Enhancing Auditors’ Reliance on Data Analytics under Inspection Risk Using Fixed and Growth Mindsets

2021 ◽  
Author(s):  
Tongrui Cao ◽  
Rong-Ruey Duh ◽  
Hun-Tong Tan ◽  
Tu Xu
Keyword(s):  
Data Analytics ◽  
Growth Mindset ◽  
Psychology Research ◽  
Fixed Mindset ◽  
Audit Firms ◽  
Audit Evidence ◽  
Big Four

Audit firms have invested significantly in data analytics (DA). However, evidence shows that auditors are often reluctant to rely on DA. A major auditor concern is that inspectors will second-guess the audit evidence gathered using DA. Drawing on psychology research, we examine how the effect of inspection risk on auditors’ reliance on DA is moderated by a fixed mindset (a belief that one’s ability is fixed) versus a growth mindset (a belief that one’s ability is malleable). In an experiment with Big Four auditors as participants, we find that, relative to low inspection risk, high inspection risk reduces auditors’ reliance on DA when auditors are prompted with a fixed mindset, but increases it when auditors are prompted with a growth mindset. Our findings contribute to auditing literature on DA, inspection risk, and mindsets, and have implications for auditors, audit firms, and regulators.

Creating a growth mindset

2017 ◽  
Vol 16 (4) ◽  
pp. 155-160
Author(s):  
Ian Johnston
Keyword(s):  
Case Studies ◽  
Design Methodology ◽  
Growth Mindset ◽  
Cultural Space ◽  
Content Type ◽  
Fixed Mindset ◽  
And Performance

Purpose This paper aims to show that everything a business does is fundamentally reliant on its culture. Culture determines how successful a strategy is and whether that strategy can be executed. If the culture in a business is out of alignment, it is imperative to change it. This paper examines how HR professionals can take ownership of this cultural space and help to create a growth mindset throughout the organisation. Design/methodology/approach The paper is based on experience gained through working with several large organisations to transform their people culture and performance by embracing a growth mindset and to help their HR leadership become the early champions of change, thus ensuring the process was successfully delivered. The paper includes case studies of two organisations where successful cultural shaping delivered improved results. Findings Companies with a growth mindset will outperform those with a fixed mindset. Changing mindsets is not overly complex, but it requires flawless implementation with the HR leaders at the forefront. Originality/value As Lou Gerstner, who turned around the computing giant IBM, said “I finally realised that culture is not part of the game, it is the game”. By understanding how individual mindsets impact culture, HR professionals can own and drive their organisation’s culture-shaping efforts.

scholarly journals I Just Have to Try Harder: Examining the Mindsets of Students with LD

2021 ◽  
pp. 082957352199895
Author(s):  
Lauren D. Goegan ◽  
Gabrielle N. Pelletier ◽  
Lia M. Daniels
Keyword(s):  
Learning Disabilities ◽  
Pilot Study ◽  
Growth Mindset ◽  
Future Research ◽  
Students With Learning Disabilities ◽  
Fixed Mindset ◽  
Students With Ld

Growth and fixed mindset messaging is gaining popularity. In our pilot study, we examine the mindsets of students with learning disabilities (LD) to determine how their self-beliefs relate to this messaging. Our results demonstrate that students with LD endorse growth mindsets more than fixed mindsets which is consistent with their peers without LD. Moreover, in their comments about being a student with LD, participants highlight important components of growth mindset messaging. However, some comments may reflect a false-growth mindset wherein students are only focused on effort and not the additional resources required for growth. We provide directions for future research.

scholarly journals A Review of the PCAOB’s Enforcement Program: 2005–2017

2020 ◽  
Author(s):  
Carl W. Hollingsworth ◽  
James H. Irving
Keyword(s):  
Overwhelming Majority ◽  
Sample Period ◽  
Pronounced Increase ◽  
Professional Obligations ◽  
Audit Firms ◽  
Time Period ◽  
Audit Evidence ◽  
Auditing Standards

This study examines the PCAOB’s Division of Enforcement from 2005 to 2017, a time period when it expanded from a $5 million to a $22 million program area.  We find that a pronounced increase in disciplinary orders issued during the latter years of the sample period is attributable to serious audit deficiencies and misconduct by triennially inspected audit firms, non-U.S. audit firms, and firms auditing brokers and dealers.  We also find that more than two-thirds of the violations of PCAOB auditing standards described in these disciplinary orders pertain to failures in general audit principles and responsibilities, obtaining audit evidence, and review and communication.  Finally, we find that the PCAOB levies punitive sanctions on an overwhelming majority of audit personnel and audit firms cited in these disciplinary orders.  Overall, our results indicate that the PCAOB’s enforcement function has actively disciplined audit personnel and audit firms that breached their professional obligations.

When Should Audit Firms Introduce Analyses of Big Data Into the Audit Process?

