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The effects of audit review format on the quality of workpaper documentation and reviewer judgments
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|Title: ||The effects of audit review format on the quality of workpaper documentation and reviewer judgments|
|Authors: ||Agoglia, Christopher P.|
Hatfield, Richard C.
Brazel, Joseph F.
|Issue Date: ||Jan-2006|
|Citation: ||Paper presented at the 2006 American Accounting Association Auditing Section Midyear Meeting, Los Angeles, CA.|
|Abstract: ||The promulgation of standards (such as PCAOB Auditing Standard No. 3) highlights the recent focus on workpaper documentation quality and its influence on audit quality. Our study matches audit workpaper preparers with reviewers to examine how the choice of workpaper review method ultimately affects sequential audit review team judgments through its impact on preparer workpaper documentation. While reviewers maintain the option of reviewing workpapers on site (“face-to-face review”), they can now also perform their reviews electronically from remote locations (“electronic review”) due to technological advancements such as e-mail and electronic workpapers. Recent research has found that review mode can affect the judgments of auditors preparing the workpapers. Our study extends the literature by examining the extent to which review mode (electronic versus face-to-face) affects the quality of documentation in the workpapers and whether reviewers are able to discern and compensate for these documentation quality issues. We propose a model which predicts that the relationship between the method of review and reviewer judgment quality is mediated by a documentation quality assessment gap (i.e., actual versus reviewer assessments of documentation quality). Such a mediation model provides insight into why the review format affects reviewer judgment quality. We find that reviewers’ judgments are affected by the form of review expected by their preparer. As predicted by our mediation model, we find that the effect of review mode on reviewer judgments is mediated by a documentation quality assessment gap. Specifically, when the mode of review was electronic, reviewers were unable to recognize and compensate for the generally lower quality documentation, resulting in lower quality reviewer judgments compared to when the mode of review was face-to-face. These results suggest that the effect of review mode persists to the reviewer’s judgment through its influence on preparer workpaper documentation and the resulting documentation quality assessment gap.|
|Appears in Collections:||Faculty Research and Publications (Accounting and Tax)|
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