Have You Seen...?
Greg Trompeter, Boston College, and Tim Pearson, West Virginia
this is the last Have You Seen column that we will compile, we
would like to take the opportunity to thank Peter DiCarlo and Jen
Gregorski for their invaluable assistance over the past three
Greg Trompeter and
Examination of Moral Development within Public Accounting by
Gender, Staff Level, and Firm, by R. A. Bernardi and D. F.
Arnold, Contemporary Accounting Research (Vol. 14, Number 4,
extends prior research on the average level of moral development
in public accounting by examining five large accounting firms and
multiple staff levels. The research highlights the need to include
auditors from several firms in research designs, provides evidence
of differences in moral development among public accounting firms,
and profiles the professions average level of moral
development for three levels. The data are from 494 managers and
seniors from five Big 6 firms. Using the defining Issues Test
(Rest 1979a) to measure moral development, several results were
noted. First, the results indicate a difference in the average
level of moral development among firms, suggesting that use of
subjects from only one firm inhibits the generalizability of
findings regarding moral development. Second, female managers are
at a significantly higher average level of moral development than
male managers. The data suggest that a greater percentage of
high-moral-development males and low-moral-development females are
leaving public accounting than their respective opposites. These
results indicate that the profession has retained, through
advancement, males who are potentially less sensitive to the
ethical implications of various issues.
Bayesian Analysis of Cost-Effectiveness of Auditing for Small
Businesses, by A. V. Deshmukh, P. H. Siegel, and K. E.
Karim, Advances in Accounting (Vol. 15, 1997): 265277.
investigates the effect of the responsibility of the auditor to
detect management fraud and the reliability of the present audit
technology on the cost-effectiveness of auditing and accessibility
of audit services to small businesses. By applying the Bayesian
framework, this paper demonstrates that due to the low base rates
of management fraud, detection of management fraud requires
extremely reliable audit technology. This condition provides a
plausible explanation for the following phenomena: (1) the
existence of audit failure in the presence of management fraud;
(2) the increasing reluctance of firms to undertake risky
audits, making it difficult for small businesses to obtain audit
services; and (3) the increasing client concentration in auditing
to spread the audit risk resulting in an increased cost of
auditing small businesses.
of the Justifiability of Performance in Ill-Structured Audit
Tasks, by J. Kennedy, D. N. Kleinmuntz, and M. E. Peecher,
Journal of Accounting Research (Vol. 35, Supplement, 1997): 105123.
examines determinants of justifiability of performance in
ill-structured audit tasks. Justifiability is the extent to which
task performance can be defended. An ill-structured audit task is
a nonroutine task that lacks definitive applicable authoritative
guidance, has multiple courses of action, and requires the auditor
to exercise significant judgment. In the experiment, auditors with
varying experience levels assessed performance justifiability for
scenarios in which an engagement partner evaluated an aggressive
accounting treatment favored by a high business-risk client. The
authors manipulated both the level of authoritative guidance
presented and whether the engagement partners preliminary
decision (prior to consultation) was to allow or disallow the
aggressive accounting treatment. The authors found that when
participants were provided with less authoritative guidance,
justifiability depended primarily on the consultation process; in
contrast, when participants were given more authoritative
guidance, justifiability depended on both the decision and
consultation. Regardless of the level of authoritative guidance,
justifiability was greatest when the engagement partner and the
consultant agreed, and was enhanced when the engagement partner
followed the consultants advice (regardless of its nature).
However, seeking advice but not following it was regarded as more
justifiable than not seeking advice in the first place, suggesting
consultation is the key to establishing justifiability.
Consultation Units: An Organizational Memory Analysis, by S.
Salterio and R. Denham, Contemporary Accounting Research (Vol. 14,
Number 4, 1997): 669691.
paper, the authors report the results of research that examines
the role of accounting consultation units in public accounting
firms. They describe the five largest accounting consultation
units in Canada. The accounting consultation units are then
examined through the lens of organizational memory theory. The
authors find differences among the accounting consultation units
in their ability to act as a source of organizational memory for
their firms. These differences include the following: the amount
of resources devoted to the consultation function, the structure
of the units, the mandate received by the unit from the firm, and
the availability and amount of documentation about previous
consultations. These differences suggest that firms
accounting consultation units differ in their ability to provide
technical accounting advice. This variability may affect the
actual or perceived quality of such advice to both clients and
external regulators. In addition, this paper introduces
organizational memory theory to the accounting literature.
Effects of SAS No. 82 on Auditors Attention to Fraud Risk
Factors and Audit Planning Decisions, by M. F. Zimbelman,
Journal of Accounting Research (Vol. 35, Supplement, 1997): 7597.
investigates whether the Auditing Standards Boards Statement
on Auditing Standards No. 82 requiring auditors to separately
assess the risk of fraud will lead auditors to spend more time
reading fraud cues and design audit plans that are more sensitive
to fraud risk. Auditors are currently required to assess
misstatement risk without documenting whether an expected
misstatement is intentional or unintentional (holistic risk
assessments). The author predicts that separately assessing the
risk of intentional and unintentional misstatements will lead
auditors to spend more time attending to fraud cues. In turn, the
information auditors gain by allocating more attention to fraud
cues is expected to lead them to develop audit plans that are more
likely to vary with fraud risk when compared to plans developed by
auditors who make holistic risk assessments. The experiment
involving 108 practicing auditors from two Big 6 firms required
them to document risk assessments and audit planning judgments.
The results provide evidence that separately assessing fraud risk
(as required by SAS No. 82) will influence auditors
attention to fraud cues and audit planning decisions.
Specifically, SAS No. 82 can be expected to direct auditors
attention to fraud cues and lead to overall increases in budgeted
hours. However, the results suggest that the nature of audit plans
may not be affected.
the Legacy Alive: Articles and Papers, 19791997, by Robert
Mednick, Andersen Worldwide SC (1998).
For most of
the past 25 years Bob Mednick has been involved in professional
policy making at Arthur Andersen. For the past 16 years he has
been chairman of the policy group and currently holds the title of
Managing PartnerProfessional and Regulatory Matters. He will
retire on August 31, 1998. Throughout his career, Mednick has been
at the forefront of debate on financial accounting and reporting
issues. In his role with Arthur Andersen and/or as a member or
chair of several influential AICPA committees, he has given
hundreds of speeches and, quoting from Emersons Professional
Services Review, is possibly the most published practicing
CPA in America.
contains reprints of 19 articles and papers that Mednick has
written over the past 20 years. Throughout these papers, he
regularly addresses the five following basic themes: (1) expansion
of the traditional attest function into new attest and assurance
services, (2) reform of accountants legal liability, (3)
development of a new approach to establishing standards of auditor
independence, (4) updating the licensure and regulation of the
profession for the 21st century, (5) transformation of todays
CPA into the premier information professional of the 21st century.
This book is a thoughtful read for students and professors alike
as it contains the vision of one of the professions leading
thinkers of the past 20 years.
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