailing company. In contrast to mainstream analyses that emphasize the novelty and mutual benefits of teamwork, we show how its introduction to replace line work extended rather than supplanted traditional, hierarchical systems of management control. Management's intention was to engender a self-managing means of continuous improvement of working practices, but the self-managing demands of teamwork contravened workers' established sense of self-identity as "machinists" and "mates." Output was raised by changing to a group bonus system, but the move to teamwork had the unintended effect of fermenting hostility toward the managerial goal of making the teams fully self-managing.
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Auditor independence, which has certainly been one of the most addressed topics in auditing literature, is a complex and ambiguous construct that can be analyzed along two dimensions. The first dimension, organizational independence, relates to auditors’ willingness to act in accordance with professional standards and to report errors found during the audit. The second dimension, operational independence, relates to auditors’ capability to work diligently and effectively in order to detect material anomalies. Surprisingly, “much of the debate has [so far] focused on the former,” while the latter has remained largely “under-discussed” (Power 1999, 132), if not ignored. In this paper, based on ethnographic data and semi-structured interviews, we examine the realities of auditors’ operational independence and discuss the practical and theoretical implications of our findings. Our evidence suggests that auditors’ operational independence is both unsettled in practice and impossible to achieve through institutional measures alone. This view may challenge orthodox and regulatory conceptions of audit, but the smooth conduct of an audit engagement largely depends on the auditees’ desire to cooperate. In order to arouse and maintain this desire, audit team members resort to a number of relational strategies that aim at securing their capability to work with diligence and efficacy, but that can also undermine their willingness to take enforcement action when necessary. Audit, therefore, appears to be a complex balancing act between capability and willingness. Ultimately, it is shown that because official arrangements designed to guarantee operational independence are unlikely to be effective, the reality of auditor independence remains highly uncertain and needs to be constantly negotiated and renegotiated in the field.
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Using change theory integrated with Bourdieusian sociology, we re-theorize a major institutional shift in the field of public accounting. The case we examine involves the consolidation of commercial values in the auditing profession. In reinterpreting this shift, we highlight an institutional process structured around a conflict between commercial innovators and guardians of the professional tradition. Our analysis indicates a peculiar kind of institutional work, wherein economic capital is reinforced at the field level while the logic of commercialism is strengthened in accounting firms' structures and practitioners' mindset. From our studying of the field of accountancy, we develop the concept of institutional experimentation in order to offer a view of institutional work as a fragile and unpredictable process. Specifically, the latter is subject to trials and tests by actors involved in a series of more or less connected experiments in trying to extend their professional jurisdiction through institutional innovation, while seeking to consolidate the traditional foundations of their jurisdictional legitimacy through institutional reproduction. Our paper also challenges the notion of organizational archetypes. While a focus on the firms' formal organizational parameters may suggest archetypical stability, the picture is more complex when one takes into account processes of institutional experimentation and the duality of institutional change and stability.
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Full text available from: http://www.sbs.ox.ac.uk/sites/default/files/research_showcase/Smets-lloyds/Smets-manuscript.pdf Drawing on a year-long ethnographic study of reinsurance trading in Lloyd's of London, this paper makes three contributions to current discussions of institutional complexity. First, we shift focus away from structural and relatively static organizational responses to institutional complexity and identify three balancing mechanisms - segmenting, bridging, and demarcating - which allow individuals to manage competing logics and their shifting salience within their everyday work. Second, we integrate these mechanisms in a theoretical model that explains how individuals can continually keep coexisting logics, and their tendencies to either blend or disconnect, in a state of dynamic tension which makes them conflicting-yet-complementary logics. Our model shows how actors are able to dynamically balance coexisting logics, maintaining the distinction between them, whilst also exploiting the benefits of their interdependence. Third, in contrast to most studies of newly formed hybrids and/or novel complexity our focus on a long-standing context of institutional complexity shows how institutional complexity can itself become institutionalized and routinely enacted within everyday practice.
