Series editor(s): Donna Bobek Schmitt
Subject Area: Accounting and Finance
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|Title:||Are Engagement Quality Reviews Really Objective?|
|Author(s):||Ambrose Jones, Carolyn Strand Norman, Jacob M. Rose|
|Volume:||14 Editor(s): Vicky Arnold, Donna Bobek, B. Douglas Clinton, Anne Lillis, Robin Roberts, Chris Wolfe, Sally Wright ISBN: 978-1-78052-086-5 eISBN: 978-1-78052-087-2|
|Citation:||Ambrose Jones, Carolyn Strand Norman, Jacob M. Rose (2011), Are Engagement Quality Reviews Really Objective?, in Vicky Arnold, Donna Bobek, B. Douglas Clinton, Anne Lillis, Robin Roberts, Chris Wolfe, Sally Wright (ed.) Advances in Accounting Behavioral Research (Advances in Accounting Behavioral Research, Volume 14), Emerald Group Publishing Limited, pp.143-164|
|DOI:||10.1108/S1475-1488(2011)0000014009 (Permanent URL)|
|Publisher:||Emerald Group Publishing Limited|
|Article type:||Chapter Item|
We investigate auditor objectivity as it relates to engagement quality reviews by examining whether engagement quality reviewers (EQRs) exhibit lower levels of objectivity when they have administrative, economic, or social ties with the audit engagement partner. Motivated reasoning theory suggests that EQRs with ties to the engagement partner will reach less conservative conclusions and be more willing to accept an engagement partner's decision relative to reviewers who have no connections with the engagement partner. We conduct an experiment where EQRs must review a decision by an engagement partner related to a contingent liability.
Results suggest that engagement quality reviews are an effective mechanism for reducing the effects of engagement partner biases to accept client-favored accounting choices. Participants with ties to the engagement partner (i.e., from the same office) and without ties (i.e., from the national office) both challenged the decision of the engagement partner and recommended disclosure of a contingent liability, which client management opposed. We also find an interaction of ties with the engagement partner and the probability of the contingent liability. National office EQRs were less likely to decide that disclosure was necessary than were local office partners when the probability of the contingent liability was low. With regard to the need to recognize a liability, EQRs with and without ties to the engagement partner concurred with the decision of the engagement partner.
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