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FAR Practice Note - The Effect of Audit Culture on Audit Quality Prof. dr. Jasmijn Bol Prof. dr. Isabella Grabner Dr. Katlijn Haesebrouck Prof. Mark E. Peecher PhD Details
 

In this research note, we discuss why designing a management control system that directs effort towards audit quality is so tricky. We discuss the different ways that audit firms motivate effort and highlight “culture controls” where, through selection and socialization, audit firms create a workforce of auditors that value and, therefore, work hard to ensure audit quality. We also discuss the importance of directing auditors’ efforts towards audit quality and distinguish three critical elements. Auditors must: (1) understand the importance of audit quality, (2) possess the right tools and capabilities, and (3) prefer those tasks that lead to audit quality. We share some preliminary results of our research that examines how successful five Dutch audit firms are at this non-trivial task. This provides firms with the knowledge to critically examine and improve their own current management control system. Our study is relevant for Dutch audit firms as well as for auditors all over the world.

 

Authors

Prof. dr. Jasmijn Bol

Professor Jasmijn Bol teaches Accounting and Controls for Operational Risk, a master’s-level class about risk and control systems at Tulane University, Freeman School of Business, USA. Her classes go beyond lectures and textbooks, incorporating interactive pedagogy and lessons drawn from her own research.

Born and raised in the Netherlands, Professor Bol has studied at universities in The Netherlands, Spain and in the U.S., and she consistently presents her research to communities across the globe. Professor Bol’s research focuses on subjectivity in compensation contracting, and she has authored and co-authored several articles that have appeared in prestigious scholarly journals. She has also earned awards for her teaching and research.

Prof. dr. Isabella Grabner

Isabella Grabner is a Professer of Management Control and Strategy Implementation at WU (Vienna University of Economics and Business).

She holds a Master’s degree in International Business from the University of Vienna and a PhD in Business Administration from WU Vienna (Title of dissertation "Creativity and Control: Conflicting Objectives?"). Before joining WU Vienna, she was a tenured faculty member at the Department of Accounting and Information Management at Maastricht University School of Business and Economics. She has also worked as visiting researcher at Emory University Goizueta Business School and the University of Technology Sydney.

Dr. Katlijn Haesebrouck

Assistant Professor Accounting & Information Management, School of Business and Economics, Maastricht University

Prof. Mark E. Peecher PhD

Mark E. Peecher, CPA, is a professor of accountancy and a Deloitte Teaching Fellow at the University of Illinois, specializing in behavioral auditing and accounting research. He holds a bachelor’s, master’s, and Ph.D. degrees in accountancy from Illinois. Prior to returning to his alma mater, he was a faculty member at the University of Washington. An active member in the AAA’s Audit Section, Mark currently serves as the Audit Section’s past president.

Professor Peecher’s business-press writings about auditing have appeared in The Wall Street Journal, and his scholarly writings have appeared in AccountingOrganizations & SocietyAuditing: A Journal of Practice & TheoryContemporary Accounting ResearchInternational Journal of AuditingJournal of Accounting ResearchOrganizational Behavior and Human Decision Processes, and The Accounting Review. He has presented his research at numerous conferences, consortia, and universities, and he has served on the editorial boards at Auditing: A Journal of Practice & TheoryThe Accounting Review, and Issues in Accounting Education. Mark enjoys teaching both undergraduate courses and doctoral seminars related to auditing. He particularly likes helping to mentor doctoral students, three of whom have won outstanding doctoral dissertation awards.


FAR Literature Review - The Effect of Audit Culture on Audit Quality Dr. Katlijn Haesebrouck Prof. Mark E. Peecher PhD Prof. dr. Jasmijn Bol Prof. dr. Isabella Grabner Details
 

In 2014, the professional body for accountants in the Netherlands (NBA) indicated that audit quality did not live up to the public’s expectations. One of the main corrective measures suggested by the NBA was an improvement in audit culture (NBA, 2014). Although audit culture can be an important determinant of audit quality, the extant academic literature has not payed much attention to audit culture. This paper provides an overview of the literature on audit quality and audit culture as a determinant of audit quality.

Authors

Dr. Katlijn Haesebrouck

Assistant Professor Accounting & Information Management, School of Business and Economics, Maastricht University

Prof. Mark E. Peecher PhD

Mark E. Peecher, CPA, is a professor of accountancy and a Deloitte Teaching Fellow at the University of Illinois, specializing in behavioral auditing and accounting research. He holds a bachelor’s, master’s, and Ph.D. degrees in accountancy from Illinois. Prior to returning to his alma mater, he was a faculty member at the University of Washington. An active member in the AAA’s Audit Section, Mark currently serves as the Audit Section’s past president.

Professor Peecher’s business-press writings about auditing have appeared in The Wall Street Journal, and his scholarly writings have appeared in AccountingOrganizations & SocietyAuditing: A Journal of Practice & TheoryContemporary Accounting ResearchInternational Journal of AuditingJournal of Accounting ResearchOrganizational Behavior and Human Decision Processes, and The Accounting Review. He has presented his research at numerous conferences, consortia, and universities, and he has served on the editorial boards at Auditing: A Journal of Practice & TheoryThe Accounting Review, and Issues in Accounting Education. Mark enjoys teaching both undergraduate courses and doctoral seminars related to auditing. He particularly likes helping to mentor doctoral students, three of whom have won outstanding doctoral dissertation awards.