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Geographically distributed teams are increasingly prevalent in the workplace, and research on distributed teams is ever more available. Despite this increased attention, we still know surprisingly little about how the dynamics of distributed teams differ from those of their collocated counterparts and how existing models of teams apply to this new form of work. For example, although it has been argued that distributed as compared with collocated teams have more severe conflicts that fester longer and resist resolution, few comparative studies investigate dynamics such as conflict in both distributed and collocated teams. In this study, we examine conflict, its antecedents, and its effects on performance in distributed as compared with collocated teams. Our goal is to understand how conflict plays out in distributed and collocated teams, thus providing insight into how existing models of conflict must be augmented to reflect the trend toward distributed work.We report the results of a field study of 43 teams, 22 collocated and 21 distributed, from a large multinational company.As expected, the distributed teams reported more task and interpersonal conflict than did the collocated teams. We found evidence that shared identity moderated the effect of distribution on interpersonal conflict and that shared context moderated the effect of distribution on task conflict. Finally, we found that spontaneous communication played a pivotal role in the relationship between distribution and conflict. First, spontaneous communication was associated with a stronger sharedidentity and more shared context, our moderating variables. Second, spontaneous communication had a direct moderating effect on the distribution-conflict relationship, mitigating the effect of distribution on both types of conflict. We argue that this effect reflects the role of spontaneous communication in facilitating conflict identification and conflict handling.
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This paper presents a review of extant literature examining issues relating to auditors' knowledge of and training in information systems. This review is important due to the rapidly increasing use of technology in business, recent changes in U.S. auditing standards on information technology and internal control, and signals of in-terest by regulators in possible future standards on auditors' information systems (IS) knowledge. We review prior research both to provide information on the current status of our literature, and to identify specific questions about which there is insufficient research. Our review covers three broad areas. First, we review the current environment of IS in financial reporting and assurance, and summarize related auditing standards. Second, we consider prior research on how financial statement (''generalist'') auditors acquire and use IS knowledge. Third, we discuss research on the interaction between generalist and IS auditors. Each section concludes with suggestions for future research.
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SYNOPSIS: The goal of this study is to advance understanding of factors that may enhance or hinder knowledge sharing in public accounting firms and, in the end, pro- vide practical recommendations for the firms. Attention to this topic is warranted for two reasons. First, today's regulatory environment and new auditing standards have broadened and intensified pressures on CPA firms to enhance the quality, effectiveness, and efficiency of the audit process. Second, knowledge and expertise are unevenly distributed among the members of the audit team. Thus, knowledge sharing can help CPA firms in leveraging the skills, knowledge, and best practices of their professional staff. Against this background, CPA firms' ability to effectively deploy knowledge- sharing activities is increasingly vital to their competitive advantage, including gaining tangible benefits in terms of time and cost reductions. We draw upon prior research in accounting, organizational learning, psychology, and knowledge management to ex- amine the role of three factors—information technology, formal and informal interac- tions among auditors, and reward systems—in encouraging knowledge sharing. We develop recommendations for public accounting firms and suggest several directions for future research.
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We draw on an in-depth longitudinal analysis of conflict over harvesting practices and decision authority in the British Columbia coastal forest industry to understand the role of institutional work in the transformation of organizational fields. We examine the work of actors to create, maintain, and disrupt the practices that are considered legitimate within a field (practice work) and the boundaries between sets of individuals and groups (boundary work), and the interplay of these two forms of institutional work in effecting change. We find that actors' boundary work and practice work operate in recursive configurations that underpin cycles of institutional innovation, conflict, stability, and restabilization. We also find that transitions between these cycles are triggered by combinations of three conditions: (1) the state of the boundaries, (2) the state of practices, and (3) the existence of actors with the capacity to undertake the boundary and practice work of a different institutional process. These findings contribute to untangling the paradox of embedded agency—how those subject to the institutions in a field can effect changes in them. We also contribute to an understanding of the processes and mechanisms that drive changes in the institutional lifecycle.
