|
A useful exercise in any research field is to periodically take a step back and look at the big picture; to assess the field's progress and the direction it is — or should be — moving. Such an exercise helps us to see the forest (rather than just the trees), and helps direct us to the neglected (and more fertile) parts of the forest — to the mutual benefit of both the researcher and the research field. To this end, the Research Committee sponsored a panel discussion involving current and past editors of Auditing: A Journal of Practice and Theory (AJPT) at the 2005 Mid-Year Auditing Conference in New Orleans. The panel was comprised of Bill Felix (University of Arizona, former AJPT editor), Arnie Wright (Boston College, past AJPT editor), Bill Messier (Georgia State University, current AJPT editor), and Dan Simunic (University of British Columbia, incoming AJPT editor). Each participant presented his views on the development of auditing research and the likely directions for auditing research in the future. This article combines and summarizes their remarks.
Auditing has been a vibrant research area for many years, and there are many reasons to be optimistic regarding the future of auditing research. Auditing institutions continue to be an important element of effective corporate governance and the capital markets. As an enforcement mechanism, high-quality auditing may be more important than high-quality financial reporting rules. Environmental and other stresses on the delivery of high-quality audits continue to generate interesting research questions. In addition, institutional changes are being brought about because of Sarbanes-Oxley and other regulatory (national and international) developments.
The development of auditing research can be organized according to either research method or research topic. Both approaches were manifest in the discussion.
Research Method
Historically, researchers have used different methods to study auditing: (1) theory/modeling, based on mathematical economics and game theory, (2) behavioral/JDM, which uses research methods from psychology and sociology, (3) archival/empirical, which uses data from audit firms and financial markets, and (4) experimental economics, which uses the laboratory market setting developed in economics. Each method has contributed to the development of auditing knowledge, and each method shows promise for continuing to do so in the future. Despite the tendency to specialize in one method, researchers should strive to be well-read across all methods.
Theory/Modeling
Theory/modeling research has provided an important basis for other research methods in the past, and is likely to continue to do so. A considerable amount of current auditing research lacks well-developed theory; modeling research can contribute significantly in this regard. Unfortunately, the dynamics of this area (e.g., high reviewer standards, publishing difficulties) have led to relatively few researchers using this method, only modest rates of research production, and avoidance of some topics because of modeling difficulties (e.g., three-person games). The result is that many areas still exist where modeling research can make contributions. Areas of particular relevance include the impact of Sarbanes-Oxley and other regulation, the globalization of firms being audited, and the demand for—and pricing of—audits. We also need better models of auditors' actions in reaching opinions, and of "strategic" financial reporting and auditing.
Behavioral/JDM
Behavioral/JDM research has been used to study many topics, including the opinion formulation process, auditor judgment, and team dynamics. Recent research has focused on client acceptance decisions and disagreements with clients over accounting principles. Despite its rich history, there is a general perception that behavioral research is becoming increasingly difficult to publish in the top accounting journals. This should not discourage researchers. Instead, it should be viewed as a challenge to improve research quality, to strengthen the theoretical foundations of the research, and to make the research more "saleable." Indeed, behavioral audit research continues to have a bright future, particularly in helping us understand some of the behavioral anomalies we see (e.g., where auditors do not behave as theory or "common sense" would dictate).
Archival/Empirical
Archival/empirical research also has a long and rich history, examining such issues as competition, audit pricing, auditor choice, audit production, audit litigation risk, corporate governance, and fraud. It has increased in prominence (relative to other areas of auditing research) during the last few years perhaps because of the increasing availability of audit-fee data in the U.S. market. It is currently the most popular method among auditing researchers, as measured by the number of submissions and published articles at top journals. The changing audit environment continues to provide a plethora of interesting ideas that can be examined using archival methods. These include the costs and benefits of Sarbanes-Oxley, and the pricing of audits post-SOX. They also include the development of theory on the role of auditing vs. other forms of monitoring, identifying better measures of market-perceived audit quality, and understanding the audit-opinion formulation process. Finally, there appears to be increasing interest in the differences in auditing economics across countries/cultures.
Experimental Markets
Experimental markets research has been somewhat limited in the past because of specialized training requirements and costs. Additional challenges have included the need for more and higher-quality economic theory development to support experimental markets. There have been some significant failures recently. However, there continue to be opportunities for research using experimental markets. Of particular note is the fact that this method provides a unique setting for obtaining evidence on alternative regulatory regimes. In addition, the underlying research in economics suggests that there is considerable room for "blending" with JDM research ideas.
Topic
Auditing research can also be classified by topic. Popular topics tend to change over the years, and they sometimes correlate with popular topics in the auditing profession—but not always. Recently, popular research topics have included auditor independence, risk assessment, program planning, and going concern reports. They have also included some of the more longstanding topics of interest in auditing, including auditor choice/change, audit fees, litigation risk, and audit performance both at the individual level (experience, memory, accountability), and at the firm level (size, specialization). However, many obvious topics are noticeably absent from this list. For example, few published studies have examined internal controls, continuous auditing, analytical procedures (particularly in the newer holistic audit approaches), or fraud detection. And relatively few published studies have examined non-North American data/settings. These topics are promising research areas.
Several other topics appear promising because of the continuing evolution of the audit environment. For example, Sarbanes-Oxley has increased the salience of internal control assurance, corporate governance mechanisms, audit committees, and internal audit. Auditing from a global perspective is also increasing in relevance, with the implementation of international standards and the increasing need to coordinate global audits. Understanding audit environments outside the U.S. should contribute greatly in this regard. Other important future topics include continuous auditing, the effectiveness of analytical procedures in fraud detection, auditor independence (including independence in appearance), instilling professionalism and skepticism in auditors, fraud risk assessment, appropriate responses to fraud risk, audit sampling, and assurance services.
All four editors were enthusiastic about the future of auditing research—they all believe that there is still much to be learned. However, throughout the meeting, they stressed the importance of improving the overall quality of auditing research, and the importance of publishing auditing research in the top accounting journals. As the concluding speaker on the panel, Dan Simunic took some time to support the view that much interesting auditing research remains to be done (at least for another 25 years) by discussing twenty major open research questions. These questions represent just some of the neglected and fertile areas of the forest we call "auditing research." This presentation (and the rest of the editors' presentation slides) will be available at the Research web site in the near future: http://aaahq.org/audit/research.htm.
|
