paper
Auditing: A Journal of Practice & Theory
Vol. 29, No. 1
May 2010 pp. 207–220
American Accounting Association
DOI: 10.2308/aud.2010.29.1.207
The Effect of Alternative Types of Review on
Auditors’ Procedures and Performance
Elizabeth A. Payne, Robert J. Ramsay, and E. Michael Bamber
SUMMARY: Audit workpaper review is a primary means of quality control in auditing firms. While prior research shows that anticipation of a review affects preparers’ judgments, there is little research on the effects of the different review formats that occur in practice. The research that does exist examines the effects of adding discussion after the preparation of written review notes. We compare the effects on preparers of anticipating a real-time interactive review ͑where review notes are not prepared in advance͒ to the effects of anticipating receipt of more traditional written review notes. We also examine how these two different types of review affect the actual audit procedures preparers perform. A path analysis reveals that an interactive review leads auditors to focus more on the cognitively demanding, conclusion-oriented audit procedures. This, in turn, leads to better performance in identifying a trend that is indicative of fraud. We find no evidence that dysfunctional behavioral strategies operate under the less structured interactive review to compromise audit performance.
Keywords: review process; interactive review; written review.
INTRODUCTION udit review is a primary means of audit quality control and auditor training ͑see Rich et al.
͓1997a͔ for a review͒. All work performed and documented in the workpapers by auditors
͑preparers, hereafter͒ is reviewed by more senior members of the audit team ͑reviewers, hereafter͒. With more than 50 percent of audit manager time and 30 percent of total audit hours allocated to review, audit firms are constantly examining ways to increase both the effectiveness and efficiency of review ͑Bamber and Bylinski
Vol. 29, No. 1
May 2010 pp. 207–220
American Accounting Association
DOI: 10.2308/aud.2010.29.1.207
The Effect of Alternative Types of Review on
Auditors’ Procedures and Performance
Elizabeth A. Payne, Robert J. Ramsay, and E. Michael Bamber
SUMMARY: Audit workpaper review is a primary means of quality control in auditing firms. While prior research shows that anticipation of a review affects preparers’ judgments, there is little research on the effects of the different review formats that occur in practice. The research that does exist examines the effects of adding discussion after the preparation of written review notes. We compare the effects on preparers of anticipating a real-time interactive review ͑where review notes are not prepared in advance͒ to the effects of anticipating receipt of more traditional written review notes. We also examine how these two different types of review affect the actual audit procedures preparers perform. A path analysis reveals that an interactive review leads auditors to focus more on the cognitively demanding, conclusion-oriented audit procedures. This, in turn, leads to better performance in identifying a trend that is indicative of fraud. We find no evidence that dysfunctional behavioral strategies operate under the less structured interactive review to compromise audit performance.
Keywords: review process; interactive review; written review.
INTRODUCTION udit review is a primary means of audit quality control and auditor training ͑see Rich et al.
͓1997a͔ for a review͒. All work performed and documented in the workpapers by auditors
͑preparers, hereafter͒ is reviewed by more senior members of the audit team ͑reviewers, hereafter͒. With more than 50 percent of audit manager time and 30 percent of total audit hours allocated to review, audit firms are constantly examining ways to increase both the effectiveness and efficiency of review ͑Bamber and Bylinski
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