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It is argued that (a) social identification is a perception of oneness with a group of persons; (b) social identification stems from the categorization of individuals, the distinctiveness and prestige of the group, the salience of outgroups, and the factors that traditionally are associated with group formation; and (c) social identification leads to activities that are congruent with the identity, support for institutions that embody the identity, stereotypical perceptions of self and others, and outcomes that traditionally are associated with group formation, and it reinforces the antecedents of identification. This perspective is applied to organizational socialization, role conflict, and intergroup relations.
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Organizations face institutional complexity whenever they confront incompatible prescriptions from multiple institutional logics. Our interest is in how plural institutional logics, refracted through field-level structures and processes, are experienced within organizations and how organizations respond to such complexity. We draw on a variety of cognate literatures to discuss the field-level structural characteristics and organizational attributes that shape institutional complexity. We then explore the repertoire of strategies and structures that organizations deploy to cope with multiple, competing demands. The analytical framework developed herein is presented to guide future scholarship in the systematic analysis of institutional complexity. We conclude by suggesting avenues for future research.
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Auditors frequently use valuation specialists to help them evaluate fair values, but researchers and regulators know little about how auditors use these specialists. Based on interviews with 28 auditors and 14 valuation specialists, I develop a theoretical framework informed by expert systems and professional competition theories. The interviews suggest that institutional pressures in the fair value environment unevenly impact auditors and specialists, causing tension between auditors' needs for ontological security and jurisdictional claims. This tension leads to one‐sided competition between auditors and specialists and incomplete acceptance of specialists' work. Auditors' competitive behaviors coupled with this incomplete acceptance result in a tendency to make specialists' work conform to auditors' views. Collectively, these findings suggest that auditors use specialists as an institutional mechanism to create comfort, but not insight. This study links expert systems and professional competition theories, and it provides critical insight into some assumptions underlying tenets of each theory. It also informs researchers, regulators, and practitioners interested in understanding and addressing problems related to the use of specialists. This article is protected by copyright. All rights reserved.
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Inspectors frequently identify deficiencies on global group audits (GGAs) attributed to problems in coordination and communication among the multiple participating firms. As GGAs involve large multinational entities with extensive global reach, the costs of audit failure are high. Prior research and theory suggest that coordination and communication challenges are common when interdependent teams perform work in complex environments. Studying actual experiences of 147 group audit leaders, we find that clients’ size/regulatory status and global structure contribute to coordination/communication challenges, but language/cultural barriers are less important. We also investigate strategies that group auditors can use to mitigate challenges, finding that modularization (advance scripting of work) and ongoing communication (availability/use of communication channels) are not as effective as tacit coordination (leveraging common ground through knowledge/experience). The variation in knowledge of component teams reported by participants leads to the question of whether group auditors can influence the training and/or selection of component personnel.
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This synthesis covers academic research on the use of valuation, tax, information technology (IT), and forensic specialists on audit engagements. The importance and role of specialists on audit engagements have recently increased, and specialist use has garnered significant attention from regulators and academics. Given the PCAOB’s (2017b) recent proposal to revise auditing standards regarding specialists’ involvement, it is important to review the specialist literature as a whole. By integrating research across these four domains, I identify commonalities and differences related to: (1) factors associated with the use of specialists on audit engagements (including the nature, timing, and extent of use); (2) factors impacting auditors’ interactions with specialists (including specialists contracted by the auditor or management); and (3) outcomes associated with the use of specialists. This integrated analysis of the specialist literatures shows variation in the use of specialists, and various factors affecting both if and how they are involved and whether auditors use specialists internal or external to the audit firm. Additionally, research has sometimes (but not always) linked specialist involvement to higher audit quality. The commonalities and areas of variation identified are informative to audit research and practice, particularly as regulators and audit firms look to improve the quality of audits using specialists. Throughout the synthesis, I also provide a number of directions for future research.
