BENTLEY UNIVERSITY
PACC 1602 – Auditing and Assurance Research Class Hours: Thursday 10:00 – 12:50
JEN 214
Professor Jean C. Bedard
AAC 240, 781-891-2410, [email protected] Office hours: ____ and by appointment
COURSE DESCRIPTION
The purpose of this seminar is to help students develop a foundation for reading, evaluating and producing scholarly research in the domain of auditing and assurance. During the seminar, we will read and critique research papers on a variety of auditing topics. With regard to each article covered, we will pay particular attention to the significant and unique contribution of the research question, logical and coherent development of the theoretical-empirical background, appropriate and valid design of the research process, rigorous and complete analysis of the data, and
meaningful and insightful discussion of the research findings. We will also discuss various alternative ways in which the author(s) might have approached the research question, and
consider the generation of future research topics arising from the article’s findings. This syllabus may be adjusted as we move through the course.
LEARNING OBJECTIVES
Upon the conclusion of the course you should:
1. Develop a deep understating of auditing and assurance theory and research;
2. Gain significant understanding of relevant and current auditing and assurance topics and issues;
3. Learn how to apply auditing and assurance research methods;
4. Know how to critically evaluate auditing and assurance research; and
5. Demonstrate your knowledge by developing a viable research proposal in the domain of auditing and assurance.
COURSE REQUIREMENTS
Required knowledge of auditing: I assume each of you has a working knowledge of the auditing process and the main provisions of the Sarbanes-Oxley Act, at least at the level of the standard undergraduate course. It will be helpful throughout the course to refer to a textbook for details on current auditing standards. However, you need not buy a text. If you do not have access to one, we will discuss in our first class how we can assure that all of you have a text for
reference.
interesting seminar experience is class participation, and thus each student is expected to make a significant contribution to discussion of each of the readings. By “significant” contribution, I mean both the quantity and quality of comments that you make. This implies that papers must be read carefully prior to class. Also, you may benefit from reading other research on which the authors of the assigned papers rely heavily. This will improve your ability to make comparisons across studies, and provide you with material for questions and comments that will enliven class discussion. Assigned readings are available on the course Blackboard site, under “Assignments”.
Presentations: Each student is required to read every assigned paper and be prepared to discuss the paper intelligently. However, one student will be assigned as the primary presenter of each paper. The primary presenter is also responsible for searching for current working papers on the topic to include in their presentation of the assigned paper. The objective of this process is to identify viable questions for research to extend the literature. You need to prepare a professional presentation, using the appropriate visual aids such as PowerPoint, and lead the class through the paper and a critique. The readings are numbered in the course schedule below. Please see the spreadsheet under “Assignments” on the course Blackboard site, which shows the papers each of you will be responsible for presenting.
Article Analysis: For each assigned article, you need to turn in an evaluation using either a bullet-point or outline format. Your article analyses should be no more than 5 manuscript pages in length (double-spaced, one-inch margins, 12-point font). Your evaluation should cover the following issues: (1) the research question and why it is interesting and important; (2) for empirical papers, the key assumptions, theories, variables (identify independent and dependent variables using Libby boxes, and discuss validity of each), hypotheses or research questions, sample, research design, and testing method; (3) the results of tests or analysis; and (4) the article’s contributions, limitations, and implications. Submit your evaluations electronically in advance of class, and bring a paper copy of each evaluation to hand in at the beginning of the class in which the readings are assigned.
Research Proposal: You are required to turn in and present a research proposal for a study related to a topic in the domain of auditing and assurance. The proposal should:
1. Identify the purpose of the proposed research project; 2. Defend the relevance of the research question;
3. Articulate the expected scholarly contribution;
4. Offer a brief synopsis of the appropriate theory and literature; 5. Propose the research model and hypotheses;
6. Set forth an experimental design; and
7. Identify the appropriate data source and statistical methods.
Your proposal should be 10 to 15 pages (double-spaced, one-inch margins, 12-point font) in length. Please talk to me about possible topics early in the term, to give you maximum
and if so, you will have a good start on the front end of the paper from this class exercise. You will present your proposals in class on December 9. Submit your proposal through turnitin.com on the course Blackboard site by end of day on December 2.
Final Examination. There will be a closed-book/notes essay format final examination at the end of the semester.
Course Grade: Your grade will be determined by your performance on in-class presentations (20%), class participation (10%), article evaluations (20%), research proposal (20%), and the final examination (30%).
