Audit committees (ACs) are expected to play a key role in improving financial statement integrity and as a consequence reduce audit risk. Companies reporting conformity with regulations can have an AC that appears effective but is not actually effective in substance. We surveyed audit partners and managers to identify their indicators of actual AC effectiveness (auditor-chosen list). We hypothesize a negative association between AC effectiveness and audit risk, only when an auditor-chosen list, rather than extent of conformity with regulations, is used to measure effectiveness. Results support our expectations.
Prior research into the effect of different types of experience on audit fees and audit effort has been primarily conducted at the individual, office or firm level but rarely at the team level. An important motivation for team level research is that within team variation could influence the conduct, quality and pricing of an audit. Audit team industry specialization and client‐specific experience have been associated with higher audit quality. We extend this research by investigating the effect of audit team industry experience and client‐specific experience on audit production hours (effort) and fees. Using proprietary team‐level data provided by two Australian mid‐tier firms, we find that audit team client‐specific experience is associated with higher effort and fees. Although team‐level industry experience is not associated with effort or fees, it is associated with the use of lower ranked auditors. Our results suggest that audit teams with industry experience enjoy cost savings, while audit teams with client‐specific experience incur additional effort, perhaps due to the provision of value‐added services.
SUMMARY Audit quality is dependent on the experience and effort of the audit team to identify and respond to client risks (risk responsiveness). Central to each team are the core role holders who plan and execute the audit. While many studies treat the partner as the primary core role holder, the manager and auditor-in-charge (AIC) are also important. Using data for engagements from two midtier firms, we analyze the association between the experience and relative effort of the manager and AIC and risk responsiveness. We find a manager's client-specific experience is associated with risk responsiveness for non-listed clients but find no evidence that the general or industry experience of a manager, or the experience of the AIC, is associated with risk responsiveness. The client-specific experience and relative effort of the partner is associated with risk responsiveness. These results suggests that managers can provide an important, albeit limited, contribution to the audit. JEL Classifications: M2. Data Availability: The data were made available to the researchers on the understanding that they will remain confidential.
In this paper, we share insights from our experience of harnessing technologies to innovatively design a capstone experience for large cohorts of accounting students in hybrid and online environments, informed by insights from key stakeholder consultations and relevant research. To support scaffolded development of professional skills and identity in a short span of eleven weeks, we designed a coherent suite of experiential learning and assessment activities based on contemporary events, an Enterprise Resource Planning business simulation, employability skills training and authentic case studies. Consistently high student evaluations of this unit suggest that our students find this experience valuable. Student responses to the Graduate Attribute Scale in the Graduate Outcomes Survey have shown improvement following the introduction of the capstone unit.
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