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Enterprise Resource Planning (ERP) systems are at the core of every firm. Making people use this costly and time-consuming investment is one of the most important issues to deal with. The main objective of the present study is to find the key determinants that open the door to user satisfaction and adoption. A theoretical model was set and an online survey was conducted to understand ERP users’ perspective on such matters. The outcome was the model validation and the understanding that top management support, training, and the system quality are important constructs to assess adoption and user satisfaction. In fact, the latter (system quality) has a significant influence on the behavioural intention to use and also in the overall user satisfaction. As management support is a very relevant determinant to ERP usage. Accordingly, this study enlightens theory, by contributing to a new model of ERP adoption and satisfaction. It also provides relevant evidence to companies involved in the ERP implementation process.
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Our research contributes to knowledge on strategic organizational responses by addressing a specific type of institutional complexity that has, to date, been rather neglected in scholarly inquiry: conflicting institutional demands that arise within the same institutional order. We suggest referring to such type of complexity as “intra-institutional”—as opposed to “inter-institutional.” Empirically, we examine the consecutive spread of two management concepts—shareholder value and corporate social responsibility—among Austrian listed corporations around the turn of the millennium. Our work presents evidence that in institutionally complex situations, the concepts used by organizations to respond to competing demands and belief systems are interlinked and coupled through multiwave diffusion. We point to the open, chameleon-like character of some concepts that makes them particularly attractive for discursive adoption in such situations and conclude that organizations regularly respond to institutional complexity by resorting to discursive neutralization techniques and strategically producing ambiguity.
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This chapter overviews the social psychology of intergroup relations; focusing on how cognitive and social interactive processes affect how people individually or collectively think and feel about, and interact with people who are not members of the same group as they are. Because what happens between groups affects and is affected by what happens within groups, this chapter also focuses more broadly on group processes. After describing relevant research methods, the chapter discusses personality and individual differences; authoritarianism and closed-mindedness; social dominance and system justification; conflict and cooperation between groups; frustrated goals and ambitions; social categorization and cognitive schemas of self and others; social identity and collective self-conception; group motives; intergroup emotions; attitudes, explanations and stereotypes; prejudice and discrimination; stigma, disadvantage and social deviance; crowds and riots; social protest and active minorities; collective action and social change; intergroup contact, social harmony and diversity; and leadership within and between groups.
Article
Some audit researchers suggest that high levels of audit team structure may encumber communication within audit teams by impeding information-gathering activities. Others suggest that structure benefits communication by coordinating and controlling information flows. This study evaluated these arguments by examining the relationship between the structure of audit teams and selected communication variables (information overload, boundary spanning, satisfaction with supervision, and accuracy of information). Questionnaire data were gathered from a national sample of 109 audit teams, with three auditors responding from each team (i.e., n = 327). Information overload, satisfaction with supervision, and accuracy of information were less in audit teams with greater structure. The implication is that the level of structure adopted by teams has both positive and negative effects on communication, with structured teams providing greater control over information overload but impairing satisfaction with supervision and the accuracy of information.
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This paper investigates the successful resolution of audit challenges faced by auditing professionals. We use an experiential questionnaire (EQ) (Gibbins and Qu 2005) to elicit practicing auditors' experiences with resolving challenges personally encountered on an audit engagement. One hundred ninety-seven auditing professionals from all levels (staff to partners) and firm types (local to Big 4) responded to our EQ, and 130 provided complete information about a self-identified challenge they had encountered. Over 70 percent of these challenges were successfully resolved wherein communication with other auditors on the engagement, along with communication with the client, aided most in the resolution process. These results provide evidence confirming theory-based research indicating the importance of knowledge sharing for CPAs (Vera-Muñoz et al. 2006). Our findings also extend prior research on the components of professional judgment (Gibbins and Emby 1985; Emby and Gibbins 1988; Gibbins and Mason 1988) by providing insight into the potentially troublesome area of challenges that are often encountered during an audit, and how effective communication can lead to successful resolution of such challenges.
