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 1999 2011 % Increase 22 73 232 # of Auditing Papers 7 9 29 # of Behavioral Auditing Papers 3 3 0 The Accounting Review # of Papers Auditing: A Journal of Practice & Theory # of Papers # of Auditing Papers # of Behavioral Auditing Papers Publishing Trends - Numbers 1999 2010 % Increase 22 72 227 # of Auditing Papers 7 15 114 # of Behavioral Auditing Papers 3 7 133 The Accounting Review # of Papers Auditing: A Journal of Practice & Theory # of Papers # of Auditing Papers # of Behavioral Auditing Papers Publishing Trends - Numbers 1999 2011 % Increase 22 73 232 # of Auditing Papers 7 9 29 # of Behavioral Auditing Papers 3 3 0 The Accounting Review # of Papers Auditing: A Journal of Practice & Theory # of Papers 17 43 153 # of Auditing Papers 17 43 153 8 21 163 # of Behavioral Auditing Papers Publishing Trends - Numbers 1999 2011 % Increase 22 73 232 # of Auditing Papers 7 9 29 # of Behavioral Auditing Papers 3 3 0 The Accounting Review # of Papers Auditing: A Journal of Practice & Theory # of Papers 17 43 153 # of Auditing Papers 17 43 153 8 21 163 38 65 71 # of Behavioral Auditing Papers Consortium Participants Publishing Trends - Topics Title The Audit Risk Model, Business Risk and Audit-Planning Decisions The Audit Review Process and Sensitivity to Information Source Objectivity How Partners’ Views Influence Auditor Judgment Risk-Based Auditing, Strategic Prompts, and Auditor Sensitivity to the Strategic Risk of Fraud How a Systems Perspective Improves Knowledge Acquisition and Performance in Analytical Procedures The Role of Problem Representation Shifts on Auditor Decision Processes The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions Does Time Constraint Lead to Poorer Audit Performance: Effects of Forewarning of Impending Time Constraints and Instructions Year Journal Publishing Trends - Topics Title Year Journal The Audit Risk Model, Business Risk and Audit-Planning Decisions 1999 TAR The Audit Review Process and Sensitivity to Information Source Objectivity How Partners’ Views Influence Auditor Judgment Risk-Based Auditing, Strategic Prompts, and Auditor Sensitivity to the Strategic Risk of Fraud How a Systems Perspective Improves Knowledge Acquisition and Performance in Analytical Procedures The Role of Problem Representation Shifts on Auditor Decision Processes The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions Does Time Constraint Lead to Poorer Audit Performance: Effects of Forewarning of Impending Time Constraints and Instructions Publishing Trends - Topics Title Year Journal The Audit Risk Model, Business Risk and Audit-Planning Decisions 1999 TAR The Audit Review Process and Sensitivity to Information Source Objectivity 1999 AJPT How Partners’ Views Influence Auditor Judgment Risk-Based Auditing, Strategic Prompts, and Auditor Sensitivity to the Strategic Risk of Fraud How a Systems Perspective Improves Knowledge Acquisition and Performance in Analytical Procedures The Role of Problem Representation Shifts on Auditor Decision Processes The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions Does Time Constraint Lead to Poorer Audit Performance: Effects of Forewarning of Impending Time Constraints and Instructions Publishing Trends - Topics Title Year Journal The Audit Risk Model, Business Risk and Audit-Planning Decisions 1999 TAR The Audit Review Process and Sensitivity to Information Source Objectivity 1999 AJPT How Partners’ Views Influence Auditor Judgment 2011 AJPT Risk-Based Auditing, Strategic Prompts, and Auditor Sensitivity to the Strategic Risk of Fraud How a Systems Perspective Improves Knowledge Acquisition and Performance in Analytical Procedures The Role of Problem Representation Shifts on Auditor Decision Processes The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions Does Time Constraint Lead to Poorer Audit Performance: Effects of Forewarning of Impending Time Constraints and Instructions Publishing Trends - Topics Title Year Journal The Audit Risk Model, Business Risk and Audit-Planning Decisions 1999 TAR The Audit Review Process and Sensitivity to Information Source Objectivity 1999 AJPT How Partners’ Views Influence Auditor Judgment 2011 AJPT Risk-Based Auditing, Strategic Prompts, and Auditor Sensitivity to the Strategic Risk of Fraud 2011 TAR How a Systems Perspective Improves Knowledge Acquisition and Performance in Analytical Procedures The Role of Problem Representation Shifts on Auditor Decision Processes The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions Does Time Constraint Lead to Poorer Audit Performance: Effects of Forewarning of Impending Time Constraints and Instructions Publishing Trends - Topics Title Year Journal The Audit Risk Model, Business Risk and Audit-Planning Decisions 1999 TAR The Audit Review Process and Sensitivity to Information Source Objectivity 1999 AJPT How Partners’ Views Influence Auditor Judgment 2011 AJPT Risk-Based Auditing, Strategic Prompts, and Auditor Sensitivity to the Strategic Risk of Fraud 2011 TAR How a Systems Perspective Improves Knowledge Acquisition and Performance in Analytical Procedures 2011 TAR The Role of Problem Representation Shifts on Auditor Decision Processes The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions Does Time Constraint Lead to Poorer Audit Performance: Effects of Forewarning of Impending Time Constraints and Instructions Publishing Trends - Topics Title Year Journal The Audit Risk Model, Business Risk and Audit-Planning Decisions 1999 TAR The Audit Review Process and Sensitivity to Information Source Objectivity 1999 AJPT How Partners’ Views Influence Auditor Judgment 2011 AJPT Risk-Based Auditing, Strategic Prompts, and Auditor Sensitivity to the Strategic Risk of Fraud 2011 TAR How a Systems Perspective Improves Knowledge Acquisition and Performance in Analytical Procedures 2011 TAR The Role of Problem Representation Shifts on Auditor Decision Processes 1999 AJPT The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions Does Time Constraint Lead to Poorer Audit Performance: Effects of Forewarning of Impending Time Constraints and Instructions Publishing Trends - Topics Title Year Journal The Audit Risk Model, Business Risk and Audit-Planning Decisions 1999 TAR The Audit Review Process and Sensitivity to Information Source Objectivity 1999 AJPT How Partners’ Views Influence Auditor Judgment 2011 AJPT Risk-Based Auditing, Strategic Prompts, and Auditor Sensitivity to the Strategic Risk of Fraud 2011 TAR How a Systems Perspective Improves Knowledge Acquisition and Performance in Analytical Procedures 2011 TAR The Role of Problem Representation Shifts on Auditor Decision Processes 1999 AJPT The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions 1999 AJPT Does Time Constraint Lead to Poorer Audit Performance: Effects of Forewarning of Impending Time Constraints and Instructions Publishing Trends - Topics Title Year Journal The Audit Risk Model, Business Risk and Audit-Planning Decisions 1999 TAR The Audit Review Process and Sensitivity to Information Source Objectivity 1999 AJPT How Partners’ Views Influence Auditor Judgment 2011 AJPT Risk-Based Auditing, Strategic Prompts, and Auditor Sensitivity to the Strategic Risk of Fraud 2011 TAR How a Systems Perspective Improves Knowledge Acquisition and Performance in Analytical Procedures 2011 TAR The Role of Problem Representation Shifts on Auditor Decision Processes 1999 AJPT The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions 1999 AJPT Does Time Constraint Lead to Poorer Audit Performance: Effects of Forewarning of Impending Time Constraints and Instructions 2011 AJPT 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 FraudRelated Planning Tasks. Auditing: A Journal of Practice & Theory 30(4): 102128 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): 12091232 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