Research Summary 13: Workpaper Reviews




Summary #13

Workpaper Reviews

Specialized reviews don’t improve audit efficiency.


ccounting firms spend a significant amount of time on workpaper review; audit managers devote more than 50% of their time to it. Firms often seek to streamline the review process to improve efficiency. The professional literature currently advises reviewers at different levels to focus on uncovering specific kinds of errors (for example, senior-level auditors on mechanical errors, and audit managers on conceptual errors), rather than on conducting successive all-encompassing reviews. However, prior research had found that specialization impairs effectiveness and that, in fact, both seniors and managers often performed comprehensive reviews.

In this study, we examined the effect of specialization on auditors’ efficiency when we asked 35 managers and 39 seniors from one accounting firm to review a set of hypothetical workpapers. Both seniors and managers performing specialized reviews were less efficient than those performing the all-encompassing ones: They required more time on average to complete such reviews and had a higher error rate. The results of the study suggest that specialization does not improve review efficiency, and that, instead, seniors and managers both should do all-encompassing reviews. From a practical standpoint, firms should proceed with caution when considering whether to introduce specialization into their workpaper review process.

For the full text of the research paper, see Auditing: A Journal of Practice & Theory, vol. 19, no. 2, Fall 2000.

E. MICHAEL BAMBER, PhD, is professor of accounting at the University of Georgia, Athens. ROBERT J. RAMSAY, CPA, PhD, is Arthur Andersen Professor of Accounting at the University of Kentucky, Lexington. His e-mail address is .


Summary #14

Audit Committees and
Auditor Selection

Independent and active committees
favor auditors who are industry specialists.


udit committees are instrumental in ensuring the quality of financial reporting. The Blue Ribbon Committee for Improving the Effectiveness of Corporate Audit Committees, established by the New York Stock Exchange and the National Association of Securities Dealers, stressed two factors affecting audit effectiveness: the independence of audit committee members and the frequency of audit committee meetings (see “Blue-Ribbon Panel Issues Its 10 Commandments,” JofA , Apr.99 , page 4, and “The State of Audit Committees,” May01, page 57 ). In this study, we examined one function of the audit committee: auditor selection.

We assumed that independent and active audit committees (that is, those that met at least twice a year) would demand a high level of audit quality because of concerns about monetary or reputation loss from lawsuits or SEC sanctions. Therefore, we predicted that companies with independent and active audit committees would be more likely to employ an auditor who was an industry specialist. Our sample comprised data on the composition and activities of 500 randomly selected public companies in 11 different industries.

The results suggested that companies with independent and active audit committees were more likely to view industry specialization by an auditor as enhancing audit quality.

For the full text of the research paper, see Auditing: A Journal of Practice & Theory, vol. 19, no. 2, Fall 2000.

LAWRENCE J. ABBOTT, PhD, is assistant professor of accounting at the University of Memphis, Tennessee. His e-mail address is . SUSAN PARKER, PhD, is Dean Witter Foundation Fellow at Santa Clara University, California.

This series is based on work published in Auditing: A Journal of Practice & Theory. The intent is to bridge the gap between researchers and practitioners by offering concise practice summaries of cutting-edge research in the field of auditing.


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