Article
Due to recent technological advancements such as online workpapers and email, audit firms have alternative methods of workpaper review that they did not have in the past. While audit workpaper preparers typically know they will be reviewed, and know the form their review will take, prior research has focused on comparing the judgments of auditors who expect to be reviewed with auditors who expect to remain anonymous. This study examines the effects on preparers of using two different methods of review: face-to-face and electronic review. The study also compares both review groups to a no-review control group. Consistent with the Heuristic-Systematic Model, we find that the method of review affects preparer effectiveness and efficiency. Specifically, preparers anticipating a face-to-face review are more concerned with audit effectiveness, produce higher quality judgments, are less efficient at their task, are less likely to be influenced by prior year workpapers, and feel more accountable than preparers in both the electronic review and no-review conditions. Interestingly, electronic review preparers generally do not differ from the no-review group. These results suggest that how a review will be conducted, and not merely the expectation that a review will occur, affects the decision-maker's judgments and perceptions.
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Field research is increasingly being employed by audit researchers around the world. However, given that many doctoral programs, especially in North America, devote little or no time to this method, understanding what constitutes good auditing field research is problematic for many editors and reviewers. Hence, the goal of this article is simple: to provide editors and reviewers with a set of suggestions/guidelines that can be employed to assess the quality of auditing field research as field research. In addition, this article might be helpful to those audit researchers who are teaching themselves field research methods to calibrate their understanding of rigorous and trustworthy field-based research methods, as well as for doctoral students and accounting departments interested in expanding their scope of course offerings. To achieve this goal we pose and answer ten questions about field research quality illustrating our responses with best practices observed in currently published or forthcoming papers. We also identify various methodological resources that will assist editors, reviewers, and authors in developing a greater appreciation for and an ability to evaluate qualitative auditing research.
Article
In an internal control audit, the consequences and assessment subjectivity of control problems motivate managers to try to persuade auditors to lower the assessed severity of an observed control deviation. We report an experiment in which 106 audit seniors evaluate either information technology (IT) or manual control deviations that are potentially indicative of significant deficiencies, after exposure to persuasion tactics based in either concession or denial. For IT control deviations, we find that auditors assess the significance of deficiency lower and the perceived adequacy of management's explanation higher for concessions than for denials. For manual control deviations, we find no differences between concessions and denials. Our results provide evidence of a systematic bias in auditor judgment and indicate a rationale for the ubiquity of management persuasion attempts around control deviations - sometimes they work.
Article
The commentaries in this forum on Big Data confront one of our profession’s most pressing challenges. How should we respond to Big Data? Big Data and business analytics now permeate almost all aspects of major companies’ decision making and business strategies. A large U.S. company, for example, might process a billion data elements every day to understand its competitive environment. Moreover, by its very nature, Big Data cannot avoid running head-on into the traditional systems of accounting and auditing that have served our profession so well in the past. What are the threats and opportunities for accounting and auditing generated by this fundamentally different way of understanding information and reporting by business organizations? This issue presents eight commentaries by expert academics and business professionals who have studied and thought much about the core issues and challenges. Collectively, these commentaries not only define and frame the important issues for accounting and auditing but, also, they identify many feasible, yet difficult, pathways forward, wherein Big Data and traditional accounting and auditing might meld to better serve firms, stakeholders, and the public.
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This study investigates whether workload pressures, as proxied by the audit busy season (i.e., December fiscal year-end date) and auditor workload compression (i.e., relative concentration of companies with the same fiscal year-end date in an auditor's client portfolio), affect audit quality. Using a sample of 8,384 firm-year observations during the period 2006-2009, we find that busy season companies exhibit greater magnitudes of abnormal accruals and are more likely to meet or beat certain earnings benchmarks. Additional tests show that these associations are enhanced by the degree of auditor workload compression. Prior experimental and survey research indicates that workload pressures lead to dysfunctional behaviors and lower audit quality among individual auditors. Our archival findings suggest that these pressures can transcend the quality control mechanisms of a firm, affecting quality at the audit engagement level.
