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2020B03 – Learning and performing in audit firms: The role of the organizational context
Project Number – 2020B03

2020B03 – Learning and performing in audit firms: The role of the organizational context

What?

What?

The first study investigates how an organizational context in which auditor-artificial intelligence interactions are prevalent affects auditors’ cognitive processing and subsequently the degree of professional skepticism exercised by auditors. If auditors over rely on artificial intelligence, both learning and performance are likely to be inhibited. Experienced audit practitioners expect that during the next five years, artificial intelligence is the area in which there will be the most innovation in the audit profession (Austin, Carpenter, Christ, and Nielson 2019). However, although artificial intelligence may lead to performance gains in the audit, artificial intelligence does not easily replicate auditor expertise. Therefore, audit firms emphasize that artificial intelligence will not replace auditors but enhance them (KPMG 2016, PwC 2017). Thus, with the adoption of artificial intelligence, auditors increasingly have to apply professional skepticism to artificial intelligence (Olsen and Gold 2018).The second study investigates the organizational context of seeking and giving performance feedback in the audit environment. Performance feedback is a cornerstone of the modern audit environment as it aids learning (Hattie and Timperley 2007), improves performance (London 2003), and improves judgment and decision-making (Bonner 2008). Yet, regulators, audit partners, and audit staff have significant concerns about the sufficiency and effectiveness of performance feedback (e.g., PCAOB 2010, Lambert and Agoglia 2011, Westermann et al. 2015). For instance, Westermann et al. (2015) show that audit partners worry that supervisors struggle to provide negative or critical evaluations to their staff, as they fear this leads to employee dissatisfaction and turnover.The third study investigates how the context of audit teams affects learning and performance. More specifically, we investigate the role of audit team familiarity (i.e., the shared experience with team members) in on-the-job learning and team performance. Auditors tend to work on multiple engagements with multiple supervisors and peers, implying that auditors frequently change supervisors and peers. Yet, we know little about whether or how the resulting lack of team familiarity affects auditor learning and performance.

Why?

In the past decade, the Dutch auditing profession has been under widespread public and political pressure to improve audit quality and change its culture from one focused on compliance and efficiency to one focused on adaptation and learning (e.g., WTA 2014; MCA 2016; 2020; CTA 2020). Inspection reports of the Dutch Financial Markets Authority (AFM 2010, 2014) had long shown too many deficiencies in critical aspects of the audit, leading to external pressures to reform.Investigating how the organizational context can contribute to a culture in which auditors focus on adaptation and on-the-job learning is important for at least three reasons. First, against the backdrop of changing expectations from society and stakeholders, rapid technological developments, and the increasing complexity of information systems, it is of utmost importance for auditors to learn new professional skills, competencies, and qualities on-the-job to keep pace with these developments (ICAS & FRC 2016). Second, auditors indicate that they want to develop themselves by learning on-the-job, exercising professional judgments, and solving problems (Wallage, Bouwens, and Bik 2018). However, technocratic aspects of the job such as standardization, regulatory burdens, and a focus on compliance hamper auditors from doing so, leading to lower audit quality and increased turnover intentions (Pierce and Sweeney 2004, Martinow, Moroney, and Harding 2020). Third, Westermann, Bedard, and Earley (2015) find that on-the-job learning functions as the primary means to transmit technical knowledge and social norms to new auditors.

