REG515 Current research in auditing

Autumn 2024

Learning outcome
This short course is based on the literature syllabus of Current JDM Research in Auditing (Professor Kathryn Kadous, Goizueta Business School, Fall 2011) and addresses current judgment and decision-making (JDM) research in auditing. The list identifies areas that have resulted in larger contributions to the field in the past and continue to be important, as well as topics that are viewed as being of increasing importance.

The purposes of this course are to get you acquainted with some of the more important recent research into auditor judgment and to provide you with some methodological background in JDM experimental research in accounting.

Knowledge
- The candidate is in the forefront of knowledge within his/her academic field
Skills
- The candidate can formulate problems, plan and carry out research and scholarly work
Competence.
- The candidate can identify new relevant auditing issues and carry out his/her research with scholarly integrity
Teaching

Reading course.
Required prerequisites

Master in Accounting and Auditing.
Compulsory Activity

Home assignments.
Assessment

Summaries (60%) and an experiment (40% at the latest February 2013).
Grading Scale

Grading: Pass / fail
Computer tools

Basic statistical tools (SPSS / STATA).
Literature
Thirty articles covering the following themes:
1. Expertise and specialization
2. Accountability and goals
3. Auditing estimates, fair values, estimates
4. Fraud detection
5. Skepticism, critical thinking, and other individual characteristics
6. Advice
Optional readings:

Bonner, S. E. 2008. Judgment and Decision Making in Accounting. Upper Saddle River, NJ: Pearson/Prentice-Hall.

Libby, R. 1981. Accounting and Human Information Processing: Theory and Applications. Englewood Cliffs, NJ: Prentice-Hall, Inc., Chapter 1.

Shadish, Cook, and Campbell. 2002. Experimental and Quasi- Experimental Designs for Generalized Causal Inference. Boston: Houghton-Mifflin, Chapters 1-3.

1 Expertise and specialization

Background readings:
- Libby, R. and J. Luft. 1993. Determinants of judgment performance
in accounting settings: Ability, knowledge, motivation, and

environment. Accounting, Organizations and Society, 18 (5):

425-450.
- Baron, R. M., and D. A. Kenney. 1986. The moderator-mediator
distinction in social psychological research: Conceptual, strategic

and statistical considerations. Journal of Personality and Social

Psychology 51 (6): 1173-1182.

Optional:
- Bonner, S. E. 2008. Judgment and Decision Making in
Accounting. Upper Saddle River, NJ: Pearson/Prentice-Hall,

Chapters 2, 3, 5.

For discussion:
- Tan, H.-T., and R. Libby. 1997. Tacit managerial versus technical
knowledge as determinants of audit expertise in the field. Journal

of Accounting Research 35 (1): 97-113.
- Coyne, M. P., S. F. Biggs, and J. S. Rich. 2010. Priming/reaction-time
evidence of the structure of auditors¿ knowledge of financial

statement errors. Auditing: A Journal of Practice & Theory 29

(1): 99-123.
- Hammersley, J. S. 2006. Pattern identification and industry-specialist
auditors. The Accounting Review 81(2): 309-336.

2 Accountability and goals

Background readings:
- Kunda, Z. 1990. The case for motivated reasoning. Psychological
Bulletin 108: 480-498.
- Buckless, F. A., and S. P. Ravenscroft. 1990. Contrast coding: A
refinement of ANOVA in behavioral analysis. The Accounting

Review 65 (4): 933-945.

Optional:
- Bonner, S. E. 2008. Judgment and Decision Making in
Accounting. Upper Saddle River, NJ: Pearson/Prentice-Hall,

Chapter 7.

For discussion:
- Bagley, P. L. 2010. Negative affect: A consequence of multiple
accountabilities in auditing. Auditing: A Journal of Practice &

Theory 29 (2): 141-157.
- Hackenbrack, K., and M. W. Nelson. 1996. Auditors¿ incentives and
their application of financial accounting standards. The

Accounting Review 71 (1): 43-59.
- Kadous, K., S. J. Kennedy, and M. E. Peecher. 2003. The effect of
quality assessment and directional goal commitment on auditors¿

acceptance of client-preferred accounting methods. The

Accounting Review 78 (3): 759-778.