Article
We investigate how auditors learn the technical aspects of their professional role while performing client engagements, and how that learning process has been shaped by changes in societal, economic and regulatory forces. Prior studies explicitly recognize that auditors need social skills and demeanor consistent with professional norms as well as requisite knowledge, but those studies generally focus on the processes through which new auditors are molded toward consistency with social norms. In contrast, we focus on forces affecting the transfer of technical knowledge from supervisor (guide) to subordinate (learner) in the everyday work setting. Our evidence derives from semi-structured interviews with 30 relatively new and more experienced audit partners at one Big 4 firm, thus spanning multiple “generations” of experience. Results confirm that auditors primarily acquire technical knowledge on the job, through the interactions among individual engagement team members. However, partners express concern about changes in the practice environment that may limit effectiveness of on-the-job learning, including characteristics of personnel, the approach to formal training at induction, supervisors’ reluctance to provide candid feedback, regulatory and economic pressures, and the increased distraction and reduced interpersonal contact associated with use of information technology. At the end of the day, our findings raise implications for practice regarding the difficulty of developing effective learning conditions for auditors in the face of these challenges.This article is protected by copyright. All rights reserved.
Article
Auditors and regulators have invested heavily in improving audits of estimates in recent years, but problems in this area persist. We examine the causes of these problems and why they persist. To do so, we interview 24 very experienced auditors about how they audit complex accounting estimates such as fair values and impairments and what problems they experience in the process. We find that auditors overwhelmingly choose to audit the details of management's estimate rather than use other allowable approaches. The steps auditors describe and the language they use to describe those steps indicate that they follow a process of verifying individual elements of management's assertions on a piecemeal basis, resulting in overreliance on management's process, rather than engaging in a critical analysis of the overall estimate. The problems that auditors identify are consistent with this view, and include failures to notice inconsistencies among the estimate and other internal data or external conditions and overreliance on specialists to identify, evaluate, and challenge critical assumptions. We interpret these processes and problems using institutional theory and identify two root causes: standards' and firm policies' emphasis on verifying management's model, and audit firms' division of knowledge between auditors and specialists. Institutional theory proposes these conventions arise from firms extending use of procedures that are legitimate in one area (i.e., auditing accounts without significant uncertainty) to a new area (i.e., auditing complex estimates), even though they are likely less effective in the new area. These conventions are reinforced by regulators' method of inspection and by firms' reluctance to change methods without a prompt to change to a clearly better method. We argue that these institutionalized conventions thwart auditors' good-faith attempts to engage in skeptical analysis of estimates. Thus, audit quality problems are likely to persist.
Article
In recent years, accounting standards worldwide have been modified so as to render them more heavily based on fair or market value. This paper explores the behavioural and jurisdictional consequences of the normative drift towards fair value. Being informed by Giddens’ work on late modernity, trust and expertise and drawing on a series of interviews with Canadian professional accountants, we argue that fair value accounting makes it increasingly harder for auditors to feel and actually be in control of their own expertise. That is, auditors’ system of expertise is now considerably more reliant on a “secondary” – but perhaps in actual fact primary – layer of expertise revolving around market valuation techniques and principles. In so doing, the auditors’ job is increasingly transformed as the involvement of valuators now represents a recurrent and pervasive phenomenon in audit processes. The auditor's role nowadays resembles that of an arbiter having to mediate discrepancies over subjective values – a number of which being produced by highly specialized valuators. Important implications ensue from a system of expertise in which the experts’ degree of control over their own jurisdictional work is increasingly eroding.
Article
The accounting industry plays an important role in the production and implementation of accountability mechanisms surrounding corporate social responsibility practices. Operating as both politicians and implementers of knowledge (Gendron, Cooper, & Townley, 2007), the expert activities of accountants are never purely technical. This paper focuses on the mediating role of accounting firms and professional bodies in aligning the socially responsible practices of organizations with the rational morality of the market. I show that the construction of the market as a moral marker of socially responsible action is the result of a major effort of rationalization aimed at justifying the emergence of a social and moral conscience in business, not in the name of subjective feelings or human values, but in the name of an economic and depoliticized logic of profitability. Drawing on the political analysis of Latour (2004) [Politics of Nature: How to Bring the Sciences into Democracy] and his metaphor of the ‘modern constitution’, I view the economicization of corporate social responsibility as symptomatic of the power imbalance between the world of humans and the world of objects governing the political structure of contemporary society and weakening democratic activity.