Prof. dr. Jasmijn Bol

Professor Jasmijn Bol teaches Accounting and Controls for Operational Risk, a master’s-level class about risk and control systems at Tulane University, Freeman School of Business, USA. Her classes go beyond lectures and textbooks, incorporating interactive pedagogy and lessons drawn from her own research.

Born and raised in the Netherlands, Professor Bol has studied at universities in The Netherlands, Spain and in the U.S., and she consistently presents her research to communities across the globe. Professor Bol’s research focuses on subjectivity in compensation contracting, and she has authored and co-authored several articles that have appeared in prestigious scholarly journals. She has also earned awards for her teaching and research.

Prof. dr. Isabella Grabner

Isabella Grabner is a Professer of Management Control and Strategy Implementation at WU (Vienna University of Economics and Business).

She holds a Master’s degree in International Business from the University of Vienna and a PhD in Business Administration from WU Vienna (Title of dissertation "Creativity and Control: Conflicting Objectives?"). Before joining WU Vienna, she was a tenured faculty member at the Department of Accounting and Information Management at Maastricht University School of Business and Economics. She has also worked as visiting researcher at Emory University Goizueta Business School and the University of Technology Sydney.

FAR Practice Note - How is auditor commercialism related to audit quality? Prof. William Ciconte PhD Dr. Justin Leiby Prof. dr. Marleen Willekens Details
 

It is taken for granted that a fundamental conflict exists between auditors’ professional responsibilities and their commercial interests. While there is no direct evidence to support this widely held belief, it nonetheless fuels extensive, costly regulatory and standard-setting activities. We propose to examine whether auditors’ commercial and professional motivations actually conflict. Moreover, we argue that quality control mechanisms in audit firms—e.g., performance evaluation and technical consultation procedures—create conditions in which the two sets of motivations are likely mutually reinforcing.

Authors

Prof. William Ciconte PhD

Assistant Professor of Accountancy University of Illinois

Dr. Justin Leiby

Associate Professor of Accountancy and Professor Ken Perry Faculty Fellow University of Illinois

Prof. dr. Marleen Willekens

Full Professor of Accounting and Auditing at KU Leuven

FAR Literature Review - How is auditor commercialism related to audit quality and efficiency? Prof. William Ciconte PhD Dr. Justin Leiby Prof. dr. Marleen Willekens Details
 

Authors

Prof. William Ciconte PhD

Assistant Professor of Accountancy University of Illinois

Dr. Justin Leiby

Associate Professor of Accountancy and Professor Ken Perry Faculty Fellow University of Illinois

Prof. dr. Marleen Willekens

Full Professor of Accounting and Auditing at KU Leuven

Ten considerations for conducting Root Cause Analysis in auditing Prof. dr. Olof Bik Details
 

Root cause analysis is an established process in a number of industries and is a developing area in the audit profession. This practice note speaks to the question of what constitutes root cause analysis specific to the auditing profession (as varying root cause analysis methods may potentially be more or less effective within the auditing context). For audit firms (large and small) wanting to apply root cause analyses as part of their quality assurance systems, the following ten considerations are discussed that are relevant for effectively and efficiently producing root cause findings and recommendations concerning the improvement of audit quality:

  • Root cause analysis, when done properly, can be a powerful tool for collective team-based learning, designed to avoid blame and strengthen continuous improvement.
  • Root cause analysis is about understanding human behavior and judgement and decision making: things that go wrong, often happen in the same way as things that go right.
  • There is not one single root cause to “fix” in the complex organizational context of auditing: incidents may happen that are reasonably beyond management control.
  • Root cause analysis findings and recommendations are not always interventions: it is up to management to weigh recommendations and decide on their “organizational fit”
  • Root cause analyses should be rigorous enough to allow for “evidence-based-change” only: formulating effective actions is more difficult than finding problems.
  • Strong recommendations rely less on a change in human behavior, but are practical, sensible, achievable, and actually measurable as far as what can be implemented.
  • Root cause analysis is a collaborative and dialogic process requiring time, human behavior expertise, and communication skills across professional and social boundaries.
  • Interviewing audit staff that depend on personal performance and professional accountability in their career development is a specifically daunting task.
  • Next to audit deficiencies as ‘triggering events”, good quality analyses and analyzing ‘near misses’ result in richer and stronger root cause analyses.
  • Next to engagement level root cause analysis, more holistic thematic and audit firm level analyses most likely deliver deeper insight and better results.

Authors

Prof. dr. Olof Bik

Olof Bik is professor Behavioral Research in Auditing at Nyenrode Business University. He is also a member of the daily board of the Foundation for Auditing Research (FAR). Bik worked in accounting practice for 18 years, since 2002 always in combination with a university appointment. He obtained his PhD at the University of Groningen with a dissertation on the effects of culture on accountant behavior.

Controversies in Future Audit Quality: A multi-stakeholder perspective MAB FAR Details
 

Based on the second International FAR Conference on 7 and 8 June 2017, a special FAR issue of Maandblad voor Accountancy en Bedrijfseconomie [MAB]

Authors

MAB
FAR
What do we know about audit quality? MAB FAR Details
 

Based on the first International FAR Conference on 9 and 10 May 2016, a special FAR issue of Maandblad voor Accountancy en Bedrijfseconomie [MAB]

Authors

MAB
FAR
Literature review on the relationship between audit quality and non-audit services (English) Prof. dr. Jan Bouwens Details
 

Authors

Prof. dr. Jan Bouwens

Academic board member and managing director FAR