Discussion with practitioners

One purpose of the pre-experimental study in this thesis is to confirm whether prior key assumptions in experimental literature are still valid under the effect of modern audit development and recent changes in the audit environment. To serve this purpose, several issues of audit review studied in prior experimental studies were discussed with practitioners during the fieldwork. Information gathered in relation to objectives of review and time budget pressure is summarized in this subsection.

The importance of that judgments made by an auditor is to be reviewed by at least one another to ensure the audit quality was stressed by an interviewed practitioner:

‗It‘s (a) judgmental area whereby each assess whether or not each has done work achieved the required level of assurance to be able to sign the audit report of that section.‘

It was suggested that due to the risk of ‗self-review‘ in audit that decision-makers often fail to identify the errors in their own judgment. For this reason, all judgments made are reviewed by a different person who is often more senior.

Prior literature has, in general, identified two review objectives – the defensibility of the documents and the appropriateness of the opinion. Practitioners confirmed these two objectives during the interview. Moreover, they claimed that they are equally important when performing an audit review.

‗They are both (important). You can‘t get to one without the other. … you need to go through all of the various steps of thinking … has all the work been done that I would expect to be done; does the work that‘s been completed support the audit opinion, and;

how we documented all of the work that we need to document … in order to, for somebody come to review the file and agree that we‘ve done appropriate work to support the audit opinion.‘

The review objectives described by the interviewees are summarised in Table 3.4 (on next page).

Table 3.1 Objectives of review from practitioners‘ view

Provide necessary guidance and support to audit team members Assess the appropriateness of the work

Appropriate opinions and judgments made from the evidence collected Check the documentation of work completed

Internal training purpose

The increasing requirement in the International Auditing Standards on the documentation of audit work was also emphasized by practitioners. It was stated from the interview that work not documented in the file would be regarded as not been performed. Therefore, all works have to be documented on the file, including all of the conclusions made, all of the work completed and all processes. This requirement is incorporated in the review so that reviewers need to make sure all work in support of the audit opinion has been adequately documented. It is also designed to ensure that audit work has been completed at appropriate level. For example, subordinates might have performed testing on a sample of insufficient size or deliberately altered the sampling criterion to diminish the amount of work. Thus, lower level of review (e.g., senior-in-charge review) also checks details like appropriateness of sampling criterion. Review also provides the initial decision-maker necessary guidance and support on the audit. The juniors, lacking in of experience, often need guidance from the seniors during the fieldwork. The audit team may require guidance on some technically complicated issues from experts or more senior level, e.g., the partner, technical partner, and the national technical office of the firm.

Additionally, audit review strengthens auditors‘ confidence in the quality of audit work in respect of the increasing pressure on auditors from external review bodies. Furthermore, review also facilitates learning and training. The reviewer of the work is often more experienced than the initial decision-maker (the preparer) in general or in the specific area of knowledge. The review activities enable auditors to communicate the rationality of judgments made. Hence, the review is also utilized as a function of the internal training.

The issue of time pressure was discussed with the practitioners.

‗Very few audit that we do probably come in, in terms of the exact time cost that we though, budget that we would, because there are too many variables there in completing the work. But the work has to get done and if the staff needs additional time, then so be it that the job will be done.‘

There is no alternative solution for situations, where a team member fails to finish the work within allocated time units, but to request extra time. The same applies to the review process where additional work or follow-up work takes more time. In order to cover the additional cost to the audit job – the extra time units consumed – auditors have to state the reason for additional time taken to complete the work, so that additional fees could then be claimed from the client.

The interviewees asserted that time pressure hardly influence the audit work and behaviours like truncating a sample in the work reported in prior experimental work does not exist in practice.

‗I can‘t imagine any firm could just say ‗Right…See how far you can get in a week and … just (make a conclusion) based on whatever you‘ve got. Well, you need to complete all the work that‘s laid out in the programmes, in the audit file, in order to get the evidence, and that‘s what the external file review will make sure happen.‘

Overall, practitioners‘ viewpoints suggested that audit review had not changed much in format after recent changes in the audit environment. To enhance the quality of audit work, review also serves as a function of internal training nowadays. In addition, time pressure is one of the environmental features of audit previously reported to adversely affect audit quality. The interviewed practitioners believed that their audit performance in practice was not affected. It could be due to the increasing quality control that removes opportunities of audit judgment to be influenced by time pressure. It is also likely that time pressure is taking effect on the cognitive level of audit judgment, which is at a level not perceived by the auditors themselves.

3.6 Conclusion

This chapter has reported pre-experimental work conducted in this doctoral research. The main purpose is to confirm whether prior key assumptions in experimental studies on audit review are still valid and to enrich knowledge of the contextual background to support the design of the experiments in this thesis.

My own observations and interviews regarding the purposes / objectives of review and time pressure in modern practice, allowed me to come to the view that audit practice has not changed much in broad terms and that the prior research provides an appropriate basis for me to design my experiments. The adverse effect of time pressure evidenced in prior literature was denied by practitioners to have impact on the quality of audit in modern practice.

Chapter 4: Research questions, hypotheses and