Article
Considerable recent audit regulation, both proposed and mandated, and accounting research has focused on auditor independence threats arising over long auditor tenure. Psychology research, however, suggests independence threats also likely arise when auditor tenure is short because auditors can quickly develop a strong client identity, raising questions about the effectiveness of mandatory audit partner or firm rotation to address independence concerns. Relying on Social Identity Theory, I examine mechanisms for promoting auditor independence that can be implemented regardless of auditor tenure or rotation. I conduct two experiments in a setting with no prior auditor-client history. As predicted, auditors who identify more strongly with their clients, by sharing their values, agree more with the client’s preferred accounting treatment, unless the salience (i.e., arousal) of their professional identity is heightened. Further, as predicted, heightening professional identity salience increases professional skepticism. My results provide an improved understanding of the joint effects of identity strength and salience on auditor judgments and suggest a cost-effective alternative to auditor rotation to maintain auditor independence, even when auditor tenure is short.
Article
This study provides both survey and experimental evidence to consider how social interactions between staff-level auditors and client management may affect staff auditors' perceptions and influence their decisions regarding the collection of audit evidence. During fieldwork, staff-level auditors have extensive interaction with client management. Survey evidence suggests that these staff-level auditors are often “mismatched” with client management, in terms of their experience, age, and accounting knowledge. Experimental results indicate that staff-level auditors may reduce the extent to which they collect evidence to avoid these interactions. Finally, the use of email communication with client management helped to mitigate the reduction in evidence collected caused by avoiding in-person interactions. Interestingly, when not collecting all the evidence, approximately half of the participants documented their findings in a vague or inappropriate manner, which would likely reduce the likelihood that reviewing auditors would identify a problem. Given the extent of audit evidence collected by young staff auditors, these findings have direct implications for workpaper and audit quality. Data Availability: Data and materials used in this study are available upon request.
Article
Both the evolution toward online continuous auditing and new assurance services for information systems reliability have helped fuel changes in the audit/attest process. These changes have already been of concern in dealing with large organizations using complex information systems to process their accounting and business information. As a result, these changes have necessitated a change in focus from traditional accounting control processes to increasingly complex information‐systems‐based control processes for advanced technology applications. With the resulting increased complexity in the internal control assessment process, the move toward group decision making in the major accountancy firms is expected to accelerate—particularly for the control‐assessment process. The research documented in this paper focuses on the impact of group decision making on decision quality within the internal control‐assessment process for information systems environments. The results indicate that improved decision quality does result from group decision making and that these improvements arise even if much of the initial assessment work is done individually by group members before the group convenes for face‐to‐face discussions. The use of preliminary individual assessments does, however, appear to result in a common information‐sampling bias. This is the phenomenon whereby group decisions become focused on information known by most or all group members, and information known by only one group member has a higher probability of not being introduced and recognized by the group.
Article
This article relies on an analysis of the institutionalization of economics worldwide during the 20th century to argue that the logic of professional development in this particular field has come to be increasingly defined in global terms. Connections to ( mainly) U.S.based standards of work and professional practice are routinely used in the local competition whereby different professional segments and groups seek to assert their authority on particular jurisdictions ( scientific, corporate, or political). In this process of professional construction ( or reconstruction), economies are being transformed through complex transnational mechanisms which, ultimately, feed back into the identity and jurisdictional claims of the economics profession itself, both in the "core" and in the "periphery."
