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Behavioral Research in Auditing 2012 AAA Auditing Doctoral Consortium. E. Michael Bamber J.M. Tull School of Accounting The University of Georgia. Outline. Perspective: 1999 vs. 2011 Publishing BAuR Sources of research questions Examples Methodology issues. Publishing Trends - Numbers.
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Behavioral Research in Auditing2012 AAA Auditing Doctoral Consortium E. Michael Bamber J.M. Tull School of Accounting The University of Georgia
Outline • Perspective: 1999 vs. 2011 • Publishing BAuR • Sources of research questions • Examples • Methodology issues
Publishing Trends – TAR 2011 • “The Effect of Using the Internal Audit Function as a Management Training Ground on the External Auditor’s Reliance Decisions,” W. F. Messier, Jr., J. K. Reynolds, C. A. Simon, and D. A. Wood (November 2011) • “Risk-Based Auditing, Strategic Prompts, and Auditor Sensitivity to the Strategic Risk of Fraud,” K. Bowlin (July 2011) • “How a Systems Perspective Improves Knowledge Acquisition and Performance in Analytical Procedures,” B. E. Brewster (May 2011)
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 • Calls for research
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 • Hammersley, J. S. 2011. A Review and Model of Auditor Judgments in Fraud-Related Planning Tasks. Auditing: A Journal of Practice & Theory 30(4): 102-128 • 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?
Prior Literature – Calls for Research • AJPT Special Calls (The Auditor’s Report Fall 2011) • Conservatism in auditing • Research on environmental assurance and auditing • Qualitative studies in auditing • Audit market structure, competition, and audit quality
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 • Risk Assessment Standards AS Nos. 8-15 • Proposed • Communications with Audit Committees (Comment period open) • Future • The Auditors’ Reporting Model (Issue proposed standard in 2012) • Auditor Independence, Objectivity, and Professional Skepticism (2012 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
Innovations in Practice • Approach: • Why/What? • Process • Antecedents and Outcomes • Interventions
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
Methodology – True • “The Effect of Using the Internal Audit Function as a Management Training Ground on the External Auditor’s Reliance Decisions” • Archival analysis and behavioral experiment • 1 X 3 Design • Norwegian auditors • “Risk-Based Auditing, Strategic Prompts, and Auditor Sensitivity to the Strategic Risk of Fraud” • Audit game based on experimental economics • 2 X 2 X 2 mixed design • Students • “How a Systems Perspective Improves Knowledge Acquisition and Performance in Analytical Procedures” • Several techniques to develop participants’ mental models • 2 X 2 between-subject design • Students
Methodology – True • Straightforward designs • 1X3, 2X2X2, 2X2 • Facilitates interpretation of results and internal and external validity • Randomization vs. control • Messier et al. 8 control variables in unexpected audit fee model vs. 1X3 experiment • Something novel • Messier et al. – archival and experimental components • Bowlin – experimental economics game • Brewster – develop mental models
Methodology – True • Participants • The big issue, cycles • Local vs. national • Students • Experimental economics game – accepted • Justification in other experiments: • 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 • Brewster, B. E. 2011. “How a Systems Perspective Improves Knowledge Acquisition and Performance in Analytical Procedures,” B. E. Brewster. The Accounting Review 86(3): 915-943
Conclusion • Publishable topics? • Yes, more than ever (SOX, PCAOB standards agenda & inspection reports) • Journal interest? • Yes, in select journals (TAR, AJPT, CAR, AOS) • Top tier • Publishable paper? • New, interesting, true, and clear • Importance of topic selection process
