An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Joseph F. Brazel
North Carolina State University

Christopher P. Agoglia
Drexel University

Richard C. Hatfield
University of Alabama

Abstract: The promulgation of PCAOB Auditing Standard No. 3 (2004) highlights the recent focus on workpaper documentation quality and its influence on audit quality. Our study examines how the choice of audit workpaper review method may ultimately affect reviewer judgments through its impact on preparer workpaper documentation. We propose a model which predicts that the relationship between the method of review and reviewer judgment quality is mediated by the documentation quality assessment gap (i.e., actual versus reviewer assessments of documentation quality). Consistent with expectations, we find that preparers of workpapers who were anticipating an electronic review provided lower quality documentation than preparers expecting a face-to-face review. As predicted by our mediation model, we find that the effect of review mode on reviewer judgments is mediated by the documentation quality assessment gap.

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