Learning the “Craft” of Auditing: A Dynamic View of Auditors' On‐the‐Job Learning

Increasing financial statement complexity along with an intense focus on audit quality has created challenges for today's auditors. As a result, audit firms are increasingly relying on various specialists to help them perform their audits. To better understand why and how audit firms are using forensic specialists on their audits, we conduct an exploratory survey of experienced audit and forensic professionals. Our results suggest auditors are largely relying on forensic specialists to provide them with additional comfort beyond that obtained from traditional audit procedures. Furthermore, our results demonstrate that the usage of forensic specialists occurs primarily on riskier engagements, such as those involving restatements, initial public offerings, and investigations by regulators or law enforcement agencies. Although their involvement varies, forensic specialists assist audit teams by providing both guidance and direct assistance across the audit in areas including fraud brainstorming, design of procedures to test for fraud, and review of results of fraud‐related testing. In addition, our findings indicate forensic specialist involvement may lead to greater comfort as evidenced by the perceived identification by forensic specialists of additional audit findings related to material misstatements, financial reporting fraud, misappropriation of assets, and internal control deficiencies. Our results also reveal the majority of auditor and forensic specialist participants believe the value of forensic involvement on audits outweighs the associated costs, even in the absence of such additional audit findings. We conclude our paper by offering a theoretical discussion of our findings based on the audit comfort framework and suggestions for future research. In summary, our findings suggest that the discomfort some auditors feel in the contemporary auditing environment is leading to changes in the rituals that underlie traditional audits such that they seek comfort afforded them through forensic specialist involvement.

Section: Coding Of Responses To Open-ended Questionsmentioning

confidence: 80%

Getting Comfortable on Audits: Understanding Firms’ Usage of Forensic Specialists

Jenkins

Negangard

Oler

2018

“…Although we recognize that inperson interviews may be more personal, phone interviews are a cost-effective means of collecting data among highly dispersed and "in-demand" individuals. Some studies in accounting that use data obtained by phone include Brown et al 2015, Westermann et al 2015, and Cohen et al 2017. Notes: Interviewees are listed chronologically by interview date in panels B and C. The information provided represents the individual's rank, status, and years of experience at the time of the survey (2012 or 2013) or interview (2014 or 2017).…”

Section: Respondentsmentioning

confidence: 99%

PCAOB Inspections: Public Accounting Firms on “Trial”

Westermann

Cohen

Trompeter

2019

Self Cite

175

146

The objective of our article is to obtain a better understanding of how auditors anticipate the potential for PCAOB inspection, experience the inspection, cope with the consequences of the inspection, and understand the PCAOB's influence within the context of professionalism. We use a qualitative approach that uses both surveys (55) and interviews (20) of auditors (of varying rank and firm) across a five‐year period (2012–2017). Respondents suggest that PCAOB inspectors are powerful, representing the “prosecution,” “judge,” and “jury” of the auditing profession. We therefore use a structural metaphor of the PCAOB inspection as a judicial “trial.” By controlling the criteria used to evaluate performance, inspectors have the power to repeatedly “subpoena,” “interrogate,” and return a “verdict” on the firm (auditor); those judged as “guilty” require supervised “probation.” This process is perceived as having improved audit quality but at a cost. Passing an inspection is so important that auditors (firms) have resorted to impression management strategies and “functionally stupid” work practices (e.g., excessive documentation, a decrease in critical thinking as a result of a “box ticking” approach to auditing). Furthermore, some respondents believe that being a good auditor has come at the expense of being a good accountant; the emphasis on audit process and concurrent de‐emphasis on technical accounting could ultimately lead to audits themselves falling short. In addition, it is evident that inspectors and auditors differ in their perceptions of risk, likely manifesting because inspectors are standards‐focused while auditors (firms) are methodology‐focused. Finally, the inspection process has created excessive stress and tension, beyond budget and fee pressures, which some auditors perceive as affecting the pool of talented auditors that firms may be able to attract and retain in the future.

“…The client as a source of institutional conformity in the audit field: Research question Particular understandings of professional value commitments and technical accounting and audit skills reflect the everyday work practices of auditors (Anderson-Goughet al 2002;Ramirez et al 2015;Westermann et al 2015). Identifying how different work experiences result in different value commitments among subgroups involves an understanding of how institutionalized beliefs are formed and upheld at the intersection between day-to-day practices with the client and field-level accounting and auditing standards (e.g., Colyvas and Jonsson 2011;Ramirez et al 2015).…”

Section: Two Aspects Of Institutional Conformity In Value Commitmentsmentioning

confidence: 99%

“…Furthermore, Grey (1998, 570) elaborates on tension between firm type and client and argues, "Both of these [firm and client type] are shown to operate to accommodate some of the tensions and paradoxes to which the discursive practice of professionalism gives rise, whilst also having their own difficulties and contradictions." Grey (1998) also argues auditors have to manage client expectations and win their confidence and respect (cf., Cooper and Robson 2006;Malsch and Gendron 2013;Westermann et al 2015). In addition, when discussing audit quality, Lawrence et al (2011) suggest potential differences between accounting firms could be a reflection of their respective clients' characteristics.…”

Section: Introductionmentioning

confidence: 99%

The Client as a Source of Institutional Conformity for Commitments to Core Values in the Auditing Profession*

Carrington

Johansson

Johed

2019

Based on an analysis of questionnaire data from a large sample of certified auditors, we examine how the main type of client being served influences auditor conformity to the core values of their profession. We contrast auditors of (primarily) listed companies with auditors of (primarily) single member companies, that is, limited liability companies with a single owner who typically is also the only employee of the company. We show that these two groups of auditors differ in the extent to which they hold certain values important (i.e., show compliance) and in the closeness with which these values are held within each group of auditors (i.e., show convergence). Our results also demonstrate that the type of client predominantly served by an auditor is relevant for explaining variation in professional values both within and between organizational contexts. In addition, we offer a new theoretical approach to classifying auditors and analyzing their commitment to core values of the profession. We analyze commitment to values via both compliance and convergence, two often overlooked aspects of conformity to value commitments in professions.