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Learning in the auditing profession: a framework and future direction
Drawing on literature in auditing and workplace learning, this paper develops the Auditor Learning Framework. The Auditor Learning Framework distinguishes auditor learning processes along two dimensions: the location of learning (on-the-engagement or off-the-engagement) and the role of the others in the learning process (active or passive). We review the auditing literature and classify papers that directly or indirectly enhance our knowledge of auditor workplace learning into our framework to identify gaps in our understanding of the auditor learning processes. Our study provides a comprehensive view of auditor learning processes and provides suggestions for future research.
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Auditing: Lifelong learning (ENG)
It is essential that auditors continuously learn. The need for continuous learning is fostered by the changing expectations from society and stakeholders, rapid technological developments, and the increasing complexity of information systems. Auditing regulators and oversight bodies are concerned that certain aspects of the auditing profession may form barriers to effective learning. To gain a better insight in how auditors can effectively learn, it is important to identify and distinguish the different learning processes in the auditing profession. Based on our recent literature review we differentiate between seven learning processes. In this FAR
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Accountancy: Een leven lang leren (NL)
Het is essentieel dat accountants voortdurend leren. De noodzaak om continu te blijven leren neemt verder toe door de veranderende verwachtingen van maatschappij en stakeholders, snelle technologische evoluties en de toenemende complexiteit van informatiesystemen. Externe toezichthouders spreken echter de zorg uit dat bepaalde factoren het leren van accountants in de weg staan. Om een beter inzicht te krijgen in hoe accountants leren is het belangrijk om de verschillende leerprocessen in het accountantsberoep te onderscheiden. Op basis van recent literatuuronderzoek onderscheiden wij zeven leerprocessen. In deze FAR
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Robotic Process Automation for the Extraction of Audit Information
Robotic Process Automation for the Extraction of Audit Information: A Use Case The paper on this subject presents an open-source algorithm to extract data from (draft) annual reports (PDF files) using Python to automate, rather than outsource, the data extraction for reconciliations. It was a joint project with Jeroen Bellinga, Seyit Hocuk, Wim Janssen and Alaa Khzam. Wim Janssen and Alaa Khzam developed the programming code.   Article AAA
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Has audit quality in the Netherlands improved over time?
The quality of statutory audits in the Netherlands has been the subject of heated debate for several years. The government, audit firms, the Dutch Professional Body of Accountants (NBA), and the Dutch Authority for the Financial Markets (AFM) have all announced far-reaching improvement measures to enhance audit quality. This raises the question of the current state of audit quality in the Netherlands and how it has developed over recent years. Audit quality is a complex and multifaceted concept that consists of input, process, and outcome levels. This study focuses on the outcome level of statutory audits: the financial reporting quality of the audited financial statements. It does so using a widely applied measure from academic literature: discretionary accruals. Results show that the outcome quality of statutory audits of listed companies significantly improved during the period 2000–2018.
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Auditor automation usage and professional skepticism
KEY TAKE-AWAYS Audit firms increasingly employ automated tools and techniques in auditing procedures. The premise of using automation is that it increases audit effectiveness and audit efficiency. For these effectiveness and efficiency gains to materialize, auditors need to use automation in an adequate manner. Regulators, however, have raised concerns that auditors may over- or under-rely on automation. I predict that auditors are subject to an automation bias and use cues from automated tools and techniques as a replacement for vigilant information seeking, thereby reducing professional skepticism when relying on automation. My findings are in line with my predictions. When auditors rely on work conducted by automated tools and techniques, they are less skeptical than when relying on the same work conducted by an audit team member. Based on psychology theory, I employ a counterarguing mindset intervention that alleviates the negative effects of automation on professionally skepticism. Finally, I also test whether a reduction in vigilance caused by automation usage spills over to subsequent tasks. I do not find evidence indicating a spillover effect. Implications for practice and theory are discussed.  
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Learning in the auditing profession: A framework and future directions
This is the final draft. The article is published in Accounting, Organizations and Society. The article is written by Bart Dierynck, Kathryn Kadous, and Christian Peters. Please find the article here: https://www.sciencedirect.com/science/article/abs/pii/S0361368223001058  
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Project info

Project Lead

Dr. Christian Peters

Research team

Dr. Christian Peters
Prof. dr. Bart Dierynck
Dr. Kathryn Kadous

Involved University

Emory University | Tilburg University | University of Wisconsin

Timeline

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Theme(s)

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Project Number – 2020B03

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