"Strategy, Technology, and Social Processes within Professional Cultures: A Negotiated Order, Ethnographic Perspective," by M. Fischer and M. Dirsmith, Symbolic Interaction [Vol. 18, Number 4, 1995]: 381-412.
The authors conducted an ethnographic field study of the Big 6 public accounting firms examining the interpenetrating of strategy, technology and internal social processes. They found that technologies were developed and unilaterally implemented by the strategic apex of the firms to achieve such stated objectives as enhancing auditor "efficiency." However, the implemented technologies were frequently resisted, transformed and redirected to serve the ends of the operating core, or practitioner subculture, of the firms. Thus, strategy, technology and social process are seen as interpenetrated within the active political-social milieu that is public accounting.
"Incidence of Accounting Irregularities: An Experiment to Compare Audit, Review, and Compilation Services," by A. Schnieder, Journal of Accounting and Public Policy [Vol. 14, Number 4, 1995]: 293-310.
This study compares the effects of three different types of CPA firm services-audits, reviews and compilations-on the extent to which two types of accounting irregularities might occur. Using the randomized response technique, and experiment was performed where experienced MBA and executive MBA students were asked to make decisions involving inappropriate ways to inflate income. One decision was whether to recognize a loss from a write-down of defective inventories, as would be necessary according to generally accepted accounting principles. The other decision was whether to alter the date on a shipping document so that income could be recognized in the current year instead of in the following year. For both decisions, differences in the expected direction were found among the responses from subjects in the audit, review and compilation groups. However, only the results for the first situation were statistically significant. In addition, subjects' perceptions about the levels of assurance provided by the three CPA firm services were similar across these services.
"Auditor Brand Name Reputations and Industry Specializations," by A. Craswell, J. Francis, and S. Taylor, Journal of Accounting and Economics [Vol. 20, Number 3, 1995]: 297-322.
The development of both brand name reputation and industry specialization by Big 8 auditors is argued to be costly and therefore to increase audit fees. For a sample of 1,484 Australian publicly listed companies, the authors estimated audit fee premia for Big 8 auditors. The results indicated that on average, industry specialist Big 8 auditors earn a 34 percent premium over nonspecialist Big 8 auditors, and the Big 8 brand name premium over non-Big 8 auditors averages around 30 percent. These results support that industry experience is a dimension of the demand for higher quality Big 8 audits and a basis for within Big 8 product differentiation.
"The Effect of Client Management Bargaining Power, Moral Reasoning Development, and Belief in a Just World on Auditor Independence," by C. Windsor and N. Ashkanasky, Accounting Organizations and Society [Vol. 20, Number 7, 8, 1995]: 701-720.
In two studies, the authors used practicing auditors' responses to hypothetical audit conflict scenarios to test hypotheses whether (1) moral reasoning development and (2) belief in a just world influence resistance to client management power. Based on a mixed factorial ANOVA design, results confirmed that auditor independence is interactively determined. Three styles of auditor decision-making emerged: autonomous, accommodating and pragmatic. Autonomous auditors were responsive to personal beliefs, such that those with strong just world beliefs were more likely to resist client management power. Pragmatic auditors were responsive to client management power, irrespective of beliefs. Accommodating auditors responded both to personal beliefs and client management power; they comprised the least resistant group, especially when they believed in a just world.
"The Importance of Audit Firm Characteristics and the Drivers of Auditor Change in UK Listed Companies," by V. Beattie and S. Fearnley, Accounting and Business Research [Vol. 25, Number 100, 1995]: 227-239.
The authors explore the importance of audit firm characteristics and the factors motivating auditor change based on questionnaire responses from 210 listed UK companies. Exploratory factor analysis reduces variables to eight uncorrelated underlying dimensions: (1) reputation-quality, (2) acceptability to third parties, (3) value for money, (4) ability to provide non-audit services, (5) small audit firm, (6) specialist industry knowledge, (7) non-Big 6 large audit firm and (8) geographical proximity. Insights into the nature of 'the Big 6 factor' emerge. Approximately 67 percent of companies had recently considered changing auditors and the main reasons cited are audit fee level, dissatisfaction with audit quality and changes in top management. Of those companies that considered change, 73 percent did not actually do so.