ACADEMIC HONESTY
It is important to stress that all assignments for this course are individual assignments. While you may benefit from talking to each other about general issues regarding the assigned papers, the preparation of work that you hand in must be your own. If you have questions on the papers, it is best to communicate with me. If it is unclear to you whether a particular communication is outside of the bounds of this policy, always ask me.
The following is taken from the Bentley College webpage. See http://www.bentley.edu/ugcatalogue/honesty/index.cfm
“At Bentley College, students and faculty are members of an academic community that supports honesty and integrity in the classroom and in research and scholarship. The opportunities for personal and intellectual growth are diverse and always expanding. The college is steadfastly committed to the pursuit of academic excellence, for students and faculty alike, and supports all scholarly activity consistent with that objective.
Learning is an opportunity and a privilege that demands responsibility and an uncompromising level of honor, integrity and trust. The expectation at Bentley is that students and faculty will take advantage of the opportunity for intellectual development, and that they will conduct themselves in a manner consistent with the standards of academic honesty. When these standards are
COURSE SCHEDULE - SESSION 1: Introduction
In this first class we will consider specific topics in auditing research, the methods generally used, sources of data for empirical auditing research, the role of research in audit practice, the process of preparing research, and research ethics. In addition to reading the following article, search the business press for articles for perspectives on auditors and some recent frauds (e.g., Satyam, Madoff, Parmalat and Enron). Consider the characteristics of the auditing firm, the nature of the fraud, and why the auditors might not have detected it. These examples will provide a context in which to consider the research we will cover in the course.
Francis, J. 2004. What do we know about audit quality? The British Accounting Review 36: 345–368.
- SESSION 2: Audit Firm Client Portfolio Management
1. Choi, J., R. Doogar, and A. Ganguly. 2004. The riskiness of large audit firm client portfolios and changes in audit liability regimes: Evidence from the U.S. audit market. Contemporary Accounting Research (Winter): 747-85.
2. Johnstone, K., and J. Bedard. 2004. Audit firm portfolio management decisions. Journal of Accounting Research (September): 659-690.
3. Landsman, W., K. Nelson, and B. Rountree. 2009. Auditor switches in the pre- and post-Enron Eras: Risk or realignment? The Accounting Review 84 (2): 531–558.
- SESSION 3: The Audit Process: Risk Assessment and Audit Planning
1. Nelson. M. W., J. A. Elliott, and R. L. Tarpley. 2002. Evidence from auditors about managers’ and auditors’ earnings management decisions. The Accounting Review (Supplement): 175-211. Includes discussant comments by M. Gibbins.
2. Kizirian, T., B. Mayhew, and D. Sneathen. 2005. The impact of management integrity on audit planning and evidence. Auditing: A Journal of Practice and Theory (November): 49-68.
3. Brazel, J., T. Carpenter., and G. Jenkins 2010. Auditors’ use of brainstorming in the consideration of fraud: Reports from the field. The Accounting Review 85 (4): 1273–1301.
- SESSION 4: The Audit Process: Analytical Procedures
1. Church, B., J. McMillan, and A. Schneider. 2001. Factors affecting internal auditors' consideration of fraudulent financial reporting during analytical procedures. Auditing: A Journal of Practice & Theory 20(1): 65-80.
and quantification in auditors’ evaluation of management-provided information. Auditing: A Journal of Practice and Theory (March): 11-27.
3. Luippold, B., T. Kida, D. Piercey, and J. Smith. 2010. Managing Audits to Manage Earnings: The Impact of Baiting Tactics on an Auditor’s Ability to Uncover Earnings Management Errors. Working paper.
- SESSION 5: The Audit Process: Control and Substantive Tests
1. Earley, C., V. Hoffman, and J. Joe. 2008. Reducing management's influence on auditors' judgments: An experimental investigation of SOX 404 assessments. The Accounting Review 83 (6): 1461-1485.
2. Bedard, J., and L. Graham. 2010. Detection and severity classification of Sarbanes-Oxley Section 404 internal control deficiencies: Archival evidence. Working paper.
3. Bennett, B., and R. Hatfield. 2010. The effect of the social mismatch between staff auditors and client management on the collection of audit evidence. Working paper.
