An Investigation of the Effects of Specialization in Audit Workpaper Review*

E. Michael Bamber · Robert J. Ramsay

47 citations0/0 files storedContemporary Accounting Research

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Auditing, Earnings Management, Governance Accounting and Financial Management Accounting Education and Careers

Abstract

Abstract. This study examines the effect of specialization at the different stages of an audit workpaper review. Auditing literature advises focusing each review level on specific kinds of errors (i.e., seniors on mechanical errors and managers on conceptual errors), rather than having seniors and managers perform successive all‐encompassing reviews. However, surveys of review practice suggest that all‐encompassing reviews are common. To determine whether specialization at different levels of review improves reviewers' overall effectiveness, this study has 35 managers and 39 seniors actually perform a review of a realistic set of workpapers. Half the subjects performed specialized reviews, whereas the other half performed all‐encompassing reviews. Overall accuracy rates in our study are consistent with prior research. In addition, the combined reviews of seniors and managers are more effective than those of either seniors or managers separately, demonstrating the benefits of hierarchical review. However, specialized review leads reviewers to be significantly less accurate than reviewers performing all‐encompassing reviews. The results suggest specialization will not automatically improve review effectiveness, and that accounting firms may need to re‐evaluate their review guidance and professional training on workpaper reviews.

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References

1997The audit review process: A characterization from the persuasion perspective 1995Justification of Decisions in Auditing 1993The review process as a control for differential recall of evidence in auditor judgments 1994Senior/Manager Differences in Audit Workpaper Review Performance 1995Knowledge structure and the estimation of conditional probabilities in audit planning 1985The Review Process and the Accuracy of Auditor Judgments 1988Research opportunities in auditing : the second decade 1990The Effect of Experience on Auditors' Memory Errors

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2007Auditors’ self-perceived abilities in conducting domain audits 1999Hierarchical Differences in Audit Workpaper Review Performance*2010The Effect of Alternative Types of Review on Auditors’ Procedures and Performance 2017An error management perspective on audit quality: Toward a multi-level model 2005DISCUSSION OF Judgment and Decision Making Research in Auditing: A Task, Person, and Interpersonal Interaction Perspective

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