the Audit Environment: Opportunities and Needs for Group Research
By Jean Bedard
and James Maroney
Joseph M. Golemme Research Professor and Assistant Professor
widespread recognition of the importance of group interaction to
the audit process (e.g., Solomon 1987; Ashton et al. 1988; Solomon
and Shields 1995; Sutton and Hayne 1997; Rich et al. 1997), there
have been relatively few studies exploring the decision processes
used by auditors performing tasks in groups or the outcomes of
Solomon (1987) reviewed the extant
multi-auditor studies at that time, and found that only six
studies examined group audit judgments and decisions. Recognizing
the need for such research, Solomon (1987) called for additional
study of the multi-person audit environment. In spite of this and
subsequent calls for group research in auditing, as well as recent
changes in the audit environment (described later) which have
further increased the interactive nature of the audit process,
there have been relatively few group audit judgment and decision
studies since Solomon's (1987) review. In fact, the Rich et al.
(1997) update of multi-auditor research conducted over the past
decade identified only three group auditing studies published
during this period (Reckers and Schultz 1993; Johnson 1994; Bamber
et al. 1996).2 While
these and earlier studies have each contributed to the auditing
literature, the amount of resources devoted to this area of
research do not appear proportionate to the importance of such
research to audit practice.
The purpose of this essay is to
reemphasize the need for group research in auditing, particularly
in light of some recent changes in the audit environment. We first
discuss some of these changes and identify group research issues
relevant to them. Next, we provide some recommendations for
increasing research related to these and other audit group issues.
Neither the group research issues suggested nor the
recommendations for increasing such research are intended to be
exhaustive. Rather, they are intended to stimulate both discussion
and action within the ABO research community.
Recent Changes in the Audit
Environment and Relevant Group Research Issues
The Audit Review Process
The audit review process has traditionally been modeled as a
sequential, hierarchical and iterative process, which relies
heavily on written communication. As preparers of working papers
complete and document their work, they pass their working papers
to the next level in the hierarchy (e.g., a senior reviews the
working papers of a staff auditor). If satisfied with the
documentation and conclusions contained within the working papers,
they are then passed on to the next level (e.g., a manager). If
the reviewer is not satisfied, written "to-do notes" are
listed for the preparer to address before moving the working
papers through the hierarchy. While some verbal interaction does
occur among the audit team members, the traditional review process
has been primarily written, with limited group interaction.
Recently, each of the Big 5 firms
has begun discussion about reengineering the audit process (see
Rich et al. 1997, for an excellent discussion of these
reengineering efforts). Many of these efforts will affect the
audit review process. The change most relevant to this essay is
that the review process is becoming more interactive, in that
reviewers now rely more extensively on verbal interaction with the
preparer. For example, the reviewer "may verbally quiz the
preparer about the objectives and potential implications of
various audit procedures" (Rich et al. 1997, p. 89). Our own
review of the in-house audit materials for a Big 5 firm confirmed
the dramatic changes being made to the audit review process,
particularly in terms of the substantial increase in the reliance
on verbal interaction between team members as audit evidence,
rather than extensive written documentation. In fact, the firm
describes the final stage of the new review process as "review
These changes to the audit review
process are moving this process closer to an interactive group
decision process and away from a primarily written, sequential,
iterative and hierarchical process, as traditionally modeled.
These recent changes further accentuate the need for audit group
research and also provide a number of new behavioral research
opportunities. For example, audit researchers can address the
question of whether the new interactive review process is as
efficient and effective as the former process. Potential sources
of process gains and losses associated with the more interactive
review process can be explored. Audit practice can then benefit if
the means to accentuate process gain and reduce process loss are
identified. Further, research can address what individual skills
are most relevant in this new environment. It may become
increasingly important to enhance the verbal communication skills
of our accounting graduates in such an interactive environment.
