Workpaper Review Research Articles

Effects of Verbal Discussion in Audit Workpaper Review on Staff Auditor's Motivation and Performance

Effects of Verbal Discussion in Audit Workpaper Review on Staff Auditor's Motivation and Performance

Hierarchical Differences in Audit Workpaper Review Performance*

AbstractThis paper investigates the performance of senior and staff auditors in the identification of conceptual and mechanical errors during workpaper review. In this study, we begin to examine the potential for effectiveness and efficiency gains by involving staff (assistant) auditors in the review process. We find that senior auditors were more accurate than staff auditors in identifying conceptual errors contained in a hypothetical set of workpapers just reviewed. However, staff auditors were more accurate than senior auditors in identifying mechanical errors. Highlighting the benefits of a hierarchical review, composite groups consisting of a staff auditor and a senior outperformed composite groups consisting of two seniors or two staff auditors. The study finds that the differences in review performance between managers and seniors found in Ramsay 1994 generalize to lower levels of experience. Considering our results in conjunction with Ramsay 1994, we show a progression to a more conceptual review template as the rank of the reviewer moves from staff to senior to manager. The paper provides some guidance to audit firms that are presently introducing major changes to the way in which the review process is carried out, including the inclusion of reviews by staff auditors.

The Effects of Specialization in Audit Workpaper Review on Review Efficiency and Reviewers' Confidence

Accounting firms are currently re-engineering their audit processes with the aim of delivering a quality audit more efficiently. One area of potential efficiency gains is the sequential and hierarchical workpaper review process. This study examines the potential for specialization to improve review efficiency and reviewer confidence. Auditing literature advises focusing each review level on specific kinds of errors (i.e., seniors on mechanical errors and managers on conceptual errors), rather than having seniors and managers perform successive all-encompassing reviews. We find that seniors but not managers performing specialized reviews were more confident in their reviews. However, both seniors and managers performing specialized reviews required on average more time than those performing all-encompassing reviews. Additional analysis suggests that specialized reviewers were also less calibrated. We attribute these results to specialization interfering with auditors' mental model of review. The results suggest specialization will not automatically improve review efficiency, and that accounting firms may need to carefully evaluate any proposed changes to their workpaper review process.

The Effects of Specialization in Audit Workpaper Review on Review Efficiency and Reviewers' Confidence

Accounting firms are currently re-engineering their audit processes with the aim of delivering a quality audit more efficiently. One area of potential efficiency gains is the sequential and hierarchical working paper review process. This study examines one approach for improving review efficiency: specialization. Auditing literature advises focusing each review level on specific kinds of errors (i.e., seniors on mechanical errors and managers on conceptual errors), rather than having seniors and managers perform successive all-encompassing reviews. To determine whether specialization at different levels of review improves reviewers' efficiency, this study has 35 managers and 39 seniors actually perform a review of a realistic set of workpapers. Seniors but not managers performing specialized reviews were more confident in their reviews. However, both seniors and managers performing specialized reviews required on average more time than those performing all-encompassing reviews. We attribute this result to specialization interfering with auditors' mental model of review. The results suggest specialization will not automatically improve review efficiency, and that accounting firms may need to carefully evaluate any proposed changes to their workpaper review process.

An Investigation of the Effects of Specialization in Audit Workpaper Review*

Abstract. This study examines the effect of specialization at the different stages of an audit workpaper review. Auditing literature advises focusing each review level on specific kinds of errors (i.e., seniors on mechanical errors and managers on conceptual errors), rather than having seniors and managers perform successive all‐encompassing reviews. However, surveys of review practice suggest that all‐encompassing reviews are common. To determine whether specialization at different levels of review improves reviewers' overall effectiveness, this study has 35 managers and 39 seniors actually perform a review of a realistic set of workpapers. Half the subjects performed specialized reviews, whereas the other half performed all‐encompassing reviews. Overall accuracy rates in our study are consistent with prior research. In addition, the combined reviews of seniors and managers are more effective than those of either seniors or managers separately, demonstrating the benefits of hierarchical review. However, specialized review leads reviewers to be significantly less accurate than reviewers performing all‐encompassing reviews. The results suggest specialization will not automatically improve review effectiveness, and that accounting firms may need to re‐evaluate their review guidance and professional training on workpaper reviews.

Senior/Manager Differences in Audit Workpaper Review Performance

The review of audit workpapers (review) is fundamental to auditing as a mechanism for controlling quality and monitoring appropriateness of work performed (Solomon [1987]). Trotman [1985] and Trotman and Yetton [1985] investigated whether review is a beneficial process and found that review reduces judgment variance (Trotman [1985]) and increases the accuracy of prereview judgments (Trotman and Yetton [1985]). However, when the studies compared teams consisting of an audit senior and an audit manager to teams consisting of two seniors they found no significant differences in performance. In both of the aforementioned studies, seniors were given audit tasks to perform, and after performing the tasks, the seniors formed interacting groups of two that arrived at new group judgments for the same task. The judgments of a subset of the seniors were then reviewed by managers who arrived at their own judgments.' When the studies compared the judgments of the audit managers to those of the teams consisting of

The Effect of Experience on Auditors' Memory Errors

This paper reports results from a study of the effects of audit experience on the frequency of two types of memory error: failure to integrate and reconstruction. Failure to integrate is defined here as failure to make mental connections between separately received pieces of information; reconstruction is defined here as altering the mental representation of information to make it consistent with existing knowledge (or memories). I asked auditors to review model work papers containing contradictions they would have discovered in the absence of reconstruction or failure to integrate. Subjects were able to refer freely to the experimental materials during their reviews, as they could do on actual audit engagements during the work paper review process. Since the work papers related to several audit tests and took about one hour to review, subjects had to use their memories to relate critical observations made earlier to later pieces of evidence when attempting to formulate an accurate representation of the meaning of all the evidence taken together, including detection of the contradictions. I found that subjects at all levels of experience made memory errors, and that both types of memory error were related to experience. Inex-