The effect of auditor interaction on decision making in the going-concern task

Purpose - To investigate the effects of auditor interaction on problem representation, information acquisition, and performance in the going-concern task. Design/methodology/approach - Participants were asked to evaluate the going-concern status of a company. The study used a pretest-posttest control group (CG) experimental design. Half of participating accountants were randomly assigned to the CG and the other half to the experimental group (EG). In stage one, participants in both CG and EG performed the entire task individually. In stage two, participants in EG performed the experimental task as an interacting dyad while participants in CG performed the experimental task again individually. Findings - The results showed that interacting auditors\u27 shared problem representation focus more on relationship between information and less focus on the simple facts or abstraction. Interacting auditors acquired fewer total number of cues, spent more time, visited financial cues fewer times, and acquired fewer liquidity and management cues than did individual auditors. The results also showed that the effects of auditor interaction were maximized when the member of a dyad were heterogeneous. Research limitations/implications - The paper used a going-concern task and non-hierarchical dyads. Future studies might investigate the effects of: different tasks other than going-concern evaluation, hierarchical dyads (e.g. senior-manager) after statistically controlling for the power variable, and different types of dyads (e.g. traditioned vs staticized) on group decision making. Practical implications - The results can be used for training purposes for auditors to increase their performance. Originality/value - The study is one of the first to work in the area of multi-person audit judgment (especially in interacting auditor judgement). © Emerald Group Publishing Limited

The effects of auditor interaction on going-concern judgments

The basic goal of audit judgment research is to improve auditor decision making (Ashton 1982; Biggs 1985). Previous auditor judgment studies show that environmental context is one of the critical factors that affects judgment performance (see e.g., Libby and Luft 1993). The purpose of this study is to investigate the effects of one of the contextual variables in auditing (i.e., group decision making) on decision process and performance.^ In terms of decision processes, auditors developed a shared problem representation, after interaction, which showed characteristics of a more well-developed knowledge structure. The interaction also affected auditors such that they concentrated relatively more on discussing and evaluating than reacquiring information. Another effect of interaction was found in auditors\u27 mitigating factor generation. Specifically, auditors increased concentration on explaining the causes of the problems, on financial aspects of mitigation, and decreased their dependence on guidelines provided by SAS 59.^ In terms of performance, however, interacting auditors did not perform better than individual auditors in terms of all performance measures (i.e., accuracy, probability estimation, and confidence). Possible reasons for this poor performance of interacting auditors include output interference effects, the lack of ecological validity of the study (i.e., the absence of the hierarchical nature of a dyad), and the difference in the degree of difficulty of the cases that they evaluated. The most interesting finding of the study is that the effects of auditor interaction was maximized when the members of a dyad were heterogeneous. This result suggests a practical implication for staffing.

A multi-attribute model for internal auditor selection

Purpose - The purpose of the paper is to help organizations more effectively select and evaluate internal auditors by introducing a multi-criteria decision model, the analytic hierarchy process (AHP) that has been applied to many areas of managerial decision-making. Design/methodology/approach - The paper structures the decision hierarchy in entering level internal auditor selection based on the competency framework for internal auditing (CFIA) and provides an illustrative application example as part of a decision support system. Findings - Recruiting and hiring qualified employees is one of the critical issues facing any organization. The selection of internal auditors is not an exception. Making the wrong choice can prove to be very costly as organizations try to uncover candidates\u27 potential for success. Recently, there have been increasing numbers of research papers regarding the employee selection process. Originality/value - Investigates an area that has not seen much progress in the auditing and auditor management field. Contributes to internal auditing research and practice. © Emerald Group Publishing Limited

An exploratory empirical investigation of environmental audit programs in S&P 500 companies

Purpose This study investigates the relationship between environmental audit programs and various organizational characteristics in S&P 500 companies. Design/methodology/approach The data for the study are derived from two different sources. First, environmental audit related data were obtained from the corporate environmental profiles database (CEPD) which is published by the Investor Research Responsibility Center (IRRC). All firms who responded to the survey between 1998 and 2003 were included for the study. In total, 192 firms responded during this time period. Second, other firm specific and industry data were obtained from research insight (i.e. COMPUSTAT) database, which is published by Standard and Poor\u27s. Findings The results show that an increasing number of companies are adopting environmental audit programs and industry-specific factors affect an organization\u27s decision to adopt environmental audit programs. Research limitations/implications Since the paper relies on the survey data, one of the limitations of the study is possible self-selection bias in the sample. Caution is needed before the results may be generalized. One promising area of future research is to investigate the relationship between the firm-specific characteristics identified in this study and the performance (both financial and non-financial) of the organization. Practical implications The results of the study can provide useful information to organizations that are planning to implement environmental auditing program. Originality/value The study is one the first for investigating the characteristics between companies with environmental audit programs and those who do not using an entire set of S&P 500 firms. Even though there have been some studies regarding environmental auditing, few have investigated the entire population of S&P 500 companies. © 2006, Emerald Group Publishing Limite

An analytic network process model for internal auditor selection

There has been an increasing amount of research on personnel selection in many business disciplines (Hough & Oswald, 2000; Breaugh & Starke, 2000). Research on internal auditor selection, however, has had limited exposure in the auditing literature (Bailey, Gramling, & Ramamoorti, 2003). Recently, Seol and Sarkis (2005) introduced an analytic hierarchy process (AHP) model that used a decision hierarchy based on the CFIA (competency framework for internal auditing) framework. A limitation of AHP, however, is the assumption of strict hierarchical relationship that needs to exist among factors. The purpose of this paper is an introduction of a more robust model, the analytical network process (ANP), which relaxes the strict hierarchical and decomposition levels of the hierarchy and incorporates possible interrelationships and interdependencies of various personnel selection criteria, factors, and alternatives. In illustrating the application, we return to the CFIA model framework, describe how and where interdependencies exist amongst the CFIA factors/attributes, and how ANP is used in the internal auditor selection process. The illustration will also describe some sensitivity analysis for the ANP approach. The tool is not without its limitations that include the potential for geometrically more questions and information elicitation from the decision makers. Finally managerial and research implications associated with the technique and results are described

A cross-cultural comparative study of internal auditor skills: UK vs Korea

Purpose: Based on the theoretical development by House et al. (2004), the purpose of this paper is to investigate the cross-cultural differences of internal auditors\u27 perceptions on the importance of internal auditor skills. Design/methodology/approach: The authors developed a survey based on the competency framework for internal auditing and collected data from the UK (Anglo cultural cluster) and Korea (Confucian cultural cluster). In total, 231 internal auditors participated in the study. Findings: The results showed that UK auditors perceived behavioral skills as more important than cognitive skills, while Korean auditors had an opposite perception. Not surprisingly, UK auditors rated each sub-category of behavioral skills higher than Korean auditors; Korean auditors gave higher scores than UK auditors for each sub-category of cognitive skills. Research limitations/implications: One limitation of the study is that two different data collection methods were used for the study: online for the UK and paper-based for Korean auditors. Another limitation of the study is that the authors did not analyze the possible impact of each participating auditor\u27s background knowledge. Practical implications: The findings of the study contributes to professional practice by providing culturally adaptive criteria for regulators\u27 policy-making, organizations\u27 employee hiring and training, and educators\u27 curriculum design across various cultural environments. Originality/value: The findings of the study can provide some insights on cultural impacts to help academic researchers develop models regarding the internal auditor selection and training in different nations