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Closing the Loop: Review Process Factors Affecting Audit Staff Follow‐Through
Author(s) -
LAMBERT TAMARA A.,
AGOGLIA CHRISTOPHER P.
Publication year - 2011
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/j.1475-679x.2011.00423.x
Subject(s) - audit , documentation , mediation , directive , accounting , quality (philosophy) , control (management) , closing (real estate) , process (computing) , quality audit , psychology , work (physics) , audit plan , process management , business , computer science , joint audit , internal audit , finance , political science , engineering , operating system , mechanical engineering , philosophy , epistemology , artificial intelligence , law , programming language
The PCAOB recently expressed concern regarding the sufficiency and effectiveness of review and supervision of audit fieldwork. For the audit review process to succeed as a quality control mechanism, any issues or questions identified by a reviewer must be adequately resolved and documented in the workpapers. If audit review fails to correct for errors/biases in the work of reviewees, there can be serious detrimental effects on audit quality and, in turn, financial statement quality. Our study extends the literature by examining the phase of the review process in which reviewees respond to (or “close”) notes/comments provided by their reviewers. Utilizing an experiment, we find that certain contextual factors (review timeliness and review note frame) influence reviewee follow‐through during this critical phase. Specifically, we find that a delayed review elicits significantly lower effort levels than a timely review. Review note frame (i.e., how the reviewer phrases the rationale given for the underlying directive of a review note) significantly affects reviewee effort and performance when the review is timely. Through mediation analyses, we explore the mediating effect of effort on performance. In addition, we find that reviewer delay leads to greater over‐documentation.