Auditing, Engagement evaluation process, Staff Auditor, Senior auditor evaluations

ABSTRACT: In response to the greater challenges and competitive pressures facing the public accounting profession in recent years, many CPA firms have hired significant numbers of MBAs. Yet there has been little empirical evidence of the comparative performance in public accounting of MBAs vis-a-vis undergraduates with an accounting major (BAs). This Issue has Important implications as to the appropriate educational training for those entering the profession and for CPA firm recruiting strategies. This study traced the performance of 54 MBA and 56 BA entry level accountants over a nine year horizon. Performance was measured by advancement, turnover, and salary Increases. MBAs advanced more rapidly in the firm than BAs but did not demonstrate significant differences in turnover or salary Increases. MBAs from top rated schools, however, reached the manager level faster and experienced lower turnover rates than other MBAs and BAs.

[In response to the greater challenges and competitive pressures facing the public accounting profession in recent years, many CPA firms have hired significant numbers of MBAs. Yet there has been little empirical evidence of the comparative performance in public accounting of MBAs vis-a-vis undergraduates with an accounting major (BAs). This issue has important implications as to the appropriate educational training for those entering the profession and for CPA firm recruiting strategies. This study traced the performance of 54 MBA and 56 BA entry level accountants over a nine year horizon. Performance was measured by advancement, turnover, and salary increases. MBAs advanced more rapidly in the firm than BAs but did not demonstrate significant differences in turnover or salary increases. MBAs from top rated schools, however, reached the manager level faster and experienced lower turnover rates than other MBAs and BAs.]

ABSTRACT: A significant issue frequently raised in the accounting literature is whether judgments of auditors from large CPA firms vary substantially from those of auditors employed by regional or local firms. This issue has important implications as to the reliability of accounting reports and auditor independence. This article presents the results of an experiment comparing the disclosure attitudes of national and regional/local CPAs on two actual audit cases. Significant differences in preferences were found, with auditors from national firms favoring adjustment while those from smaller firms favored footnote disclosure. Participants demonstrated low consensus in their judgments, especially those from national firms. Reliance on environmental factors was found to vary significantly by CPA-firm size. However, there was no apparent pattern across cases. The perceived weighting on 'various decision factors was similar for both national and regional/local CPAs. The differences in disclosure preferences found should raise concerns for auditing policy-setting bodies. To the extent that preferences mirror reporting decisions, the differences found may result in substantial variations in accounting reports as a function of the size of the auditing firm involved.

Analytical Procedures (APs) provide a means for auditors to evaluate the reasonableness of financial disclosures by comparing a clients reported performance to expectations gained through knowledge of the client based on past experience and developments within the company and its industry. Thus, APs are fundamentally different than other audit tests in taking a broader perspective of an entitys performance vis-a-vis its environment. As such, APs have been found to be a cost-effective means to detect misstatements, and many have argued that a number of prior financial frauds would have been detected had auditors employed effective APs. With several dramatic and far-reaching developments over the past decade, the current study examines whether and how APs have changed during this period. In particular, we focus on the impact of significant enablers and drivers of change such as technological advancements and the enactment of the Sarbanes-Oxley Act. We also compare our findings to an influential study of the practices of APs by Hirst and Koonce (1996) that was conducted over 10 years ago. We interview 36 auditors (11 seniors, 13 managers, and 12 partners) from all of the Big 4 firms using a structured questionnaire. The data reveal some similarities in findings when compared to prior research (e.g., auditors continue to use fairly simple analytical procedures). However, there are a number of significant differences reflecting changes in AP practices. For instance, as a result of technology auditors now rely more extensively on industry and analyst data than previously. Further, auditors report that they develop more precise quantitative expectations and use more nonfinancial information. They also appear to rely more on lower level audit staff to perform APs, conduct greater inquiry of non-accounting personnel, and are willing to reduce substantive testing to a greater extent as a result of APs conducted in the planning phase. Finally, the Sarbanes-Oxley Act has had an impact in greater consideration and knowledge of internal controls, which is seen as the most important factor driving the use and reliance on APs. © 2010 CAAA.