"Justification of Decisions in Auditing," by L. Koonce, U. Anderson, and G. Marchant, Journal of Accounting Research [Vol. 33, Number 2, 1995]: 369-384.
This study examines how (1) anticipation of the audit review process and (2) the degree to which evidence that supports (or refutes) management's explanations influence the justifications of audit-planning decisions. When planning the audit, auditors will typically examine the financial statements for unexpected fluctuations in account balances and ratios that indicate where additional audit work may be warranted. After observing any unexpected fluctuations and asking management for explanations, auditors decide how (if at all) to revise the audit plan and document in the audit work papers justifications for the plan. Because it is often difficult to gauge the correctness of audit-planning decisions, the justification of such decisions is critical for judging their quality.
"Configural Information Processing in Auditing: Further Evidence," by C. Hooper and K. Trotman, Accounting and Business Research [Vol. 26, Number 2, 1996]: 125-136.
This paper extends prior research of how auditors are able to configurally process information. The authors examine some conditions that may facilitate the development of auditors' ability to configurally process available information. The study found that: (a) the proportion of auditors processing the information configurally was greater than chance; (b) for those who processed the information configurally, the form of the interaction was as predicted, that is, ordinal with a compensatory form; (c) increasing depth of processing by requiring subjects to provide explanations for their judgments did not have a significant effect on the number of auditors processing configurally; (d) the level of consensus was higher for auditors who processed configurally than for those who did not; and (e) the analysis of the explanations provided by configural cue processors indicated that they saw the relevant cues as being substitutable.
"Evidence on Opinion Shopping from Audit Opinion Conservatism," by J. Krishnan and R. Stephens, Journal of Accounting and Public Policy [Vol. 14, Number 3, 1995]: 179-202.
This study examines the relationship between independent auditor switching and the audit opinion. The study examines (1) both firms that did and firms that did not switch auditors and (2) for those firms that did switch, the decisions of predecessor and successor auditors prior to and following the switch. Comparing pre-and post-switch years, the findings do not indicate any difference in the treatment of clients that did not switch auditors vs. those that did switch. In fact, clients that switched received relatively conservative treatment from their former and current auditors.
"Audit Fees and Auditor Change; An Investigation of the Persistence of Fee Reduction by Type of Change," by A. Gregory and P. Collier, Journal of Business Finance and Accounting [Vol. 23, Number 1, 1996]: 13-29.
In this article, the authors examine the effects of auditor change on audit fees in Great Britain. They demonstrate that, similar to findings elsewhere in the world, price cutting and subsequent price recovery also occur in Europe. Findings indicate that corporate clients shifting to major firms experience the greatest reductions. Further, involuntary changes are associated with fee increases while voluntary changes are associated with fee reductions. Finally, the authors provide tests indicating that their results are robust with respect to model specification. Based on the specific nature of these tests, the authors argue that it is inappropriate to attribute fee reductions to economies of scale or scope.
"A Reexamination of the Internal Auditors' Code of Ethics," by P. Siegel, J. O'Shaughnessy, and J. Rigsby, Journal of Business Ethics [Vol. 14, Number 11, 1995]: 949-958.
This study empirically examined the views of Certified Internal Auditors (CIAs) concerning the role of Code of Ethics for members of the Institute of Internal Auditors. It is a continuation of an earlier study which examined the usefulness of the Code to CIAs. Among the questions asked were "What is the primary reason for the Code of Ethics?", "How useful is it?", "Have you used it?", "Should more enforcement action be taken against members who violate the Code?" and "What are the legal and moral responsibilities of the CIA to report serious ethical violations (e.g., environmental pollution) to outsiders when top management and the board of directors are aware of the matter but are not doing anything to correct it?". The results indicate strong support for the Code, its enforcement and use as an instrument to encourage the internal flow of ethical behavior by members and others.
"Auditors' Ethical Reasoning: Some Audit Conflict and Cross Cultural Evidence," by J. Tsui, The International Journal of Accounting [Vol. 31, Number 1, 1996]: 121-133.
