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Hierarchical Differences in Audit Workpaper Review Performance

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  • NOEL HARDING
  • KEN T. TROTMAN

Abstract

This paper investigates the performance of senior and staff auditors in the identification of conceptual and mechanical errors during workpaper review. In this study, we begin to examine the potential for effectiveness and efficiency gains by involving staff (assistant) auditors in the review process. We find that senior auditors were more accurate than staff auditors in identifying conceptual errors contained in a hypothetical set of workpapers just reviewed. However, staff auditors were more accurate than senior auditors in identifying mechanical errors. Highlighting the benefits of a hierarchical review, composite groups consisting of a staff auditor and a senior outperformed composite groups consisting of two seniors or two staff auditors. The study finds that the differences in review performance between managers and seniors found in Ramsay 1994 generalize to lower levels of experience. Considering our results in conjunction with Ramsay 1994, we show a progression to a more conceptual review template as the rank of the reviewer moves from staff to senior to manager. The paper provides some guidance to audit firms that are presently introducing major changes to the way in which the review process is carried out, including the inclusion of reviews by staff auditors.

Suggested Citation

  • 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.
    • Handle: RePEc:wly:coacre:v:16:y:1999:i:4:p:671-684
    DOI: 10.1111/j.1911-3846.1999.tb00600.x
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    References listed on IDEAS

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    1. E. Michael Bamber & Joseph H. Bylinski, 1987. "The effects of the planning memorandum, time pressure and individual auditor characteristics on audit managers' review time judgments," Contemporary Accounting Research, John Wiley & Sons, vol. 4(1), pages 127-143, September.
    2. Ramsay, Rj, 1994. "Senior Manager Differences In Audit Workpaper Review Performance," Journal of Accounting Research, Wiley Blackwell, vol. 32(1), pages 127-135.
    3. Trotman, Kt & Yetton, Pw, 1985. "The Effect Of The Review Process On Auditor Judgments," Journal of Accounting Research, Wiley Blackwell, vol. 23(1), pages 256-267.
    4. 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.
    5. Trotman, Kt, 1985. "The Review Process And The Accuracy Of Auditor Judgments," Journal of Accounting Research, Wiley Blackwell, vol. 23(2), pages 740-752.
    6. 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.
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    Citations

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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. 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.
    4. 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.
    5. Andiola, Lindsay M. & Brazel, Joseph F. & Downey, Denise Hanes & Schaefer, Tammie J., 2024. "Coaching Today's auditors: What causes reviewers to adopt a more developmental approach?," Accounting, Organizations and Society, Elsevier, vol. 112(C).
    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. 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.
    8. 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.

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