- SESSION 6: The Audit Process: Review
1. Tan, H. and K. T. Trotman. 2003. Reviewers’ responses to anticipated stylization attempts by preparers of audit workpapers. The Accounting Review (April): 581-604.
2. Agoglia, C., R. Hatfield, and J. Brazel. 2009. The effects of audit review format on review team judgments. Auditing: A Journal of Practice & Theory 28 (1): 95-111.
3. Lambert, T., and C. Agoglia. Closing the loop: Review process factors affecting audit staff follow-through.
- SESSION 7: Auditor-Client Negotiation
1. Kadous, K., J. Kennedy, and M. Peecher. 2003. The effect of quality assessment and directional goal commitment on auditors’ acceptance of client-preferred accounting methods. The Accounting Review (July): 759-778.
2. Gibbins, M., S. Salterio, and A. Webb. 2001. Evidence about auditor-client management negotiation concerning client’s financial reporting. Journal of Accounting Research (December), 535-564.
3. Trotman, K., A. Wright, and S. Wright. 2005. Auditor negotiations: An examination of the efficacy of intervention methods. The Accounting Review (January):349-367.
- SESSION 8: Audit Firm Quality Control
1. Coram, P., J. Ng, and D. Woodliff. 2000. The effect of risk of misstatement on the propensity to commit reduced quality acts under time budget pressure. Auditing: A Journal of Practice & Theory (September): 159-167.
2. Dowling, C. 2008. Appropriate audit support system use: The influence of auditor, audit team and firm factors. The Accounting Review 84 (3): 771–810.
3. Casterella, J., K. Jensen, and R. Kenchel. 2009. Is self-regulated peer review effective at signaling audit quality? The Accounting Review 84 (3): 713–735.
- SESSION 9: Auditor Independence
1. Kinney, W. R. Jr., Z-V. Palmrose, and S. Scholz. 2004. Auditor independence, non-audit services, and restatements: Was the U. S. government right? Journal of Accounting Research (June): 561-588.
2. Myers, J. N., L. A. Myers, and T. C. Omer. 2003. Exploring the term of the auditor-client relationship and the quality of earnings: A case for mandatory rotation? The Accounting Review (July): 759-778.
3. Carey, P. and R. Simnett. 2006. Audit partner tenure and audit quality. The Accounting Review 81(3): 653–676.
-- SESSION 10: Economics of Auditing
1. Casterella, J., J. Francis, B. Lewis, and P. Walker. 2004. Auditor industry specialization, client bargaining power, and audit pricing. Auditing: A Journal of Practice and Theory 23 (1): 123-140.
2. Blokdijk, H., F. Drieenhuizen, D. Simunic, and M. Stein. 2006. An analysis of cross-sectional differences in Big and Non-Big public accounting firms’ audit programs. Auditing: A Journal Of Practice & Theory 25 (1): 27–48.
3. Houston, R., M. Peters, and J. Pratt. 2005. Nonlitigation risk and pricing audit services. Auditing: A Journal of Practice and Theory 24 (1): 37–53
- SESSION 11: Research Proposal Development
- SESSION 12: International Auditing Research
1. Carcello, J., A. Vanstraelen, and M. Willenborg. 2009 Rules rather than discretion in audit standards: going-concern opinions in Belgium. The Accounting Review 84 (5): 1395–1428.
2. Choi, J-H., J-B Kim, X. Liu, and D. Simunic. 2009. Cross-listing audit fee premiums: Theory and evidence. The Accounting Review 84 (5): 1429–1463.
3. Carson, E. 2008. Industry specialization by global audit firm networks. The Accounting Review 84 (2): 355–382
THANKSGIVING BREAK
- SESSION 13: Litigation against Auditors
(Submit your research proposal papers by end of day.)
1. Lee, H Y., and V. Mande. 2003. The effect of the Private Securities Litigation Reform Act of 1995 on accounting discretion of client managers of Big 6 and Non-Big 6 auditors. Auditing: A Journal of Practice & Theory 22 (1): 93-108.
2. Barton, J. 2005. Who cares about auditor reputation? Contemporary Accounting Research (Fall): 549-86.
3. Krishnan, J., and Y. Zhang. 2005. Auditor Litigation Risk and Corporate Disclosure of Quarterly Review Report. Auditing: A Journal of Practice & Theory 24 (Supplement): 115–138. Also read Mary Stone’s discussion of this paper.
- SESSION 14: Present research proposals