Les procédures analytiques procurent aux auditeurs un mécanisme d’évaluation de la « vraisemblance » des informations financières, grâce à la comparaison de la performance présentée par l’entité cliente et des attentes découlant de leur connaissance de l’entité cliente, fondée sur l’expérience passée et l’évolution de l’organisation et de son secteur d’activité. Les procédures analytiques diffèrent donc foncièrement des autres procédures d’audit, du fait que la performance de l’entité est envisagée dans une perspective plus large, dans le contexte de son environnement. Cela explique que les procédures analytiques se soient révélées efficientes dans le dépistage des anomalies, et nombreux sont ceux qui affirment que plusieurs des fraudes financières passées auraient été décelées si les auditeurs avaient mis en œuvre des procédures analytiques efficaces. Compte tenu de l’ampleur et de la portée des progrès réalisés au cours de la dernière décennie, les auteurs se demandent si les procédures analytiques ont changé au fil de ces années et, le cas échéant, comment ces changements se sont manifestés. Ils s’intéressent en particulier à l’incidence de « facilitateurs » et d’« inducteurs » de changement importants, comme les progrès technologiques et l’adoption de la loi Sarbanes‐Oxley. Ils comparent également leurs observations aux résultats d’une étude marquante sur les méthodes utilisées dans la mise en œuvre des procédures analytiques, réalisée par Hirst et Koonce (1996) il y a plus de 10 ans. Les auteurs interrogent en entrevue 36 auditeurs (11 chargés de missions, 13 chefs de groupe et 12 associés) provenant tous des Quatre Grands cabinets d’expertise comptable, à l’aide d’un questionnaire structuré. Les données recueillies révèlent certaines similitudes dans les observations lorsqu’elles sont comparées aux résultats des études antérieures (par exemple, les auditeurs continuent d’utiliser des procédures analytiques relativement simples). Toutefois, les auteurs relèvent bon nombre de différences sensibles attestant de l’évolution des méthodes utilisées dans la mise en œuvre des procédures analytiques. Ainsi, par suite des progrès de la technologie, les auditeurs s’appuient maintenant plus largement qu’ils ne le faisaient auparavant sur les données sectorielles et les données des analystes. En outre, les auditeurs disent élaborer des prévisions quantitatives plus précises et utiliser davantage d’informations non financières. Ils semblent également confier plus fréquemment la mise en œuvre des procédures analytiques au personnel d’audit d’échelon inférieur, prennent une quantité plus grande d’informations auprès du personnel non comptable et sont disposés à réduire davantage les tests de corroboration, compte tenu des procédures analytiques mises en œuvre à la phase de planification. Enfin, la loi Sarbanes‐Oxley a favorisé l’augmentation de la prise en compte et de la connaissance des contrôles internes, facteur que l’on estime avoir joué le rôle le plus important dans la recrudescence de l’utilisation des procédures analytiques et le renforcement de la confiance accordée à ce type de procédures.

Analytical Procedures (APs) provide a means for auditors to evaluate the “reasonableness” of financial disclosures by comparing a client’s reported performance to expectations gained through knowledge of the client based on past experience and developments within the company and its industry. Thus, APs are fundamentally different than other audit tests in taking a broader perspective of an entity’s performance vis‐à‐vis its environment. As such, APs have been found to be a cost‐effective means to detect misstatements, and many have argued that a number of prior financial frauds would have been detected had auditors employed effective APs. With several dramatic and far‐reaching developments over the past decade, the current study examines whether and how APs have changed during this period. In particular, we focus on the impact of significant “enablers” and “drivers” of change such as technological advancements and the enactment of the Sarbanes‐Oxley Act. We also compare our findings to an influential study of the practices of APs by Hirst and Koonce (1996) that was conducted over 10 years ago. We interview 36 auditors (11 seniors, 13 managers, and 12 partners) from all of the Big 4 firms using a structured questionnaire. The data reveal some similarities in findings when compared to prior research (e.g., auditors continue to use fairly simple analytical procedures). However, there are a number of significant differences reflecting changes in AP practices. For instance, as a result of technology auditors now rely more extensively on industry and analyst data than previously. Further, auditors report that they develop more precise quantitative expectations and use more non‐financial information. They also appear to rely more on lower level audit staff to perform APs, conduct greater inquiry of non‐accounting personnel, and are willing to reduce substantive testing to a greater extent as a result of APs conducted in the planning phase. Finally, the Sarbanes‐Oxley Act has had an impact in greater consideration and knowledge of internal controls, which is seen as the most important factor driving the use and reliance on APs.

ABSTRACT: Behavioral researchers have long been concerned about the effects of experience on decision making, especially in highly technical fields such as auditing. Relying on Simon's model of the decision process, this paper provides evidence that the experience effect is significant when task complexity is explicitly considered. It reports the results of a series of experiments examining structured, semi-structured, end unstructured tasks where subjects am pooled into two groups: "experienced" (those having reached the staff level where the required normative skills are developed) end "inexperienced" (lower staff levels or auditing students). Responses to a separate study of 88 partners and managers were used to Independently establish the appropriate staff level for each task and complexity. Significant decision differences were found between the experimental groups on each task. Pooling all subjects together, however, showed only an isolated significant experience effect, highlighting the need to consider explicitly and control for task complexity and appropriate normative skills in studying the nature of expertise. These results further suggest that auditing students or less experienced junior auditors ere questionable surrogates for CPAs in complex audit decision settings. Future corroborating research examining other audit judgments and other audit populations is encouraged, e.g., design of audit programs.

[Behavioral researchers have long been concerned about the effects of experience on decision making, especially in highly technical fields such as auditing. Relying on Simon's model of the decision process, this paper provides evidence that the experience effect is significant when task complexity is explicitly considered. It reports the results of a series of experiments examining structured, semi-structured, and unstructured tasks where subjects are pooled into two groups: "experienced" (those having reached the staff level where the required normative skills are developed) and "inexperienced" (lower staff levels or auditing students). Responses to a separate study of 88 partners and managers were used to independently establish the appropriate staff level for each task and complexity. Significant decision differences were found between the experimental groups on each task. Pooling all subjects together, however, showed only an isolated significant experience effect, highlighting the need to consider explicitly and control for task complexity and appropriate normative skills in studying the nature of expertise. These results further suggest that auditing students or less experienced junior auditors are questionable surrogates for CPAs in complex audit decision settings. Future corroborating research examining other audit judgments and other audit populations is encouraged, e.g., design of audit programs.]