Behavioral Research in Auditing2011 AAA Auditing Doctoral Consortium E. Michael Bamber J.M. Tull School of Accounting The University of Georgia
Outline • Perspective: 1999 vs. 2010 • Publishing BAuR • Sources of Research Questions • Examples • Issues
A Publishable Paper Provides Insights That Are: • New – Cause belief revision • Interesting – Belief revision is consequential • True • Clear
Deciding on a Topic • Prior literature • Innovations in practice • Psychology theory
Prior Literature • Critically evaluate prior research (Sources: SSRN, Web of Science, AAA and conference websites) • What is the question? • What is the research method? • What is the punchline? • Critique. • What would we still like to know?
Prior Literature • Build a framework • How do the prior papers fit together? • Distill stylized facts: What do we think we know? • Identify research opportunities: What would we like to know? • Rely on others • Existing literature reviews and frameworks
Prior Literature - Examples • Nelson, M. 2009. A model and literature review of professional skepticism in auditing. Auditing: A Journal of Practice and Theory 28(2): 1-34. • Framework for classifying failures in professional skepticism (PS): More important antecedents? • Definition of PS: Presumptive doubt? • Influence of traits and incentives? • “Justifiable inefficiencies” • Incentives to avoid? Interventions to highlight and reward?
Prior Literature - Examples • Peecher, M.E., I. Solomon, and K.T. Trotman. 2010. Improving the quality of financial-statement audits by updating external auditors’ accountabilities. Working paper • Focus less on penalties and more on rewards • Propose 7 reforms, including • Refine the concept of professional skepticism • Improve the content of the audit report • Reward auditors who uncover fraud
Prior Literature - Examples • Hammersley, J.S. 2010. A Review and Model of Auditor Judgments in Fraud-Related Planning Tasks. Working Paper. • Fraud knowledge obtained primarily from training rather than experience • Antecedents to effectively perform fraud related tasks? • Conditions under which auditors do/do not respond to risk?
Innovations in Practice • Carefully read and analyze the practice literature (Sources: AICPA, PCAOB, SEC, Accounting firms) • One-on-one communications • Distill state of practice: Where would the profession like to be? • Identify research opportunities: Improve practice? • E.g., Carpenter, T. 2007. Audit team brainstorming, fraud risk identification, and fraud risk assessment: Implications of SAS No. 99. The Accounting Review 82 (5): 1119-1140. • Messier, W.F., T.M. Kozloski, and N. Kochetova-Kozloski. 2010. An analysis of SEC and PCAOB enforcement actions against engagement quality reviewers. Auditing: A Journal of Practice & Theory 29(2): 232-252.
Innovations in Practice - Examples • PCAOB Standards • New • AS No. 7 Engagement Quality Review • Proposed • Concept Release on Requiring the Engagement Partner to Sign the Audit Report • Future • The Auditors’ Reporting Model (2011 Agenda)
Innovations in Practice - Examples • PCAOB Inspection Reports • Report on Observations of PCAOB Inspectors Related to Audit Risk Areas Affected by the Economic Crisis (Sept. 2010) • Fair value assumptions – failure to test beyond inquiry of management • Fair values – failure to reconcile inconsistencies between management and third party estimates • Revenue recognition - failure to respond to specific risks, including risk of fraud
Psych Theory • Coursework, esp. non-accounting • Read the literature, esp. literature reviews and seminal papers • Citation searches for most recent work • Examples • Wilks, T.J. 2002. Predecisional distortion of evidence as a consequence of real-time audit review. The Accounting Review 77(1):51-72 • Organizational Identity Theory, Small Group Theory, Social Identity Theory, Construal Level Theory
Developing the Topic • Goal: a publishable paper • Consequential belief revision in behavioral auditing will likely require integration of all three: • Prior auditing literature – New – moving literature forward • Practice – Interesting – others care about the topic • Theory – New and Interesting – results are generalizable/consequential
Issues • Publishable topics? • Yes, more than ever (SOX, PCAOB standards agenda & inspection reports) • Journal interest? • Yes, in select journals (TAR, AJPT, CAR, AOS) • Top tier • Participants? • The big issue, cycles • Local vs. national • Students • Lynch, A.L., U.S. Murthy, and T.J. Engle. 2009. Fraud brainstorming using computer-mediated communication: The effects of brainstorming technique and facilitation. The Accounting Review 84 (4): 1209-1232