Article
This paper examines the effects of time budget pressure and risk of mis-statement on the propensity of auditors to commit reduced audit quality (RAQ) acts. Understanding the different conditions under which time budget pressure can impact on auditors' behavior is important because of the emphasis on meeting budgets in practice. A 2 × 2 × 2 mixed design was used with two between-subjects variables for time budget pressure and risk and a repeated measure for the type of RAQ (accepting doubtful audit evidence and truncating a selected sample). The dependent variable was the propensity to commit RAQ. The results support the contention that, undertime budget pressure, the likelihood of RAQ is lower when the risk of misstatement is higher. However, this effect was observed for only one of the two RAQ acts examined, suggesting that these RAQ acts are not seen to be the same by auditors. Different risk responses conditioned on the type of RAQ may be indicative of a strategic response to use of RAQ under time budget pressure.
Article
The study describes and contrasts information systems (IS) and financial auditors’ perceptions of the current and future role of IS auditing within the largest accounting/professional services organizations (the Big Five). We conducted a field study of 20 senior managers and partners among the then Big Five firms in the United States to better understand how the IS audit function is expected to change. We find that IS and financial auditors have different perceptions about the current and future relationship between IS and financial audit and differ in their opinions of clients’ expectations for future audit services.
Article
Organizations are increasingly subject to conflicting demands imposed by their institutional environments. This makes compliance impossible to achieve, because satisfying some demands requires defying others. Prior work simply suggests that organizations develop strategic responses in such situations. Our key contribution is to provide a more precise model of organizational responses that takes into account intraorganizational political processes. As a result, we identify situations in which conflicting institutional demands may lead to organizational paralysis or breakup.
Article
In this article, we review and evaluate recent management research on the effects of different types of diversity in group composition at various organizational levels (i.e., boards of directors, top management groups, and organizational task groups) for evidence of common patterns. We argue that diversity in the composition of organizational groups affects outcomes such as turnover and performance through its impact on affective, cognitive, communication, and symbolic processes.
Article
Diversity can enhance as well as disrupt team performance. Diversity beliefs and climates may play an important moderating role in these effects, but it is unclear what form these should take to promote the positive effects of diversity. Addressing this question in an integration of research in team cognition and diversity, we advance the concept of diversity mindsets, defined as team members’ mental representations of team diversity. These mindsets capture diversity-related goals and associated procedural implications for goal achievement. We develop theory about the accuracy, sharedness, and awareness of sharedness of mindsets as moderators of the diversity-performance relationship. We also identify the determinants of these aspects of diversity mindsets. Finally, we discuss the implications of our model for the management of diversity.
Article
In multidisciplinary teams in the oil and gas industry, we examined expertise diversity's relationship with team learning and team performance under varying levels of collective team identification. In teams with low collective identification, expertise diversity was negatively related to team learning and performance; where team identification was high, those relationships were positive. Results also supported nonlinear relationships between expertise diversity and both team learning and performance. Finally, team learning partially mediated the linear and nonlinear relationships between diversity and performance. Findings broaden understanding of the process by which and the conditions under which expertise diversity may promote team performance.
Article
The ability to transfer best practices intemally is critical to a firm's ability to build competitive advantage through the appropriation of rents from scarce internal knowledge. Just as a firm's distinctive competencies might be difficult for other firms to imitate, its best practices could be difficult to imitate internally. Yet, little systematic attention has been paid to such intemal stickiness. The author analyzes intemal stickiness of knowledge transfer and tests the resulting model using canonical correlation analysis of a data set consisting of 271 observations of 122 best-practice transfers in eight companies. Contrary to conventional wisdom that blames primarily motivational factors, the study findings show the major barriers to internal knowledge transfer to be knowledge-related factors such as the recipient's lack of absorptive capacity, causal ambiguity, and an arduous relationship between the source and the recipient. The identification and transfer of best practices is emerging as one of the most important and widespread practical management issues of the latter half of the 1990s. Armed with meaningful, detailed performance data, firms that use fact- based management methods such as TQM, bench- marking, and process reengineering can regularly compare the perfonnance of their units along operational dimensions. Sparse but unequivocal evidence suggests that such comparisons often reveal surprising perfonnance differences between units, indicating a need to improve knowledge utilization within the firm (e.g., Chew, Bresnahan, and Clark, 1990).' Because intemal transfers typi-