We thank Pennie Bagley, Joe Brazel, Nandini Chandar, Anna Cianci, Victoria Glackin, Barb Grein, Erin Hamilton, Rick Hatfield, Travis Holt, Kathryn Kadous, Tom Kida, Ben Luippold, Dave Piercey, Linda Quick, Tammie Rech, Aaron Saiewitz, Steve Salterio, Maria Sanchez, John Schaubroeck, Jim Smith, Brian Stewart, Ken Trotman, George Tsakumis, Scott Vandervelde, Lei Wang, Arnie Wright, and workshop participants at Drexel University, North Carolina State University, Northern Illinois University, Texas Tech University, the University of Massachusetts Amherst, the University of Wisconsin – Milwaukee, the 2011 International Symposium on Audit Research, the 2010 AAA Annual Meeting, and the 2011 AAA Audit Mid-Year Meeting for their helpful comments.
Closing the Loop: Review Process Factors Affecting Audit Staff Follow-Through
Article first published online: 29 AUG 2011
©, University of Chicago on behalf of the Accounting Research Center, 2011
Journal of Accounting Research
Volume 49, Issue 5, pages 1275–1306, December 2011
How to Cite
LAMBERT, T. A. and AGOGLIA, C. P. (2011), Closing the Loop: Review Process Factors Affecting Audit Staff Follow-Through. Journal of Accounting Research, 49: 1275–1306. doi: 10.1111/j.1475-679X.2011.00423.x
- Issue published online: 17 OCT 2011
- Article first published online: 29 AUG 2011
- Accepted manuscript online: 28 JUL 2011 11:22PM EST
- Received 16 December 2010; accepted 3 July 2011
The PCAOB recently expressed concern regarding the sufficiency and effectiveness of review and supervision of audit fieldwork. For the audit review process to succeed as a quality control mechanism, any issues or questions identified by a reviewer must be adequately resolved and documented in the workpapers. If audit review fails to correct for errors/biases in the work of reviewees, there can be serious detrimental effects on audit quality and, in turn, financial statement quality. Our study extends the literature by examining the phase of the review process in which reviewees respond to (or “close”) notes/comments provided by their reviewers. Utilizing an experiment, we find that certain contextual factors (review timeliness and review note frame) influence reviewee follow-through during this critical phase. Specifically, we find that a delayed review elicits significantly lower effort levels than a timely review. Review note frame (i.e., how the reviewer phrases the rationale given for the underlying directive of a review note) significantly affects reviewee effort and performance when the review is timely. Through mediation analyses, we explore the mediating effect of effort on performance. In addition, we find that reviewer delay leads to greater over-documentation.