The Gender Composition of
A second change in the audit environment that
has increased the relevance of group audit research is the
changing gender composition of the audit work place. Since the
1970s, women have been entering the public accounting profession
in greater numbers. By 1994, close to 50 percent of new
professionals entering public accounting were women (Hooks 1994;
Johnson et al. 1996). Thus, it is very likely that many audit
decisions are made in groups comprised of both men and women. We
are aware of no published research in the accounting context
examining the effect of gender on the interaction and performance
of small groups.3
However, studies in education, sociology and
psychology have found that the gender of group participants
affects the amount and nature of interpersonal interaction, with
females interacting less, and interacting differently, in the
presence of males. If such interaction patterns also exist in
professional accounting settings, they may affect both audit
efficiency and effectiveness. Further, the job satisfaction and
performance evaluations of women may be adversely affected if
group interaction patterns differ by gender. Thus, this is an
important area for behavioral accounting researchers to pursue.4
Advances in Communication
Technologies An additional change in the audit environment
which has further increased the relevance of group audit research
is the significant advance in communication technologies. Through
these advances, geographically dispersed individuals can now solve
audit problems interactively through the use of "group
support systems" (GSS). Some accounting researchers have
predicted that group support systems "promise to reshape the
way accounting and management work is performed" (Sutton and
Hayne 1997, 157). One recent auditing study (Bamber et al. 1996)
found that groups using GSS identified significantly more issues
relevant to an audit decision than both individuals and
face-to-face groups. This finding suggests that a potential
benefit of GSS groups may be a more complete analysis of an audit
problem. However, there were no differences between experimental
conditions in the decision outcome. Bamber et al. (1996) suggest
that these findings may indicate that the primary GSS benefits may
be from information generation rather than evaluation, a
conjecture supported by other GSS literature.
While Bamber et al. (1996) provide
an important contribution to the auditing literature, the authors
acknowledge that their results only provide "some tentative
insights for where and how GSSs should be employed in auditing"
(Bamber et al. 1996, 133). The study of GSS is a significant
research area for behavioral accounting researchers to pursue.
There are myriad research issues which could be explored. For
example, when are GSS utilized in auditing? When should they be
used? What process gains and losses arise from the use of GSS over
individual decision making and face-to-face group decision making?
What factors are relevant in determining what type of decision
making process (e.g., GSS, face-to-face group, or individual) is
most appropriate for an audit task? These are only a few of the
research questions relevant to this important environmental change
that can be addressed through behavioral methods.
While the focus of this essay has
been on the need for behavioral accounting researchers to conduct
additional research on audit groups, particularly due to changes
in the audit environment, some of these changes also affect
management and tax accounting. For example, advances in
communication technologies and the potential effects of gender on
group interaction behavior and performance affect management and
tax accounting working groups, as well as audit groups. It is
important that behavioral accounting researchers conduct research
programs that examine the implications of these changes and other
factors as they relate to group decisions made in management and
tax accounting. Also, because there are similarities between each
of these areas of accounting, research findings in one area may be
relevant to the other.
While there is a need for more
group research in accounting, group studies are more difficult to
conduct than individual studies. Solomon (1987) recognized this
and summarized and discussed a number of the
methodological/theoretical issues which contribute to this
difficulty. One primary issue is the increased number of subjects
required for group research. Researchers may need three to four
times the number of subjects for a group study than an individual
study. If the researcher desires "natural" groups
(individuals that work together on a regular basis) rather than "ad
hoc" groups, data must be gathered from individual field
offices rather than at training seminars. Further, the researcher
must usually be physically present. These requirements magnify the
difficulty of the data collection for a group vs. an individual
study. What resources can be provided to behavioral accounting
researchers to encourage them to pursue group
judgment/decision-making research? We believe that behavioral
accounting researchers will pursue group research in accounting,
in spite of the difficulties discussed above, if the likelihood of
publishing such research is increased. One means of doing so is to
provide a group research theme for future conferences such as the
ABO Research Conference. Also, special sections or supplements
could be devoted to group research in such journals as Behavioral
Research in Accounting, Auditing: A Journal of Practice &
Theory and Advances in Accounting Behavioral Research.