3 Auditing estimates, fair values, estimates

Background readings:
- Martin, R. D., J. S. Rich, and T. J. Wilks. 2006. Auditing fair value
measurements: A synthesis of relevant research. Accounting

Horizons 20 (3): 287-303.
- Bullock, J. G., D. P. Green, and S. E. Ha. 2010. Yes, but what¿s the
mechanism? (Don¿t expect an easy answer). Journal of

Personality and Social Psychology 98 (r): 550-558.

Optional:
- Bonner, S. E. 2008. Judgment and Decision Making in
Accounting. Upper Saddle River, NJ: Pearson/Prentice-Hall,

Chapter 9.

For discussion:
- Agoglia, C. P., Doupnik, T. S. And Tsakumis, G. T. 2011.
Principles-Based versus Rules-Based Accounting Standards: The

Influence of Standard Precision and Audit Committee Strength on

Financial Reporting Decisions. The Accounting Review 86 (3):

747-767.
- Nelson, M. W., and W. R. Kinney, Jr. 1997. The effect of ambiguity
on loss contingency reporting judgments. The Accounting Review

72(2): 257-274.
- Earley, C. E., V. B. Hoffman, and J. R. Joe. 2008. Reducing
management¿s influence on auditors¿ judgments: An experimental

investigation of SOX 404 assessments. The Accounting Review 83

(6): 1461-1485.

4 Fraud detection

Background readings:
- Asare, S. K., and A. M. Wright. 2004. The effectiveness of alternative
risk assessment and program planning tools in a fraud setting.

Contemporary Accounting Research 21 (2): 325-352.

For discussion:
- Hammersley, J. S., K. Johnstone, and K. Kadous. 2011. How do audit
seniors respond to heightened fraud risk? Auditing: A Journal of

Practice & Theory 30 (3): 81-101.
- Hoffman, V. B. and M. F. Zimbelman. 2009. Do strategic reasoning
and brainstorming help auditors change their standard audit

procedures in response to fraud risk? The Accounting Review 84

(3): 811-837.
- Hammersley, J. S., E. M. Bamber, and T. D. Carpenter. 2010. The
influence of documentation specificity and priming on auditors¿

fraud risk assessments and evidence evaluation decisions. The

Accounting Review 85 (2): 547-571.

5 Skepticism, critical thinking, and other individual characteristics

Background readings:
- Nelson, M. W. 2009. A Model and Literature Review of Skepticism in
Auditing. Auditing: A Journal of Practice & Theory 28(2): 1-34.

Hurtt, R. K. 2010. Development of a scale to measure professional

skepticism. Auditing: A Journal of Practice & Theory 29 (1):

149-171.

Optional:
- Bonner, S. E. 2008. Judgment and Decision Making in
Accounting. Upper Saddle River, NJ: Pearson/Prentice-Hall,

Chapter 4.

For discussion:
- Brewster, B. E. 2011. How a systems perspective improves
knowledge acquisition and performance in analytical procedures.

The Accounting Review 86 (3): 915-943.
- McKnight, C. A., and W. F. Wright 2011. Characteristics of relatively
high-performing auditors. Auditing: A Journal of Practice &

Theory 30 (1): 191-206.
- Robertson, J. C. 2010. The effects of ingratiation and client incentive
on auditor judgment. Behavioral Research in Accounting 22 (2):

69-86.

6 Advice

Background readings:
- Soll, J. B. 1999. Intuitive theories of information: Beliefs about the
value of redundancy. Cognitive Psychology 38(2): 317-346.

Skim: Bonaccio, S., and R. Dalal. 2006. Advice taking and decision

making: An integrative literature review, and implications for the

organizational sciences. Organizational Behavior and Human

Decision Processes 101: 127-151.

For discussion:
- Ng, T., and P. Shankar. 2010. Effects of technical department's
advice, quality assessment standards and client justifications on

auditors' propensity to accept client-preferred accounting

methods. The Accounting Review 85 (5): 1743-1761.
- Gold, A., R. Knechel, and P. Wallage. 2011. The effect of strictness of
consultation requirements on fraud consultation. Working Paper,

Erasmus University.
- Kadous, K., J. Leiby, and M. E. Peecher. 2011. How Do Auditors
Weight Informal Advice? The Joint Influence of Advisor

Affiliation Strength and Advice Justifiability. Working paper,

Emory University.