Zhu, Skye, and Phang, Soon-Yeow (2021) How do lead auditor instructions influence component auditors' evidence collection decisions? The joint influence of construal interpretations and responsibility. In: [Presented at the European Accounting Association Virtual Conference]. From: EAA 2021: European Accounting Association Virtual Conference, 26-28 May 2021, Online.

PDF (Presentation) - Submitted Version Restricted to Repository staff only

Abstract

Component auditors frequently receive instructions from lead auditors to audit a component’s financial statements, but regulators have raised concerns on a range of issues with regard to the quality of component auditors’ work. Of particular concern is that component auditors often do not adequately perform procedures and gather quality evidence. These audit failures are likely caused by different interpretations of lead auditor instructions and component auditors’ lack of responsibility. We propose that a prevention focus intervention that reminds component auditors to be aware of their duties and obligations to the group audit engagement can improve their evidence collection decisions. Our main experiment provides evidence that an intervention to prompt component auditors to adopt a prevention focus sense of responsibility would improve component auditors’ evidence collection decisions, and this ameliorating effect is greater for component auditors receiving low-level construal instructions. Our two supplementary experiments show that our proposed responsibility prompt can still effectively improve component auditors’ evidence collection decisions even if they are not provided with any group instructions that prime levels of construals, and that these findings hold across different cultural settings. We also demonstrate that the effect of a responsibility prompt is driven by component auditors’ regulatory concerns. Last, we conduct semi-structured interviews with practitioners which suggest that component auditors tend to interpret lead auditor instructions concretely as they often receive detailed, step-by-step instructions from lead auditors. Overall, our study provides evidence relevant to regulators and practitioners from the perspective of component auditors’ performance and supports the implementation of the revised standards on the quality management of group audits.

Item ID:	76932
Item Type:	Conference Item (Presentation)
Keywords:	audit instructions; audit judgments; evidence collection; group audit; regulatory fit
Date Deposited:	05 Dec 2022 23:56
FoR Codes:	35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3501 Accounting, auditing and accountability > 350101 Accounting theory and standards @ 80% 35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3501 Accounting, auditing and accountability > 350199 Accounting, auditing and accountability not elsewhere classified @ 20%
SEO Codes:	28 EXPANDING KNOWLEDGE > 2801 Expanding knowledge > 280106 Expanding knowledge in commerce, management, tourism and services @ 100%
Downloads:	Total: 8
	More Statistics