Assuming that accounting researchers have adequate notice of such
opportunities, we may be more likely to attempt to address the
difficulties inherent in group accounting research. While the
increased need for subjects requires an additional commitment from
auditing firms, firms may be more willing to help if they feel the
research may benefit their practice. We believe that auditing
researchers can provide a number of credible arguments that such
research is particularly relevant to audit practice, especially in
light of some of the recent changes in the auditing environment
discussed in this essay.
Ashton, R. H., D. N. Kleinmuntz,
J. B. Sullivan, and L. A. Tomassini. 1988. Audit decision making.
In Research Opportunities in Auditing: The Second Decade,
edited by A. R. Abdel-khalik, and I. Solomon. Sarasota, FL:
American Accounting Association: 95-132.
Bamber, E. M., R. T. Watson, and
M. C. Hill. 1996. The effects of group support system technology
on audit group decision making. Auditing: A Journal of
Practice & Theory 15 (Spring): 122-134.
Brazelton, E. K. 1998.
Implications for women in accounting: Some preliminary evidence
regarding gender communication. Issues in Accounting Education
Hooks, K. L. 1994. Facts and myths
about woman CPAs. Journal of Accountancy 178(4): 79-86.
Johnson, E. N. 1994. Auditor
memory for audit evidence: Effects of group assistance, time
delay, and memory task. Auditing: A Journal of Practice &
Theory 13 (Spring): 36-56.
-----, D. J. Lowe, and P., M. J.,
Lowe. 1996. An examination of direct and indirect gender effects
in public accounting. Advances in Accounting 14: 179-192.
Reckers, P., M. J., and J.
Schultz. 1993. The effects of fraud signals, evidence order, and
group- assisted counsel on independent auditor judgment. Behavioral
Research in Accounting 5: 124-144.
Rich, J. S., I. Solomon, and K.
Trotman. 1997. Multi-auditor judgment/decision making research: A
decade later. Journal of Accounting Literature 16: 86-126.
Solomon, I. 1987. Multi-auditor
judgment/decision making research. Journal of Accounting
Literature 6: 1-25.
-----, and M. Shields. 1995.
Judgment and decision research in auditing. In Judgment and
Decision-Making Research in Accounting and Auditing, edited by
R. H. Ashton, and A. H. Ashton, 137-175. Cambridge, MA: Cambridge
Sutton, S. G., and S. C. Hayne.
1997. Judgment and decision making, Part III: Group Processes. In
Behavioral Accounting Research: Foundations and Frontiers,
edited by V. Arnold, and S. G. Sutton, 134-163. Sarasota, FL:
American Accounting Association.
Wagner, D., and J. Berger. 1997.
Gender and interpersonal task behaviors: Status expectation
accounts. Sociological Perspectives (40: 1): 1-32.
to Solomon (1987), by audit groups we refer to multi-auditor
concurrent judgment/decision making, intended to solve an audit
problem or perform an audit task. Solomon (1987) uses the term "audit
teams" to refer to multi-auditor judgments/decisions made
within the hierarchical, sequential and iterative audit review
process. In audit firms, the process for making decisions can
range from an individual process (decisions made by a single
person without input from other team members) to a group process
(an interactive and concurrent group decision). Many audit
decisions will fall somewhere along this continuum and involve
both individual and group processes. The focus of this essay is
primarily on interactive and concurrent audit group decisions.
Back to the article
further evidence of the relative lack of group research in
accounting, of the about 40 papers on the programs of the 1997 and
1998 ABO Research Conferences, only two in each year dealt with
group accounting research. Back to the article
recent study in accounting education (Brazelton 1998) examines
participation and interaction of males and females in accounting
classrooms. Brazelton finds that men participate more in the
accounting classroom and also receive more attention from their
instructors. Back to the article
of the research on gender-based interaction is based on "expectations
states theory" (e.g., Wagner and Berger 1997), which
describes gender as a status characteristic. Expectations states
theory predicts that status characteristics (including race, rank
and income level as well as gender) produce differences in how
well individuals are expected to perform, often leading to both
interaction and performance differences. Since audit teams may be
diverse as to these characteristics, audit effectiveness and
efficiency may be affected if each group member does not have an
equal opportunity to contribute to the audit problems being
considered. Back to the article