The ABO Reporter

Changes in the Audit Environment: Opportunities and Needs for Group Research

By Jean Bedard and James Maroney
Joseph M. Golemme Research Professor and Assistant Professor
Northeastern University


Despite the 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 their decisions.1 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 by interview."

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 Audit Firms
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 13(3): 509-530.

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 University Press.

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.

1Similar 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

2As 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

3One 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

4Much 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

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