Graduate Student Audit Project

This paper discusses Marquette University’s graduate student audit project, designed to enhance student learning and retention of auditing procedures and concepts learned in the classroom

The Ethics Of Managing Short-Term Earnings: Business Managers And Business Students Rate Earnings Management Practices Implications For Academia

In 1990, Bruns and Merchant surveyed the readership of the Harvard Business Review (HBR).  Their survey asked HBR readers to rate the acceptability of earnings management practices. Prior to that study, researchers and accounting practitioners paid little attention to the morality of short-term earnings management.  However, in the wake of highly publicized financial frauds and failures, the profession and academic journals have emphasized the importance of the concepts of earnings quality and earnings management.The Bruns and Merchant survey provided 13 earnings management situations and asked the HBR readers to rate the acceptability of those practices.  In this study, we surveyed students and business managers to measure their perceptions about the morality of specific earnings management actions to determine if their perceptions are different from those of the HBR readers 15 years ago.  This article also compares the results of our study with several other studies that used the Bruns & Merchant instrument during the most recent 15 years.    Based on our findings, we discuss implications for academia

A Review Of Going Concern Prediction Studies: 1976 To Present

In 1962, the Securities and Exchange Commission (SEC) was the first to address going concern issues with Accounting Series Release (ASR) No. 90.   Then, in 1963, the AICPA issued Statement on Auditing Procedures (SAP) No. 33, in response to ASR No. 90.  Both ASR No. 90 and SAP No. 33 addressed qualifications for issues that were unresolved and the results of which were indeterminable at the statement date. Soon after the issuance of Statement on Auditing Standards (SAS) No. 2 in 1974, researchers began to conduct studies on going concern issues.  This paper provides a comprehensive review of the literature on going concern studies and updates studies by Mutchler (1983) and Asare (1990) which provide detailed reviews of the evolution of the going concern report and requirements of the standards related to auditors' assessment of going concern.  Since SAS No. 2, the profession has not provided additional guidance on going concern.  Even the Sarbanes-Oxley Act of 2002 (SOX), makes no modifications to the requirements for considering going concern and the Public Company Accounting Oversight Board has not issued guidance addressing going concern. Starting with the first going concern prediction study [McKee, 1976], this paper identifies 27 models developed for predicting the going concern opinion and identifies the primary methods used for model development; multivariate discriminant analysis (MDA), logit analysis, probit analysis, and neural networks are.  This paper also identifies; the most popular type of focused model and identifies three non-U.S. firm models, the number of factors considered in any one study,  and the predictive abilities of the models. The paper also provides an annotated bibliography for the 27 models

Information Sharing during Auditors\u27 Fraud Brainstorming: Effects of Psychological Safety and Auditor Knowledge

We investigate the effects of psychological safety and auditor knowledge on subordinates\u27 willingness to share privately known, fraud-relevant information during brainstorming. We test a model illustrating how partner leadership affects subordinates\u27 perceptions of psychological safety (P-S), which then affect brainstorming differentially depending on the level of subordinates\u27 task knowledge. Participants watch a video of a simulated brainstorming session in which we manipulate P-S by altering how the partner communicates. In the more (less) P-S condition, the partner engenders a supportive (non-supportive), non-threatening (threatening) group dynamic and a style that encourages (discourages) idea sharing. We predict and find that less-knowledgeable auditors increase their willingness to share privately known, fraud-relevant information in a more P-S setting than in a less P-S setting; there is no effect of differential levels of P-S on more-knowledgeable auditors\u27 changes in willingness to share such information. This implies the criticality of encouraging team dynamics that engender P-S for less-knowledgeable subordinates