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An Investigation of the Effects of Specialization in Audit Workpaper Review

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  • E. MICHAEL BAMBER
  • ROBERT J. RAMSAY

Abstract

. This study examines the effect of specialization at the different stages of an audit workpaper review. Auditing literature advises focusing each review level on specific kinds of errors (i.e., seniors on mechanical errors and managers on conceptual errors), rather than having seniors and managers perform successive all†encompassing reviews. However, surveys of review practice suggest that all†encompassing reviews are common. To determine whether specialization at different levels of review improves reviewers' overall effectiveness, this study has 35 managers and 39 seniors actually perform a review of a realistic set of workpapers. Half the subjects performed specialized reviews, whereas the other half performed all†encompassing reviews. Overall accuracy rates in our study are consistent with prior research. In addition, the combined reviews of seniors and managers are more effective than those of either seniors or managers separately, demonstrating the benefits of hierarchical review. However, specialized review leads reviewers to be significantly less accurate than reviewers performing all†encompassing reviews. The results suggest specialization will not automatically improve review effectiveness, and that accounting firms may need to re†evaluate their review guidance and professional training on workpaper reviews.

Suggested Citation

  • E. Michael Bamber & Robert J. Ramsay, 1997. "An Investigation of the Effects of Specialization in Audit Workpaper Review," Contemporary Accounting Research, John Wiley & Sons, vol. 14(3), pages 501-513, September.
    • Handle: RePEc:wly:coacre:v:14:y:1997:i:3:p:501-513
    DOI: 10.1111/j.1911-3846.1997.tb00538.x
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    1. Ramsay, Rj, 1994. "Senior Manager Differences In Audit Workpaper Review Performance," Journal of Accounting Research, Wiley Blackwell, vol. 32(1), pages 127-135.
    2. Rich, J. S. & Solomon, I. & Trotman, K. T., 1997. "The audit review process: A characterization from the persuasion perspective," Accounting, Organizations and Society, Elsevier, vol. 22(5), pages 481-505, July.
    3. Libby, Robert & Trotman, Ken T., 1993. "The review process as a control for differential recall of evidence in auditor judgments," Accounting, Organizations and Society, Elsevier, vol. 18(6), pages 559-574, August.
    4. Trotman, Kt, 1985. "The Review Process And The Accuracy Of Auditor Judgments," Journal of Accounting Research, Wiley Blackwell, vol. 23(2), pages 740-752.
    5. Moeckel, C, 1990. "The Effect Of Experience On Auditors Memory Errors," Journal of Accounting Research, Wiley Blackwell, vol. 28(2), pages 368-387.
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    Cited by:

    1. Michael Gibbins & Ken T. Trotman, 2002. "Audit Review: Managers' Interpersonal Expectations and Conduct of the Review," Contemporary Accounting Research, John Wiley & Sons, vol. 19(3), pages 411-444, September.
    2. Ulfert Gronewold & Anna Gold & Steven Salterio, 2013. "Reporting Self-Made Errors: The Impact of Organizational Error-Management Climate and Error Type," Journal of Business Ethics, Springer, vol. 117(1), pages 189-208, September.
    3. Owhoso, Vincent & Weickgenannt, Andrea, 2009. "Auditors’ self-perceived abilities in conducting domain audits," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 20(1), pages 3-21.
    4. Dierynck, Bart & Kadous, Kathryn & Peters, Christian P. H., 2023. "Learning in the auditing profession: A framework and future directions’," Other publications TiSEM eb74c8e4-bc4a-4b71-b88a-4, Tilburg University, School of Economics and Management.
    5. Sweeney, John T. & Suh, Ik Seon & Dalton, Kenneth C. & Meljem, Sylvia, 2017. "Are workpaper reviews preparer-specific?," The British Accounting Review, Elsevier, vol. 49(6), pages 560-577.
    6. Trotman, Ken T. & Bauer, Tim D. & Humphreys, Kerry A., 2015. "Group judgment and decision making in auditing: Past and future research," Accounting, Organizations and Society, Elsevier, vol. 47(C), pages 56-72.
    7. William F. Messier, Jr. & Vincent Owhoso & Carter Rakovski, 2008. "Can Audit Partners Predict Subordinates' Ability to Detect Errors?," Journal of Accounting Research, Wiley Blackwell, vol. 46(5), pages 1241-1264, December.
    8. Peecher, Mark E. & Solomon, Ira & Trotman, Ken T., 2013. "An accountability framework for financial statement auditors and related research questions," Accounting, Organizations and Society, Elsevier, vol. 38(8), pages 596-620.
    9. Gold-Nöteberg, A.H. & Gronewold, U. & Salterio, S., 2010. "The Impact of Error-Management Climate, Error Type and Error Originator on Auditors’ Reporting Errors Discovered on Audit Work Papers," ERIM Report Series Research in Management 20551, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    10. Noel Harding, 2010. "Understanding the structure of audit workpaper error knowledge and its relationship with workpaper review performance," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 50(3), pages 663-683, September.
    11. Noel Harding & Ken T. Trotman, 1999. "Hierarchical Differences in Audit Workpaper Review Performance," Contemporary Accounting Research, John Wiley & Sons, vol. 16(4), pages 671-684, December.

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