This study uses an experimental audit conflict situation to examine the relationship between different levels of ethical reasoning and the ethical behavior of Hong Kong auditors. It tests the hypothesis that ethical reasoning scores for Hong Kong auditors will be lower than similar scores for USA auditors on the basis of Hofstede's theory of cultural differences. Fifty experienced auditors from four Big 6 CPA firms in Hong Kong were administered the Defining Issues Test and participated in an experiment that required them to make a decision on an auditor-client conflict situation. It was found that the higher the level of ethical reasoning, the lower the likelihood that the auditor would respond as acceding to the client's request. Higher levels of ethical reasoning were thus associated with more independent behavior. It was also found that P scores were significantly lower than the sample in USA thus suggesting that cultural differences could affect levels of ethical reasoning.
"Setting a Research Agenda for Auditing Issues in the People's Republic of China," by L. Graham, The International Journal of Accounting [Vol. 31, Number 1, 1996]: 19-37.
The author identifies a number of potentially meaningful auditing research issues that arise from the dramatic changes currently taking place in the People's Republic of China. These issues arise in the current economic environment, but are heavily influenced by political, cultural and historical circumstances. The research identifies organizational, technical practice and economic issues that impact the practice of accounting and auditing. The recent growth in the profession is evidence of the critical role accountants and auditors will play in future economic advances in the P.R.C. Research can also assist in identifying and resolving problems that may arise during the change to a "socialist-market" economy.
"A Review and Synthesis of Research on Supplier Concentration, Quality and Fee Structure in Non-U.S. Markets for Auditor Services," by K. Walker and E. Johnson, The International Journal of Accounting [Vol. 31, Number 1, 1996]: 1-18.
This study reviews and summarizes extant research into auditor concentration, audit quality and the determinants of audit fees in audit markets outside the United States. Similarities and differences between studies, including methodologies and findings, are discussed. The review identifies some structural differences in audit markets between studies that are traceable to divergences in economic, cultural and social norms across developed and developing nations. The authors conclude by identifying areas where future research may be most helpful in identifying other differences and similarities in international markets for audit services.
"Auditors' Behavior in an Audit Conflict Situation: A Research Note on the Role of Locus of Control and Ethical Reasoning," by S. Tsui and F. Ferdinand, Accounting Organizations and Society [Vol. 21, Number 1, 1996]: 41-51.
This study investigates the interaction effects of locus of control, a personality variable and ethical reasoning on the behavior of auditors in an audit conflict situation. Eighty experienced auditors form a sample of Big 6 and non-Big 6 CPA firms in Hong Kong were provided with a case study involving an audit conflict situation and were asked to state the extent to which they would accede to the client's request. Subjects were also administered Rotter's Locus of Control Scale and the Defining Issues Test to measure ethical reasoning. Regression analyses results indicate that ethical reasoning moderated the relationship between locus of control and the auditors' responses to accede to clients' request in an audit conflict situation. An implication of these results is that the explicit recognition of both locus of control and ethical reasoning provides a better explanation for differences in auditors' ethical decision making.
"Game Theory and the Auditor's Penalty Regime," by D. Hatherly, L. Nadeau and L. Thomas, Journal of Business Finance and Accounting [Vol. 23, Number 1, 1996]: 29-46.
This study uses a cooperative game theory of the audit to examine the strategic decision-making of the auditee and the auditor. It focuses on how decisions may be affected when auditees and auditors are penalized for releasing a materially inaccurate set of statements without qualifying the audit opinion. Investigation shows that these penalties must be set within particular zones. Selection of the zone should be based on the policy objectives of the penalty regime.
"Competence and Independence; The Conceptual Twins of Auditing?" by T. Lee and M. Stone, Journal of Business Finance and Accounting [Vol. 22, Number 8, 1995]: 1169-1178.
In this paper, the authors suggest less restrictive definitions for both auditor competence and independence. Further, they argue for a revision of the conceptual linkage of these factors to provide empirical researchers with a more complete theoretical explanation of auditor behavior. The authors note the empirical work of Barnes and Huan (1993) who used narrow definitions, classifying the two concepts as mutually inclusive characteristics of auditor behavior, in their study of the going concern decision.
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