2017 ◽  
Vol 31 (3) ◽  
pp. 81-99 ◽  
Author(s):  
Anna M. Rose ◽  
Jacob M. Rose ◽  
Kerri-Ann Sanderson ◽  
Jay C. Thibodeau
Keyword(s):  
Big Data ◽  
Audit Process ◽  
Processing Mode ◽  
Big 4 ◽  
Audit Firms ◽  
Audit Evidence ◽  
Evaluation Of Evidence ◽  
Data Visualizations ◽  
Professional Judgments

ABSTRACT This study investigates how the timing of the consideration of Big Data visualizations affects an auditor's evaluation of evidence and professional judgments. In addition, we examine whether the use of an intuitive processing mode, as compared to a deliberative processing mode, influences an auditor's use and evaluation of Big Data visualizations. We conduct an experiment with 127 senior auditors from two Big 4 firms and find that auditors have difficulty recognizing patterns in Big Data visualizations when viewed before more traditional audit evidence. Our findings also indicate that auditors who view Big Data visualizations containing patterns that are contrary to management assertions after they view traditional audit evidence have greater concerns about potential misstatements and increase budgeted hours more. Overall, our results suggest that Big Data visualizations used as evidential matter have fewer benefits when they are viewed before auditors examine more traditional audit evidence.

Commercialization of audit firms and auditors’ subjective well-being

2020 ◽  
Vol 28 (4) ◽  
pp. 565-585 ◽  
Author(s):  
Yilia Ponomareva ◽  
Timur Uman ◽  
Pernilla Broberg ◽  
Emmy Vinberg ◽  
Karoline Karlsson
Keyword(s):  
Design Methodology ◽  
Empirical Support ◽  
Well Being ◽  
Conservation Of Resources ◽  
Subjective Well Being ◽  
Ongoing Debate ◽  
Content Type ◽  
Audit Firms ◽  
Big Four ◽  
Positive Effect

Purpose The purpose of this study is to explore how the commercialization of audit firms relates to the subjective well-being (SWB) of auditors. Drawing on the conservation of resources and social identity theories, the authors argue that the commercialization of audit firms enhances auditors’ subjective well-being in its overall happiness and job-related dimensions through two theoretical mechanisms. First, it constitutes a valuable resource for an auditor, and second, it reinforces the auditor’s identification with a firm. The authors subsequently contend that this relation is contingent on whether auditors are used in Big four or non-Big four audit firms. Design/methodology/approach The authors test our hypotheses-based data obtained from a survey of 166 Swedish auditors. The data are explored by means of descriptive statistics, correlation matrixes and linear moderating multiple regression analyzes. Findings The authors show that commercial orientation can have a positive effect on auditors’ SWB. The authors also find that the positive relationship between commercialization and SWB is stronger for auditors employed by one of the Big four firms. Originality/value The results contribute to the ongoing debate about the normalization of commercialization within the audit profession by theorizing on and providing empirical support for the positive consequences of commercialization.

Audit quality following the Public Company Accounting Oversight Board’s operation

2017 ◽  
Vol 17 (5) ◽  
pp. 927-946
Author(s):  
She-Chih Chiu ◽  
Chin-Chen Chien ◽  
Hsuan-Chu Lin
Keyword(s):  
Audit Quality ◽  
Univariate Analysis ◽  
Self Regulation ◽  
Discretionary Accruals ◽  
Content Type ◽  
Positive Effects ◽  
Audit Firms ◽  
Public Company ◽  
The Usa ◽  
Big Four

Purpose The purpose of this paper is to investigate the extent to which the transition from self-regulation to heteronomy has changed the gap in audit quality between Big Four and non-Big Four auditors. Design/methodology/approach This study analyzes publicly held companies in the USA between 1999 and 2012 using univariate analysis, multivariate analysis and quantile regression analysis. Audit quality is measured with discretionary accruals. Findings This study shows an insignificant difference in audit quality between the clients of Big Four and non-Big Four auditors after Public Company Accounting Oversight Board (hereafter, PCAOB) began its operations. In the analysis of the effects of PCAOB inspections on the audit quality of audit firms that are inspected annually and triennially, the findings show that the inspections have more positive effects when carried out annually. This suggests that the frequency of inspection is positively associated with audit quality. Overall, these results provide evidence that recent improvements in audit quality have been caused by changes in regulatory standards. Originality/value The paper provides three major original contributions. First, the authors add to the literature on audit quality by further demonstrating a reduced gap in audit quality between Big Four and non-Big Four audit firms due to heteronomy. Secondly, this study contributes to the debate as to whether independent inspections on audit firms are beneficial or not and suggests that the PCAOB inspections help increase audit quality. Finally, the results of this work contribute to the growing literature examining discretionary accruals.

scholarly journals Review of Mindset

2019 ◽  
Vol 3 (1) ◽  
pp. 31
Author(s):  
George M Jacobs
Keyword(s):  
Growth Mindset ◽  
Sociological Perspective ◽  
Fixed Mindset ◽  
Present Book ◽  
New Ideas ◽  
Psychological View ◽  
New Strategies ◽  
The Way

<p>Educators can benefit from occasionally stepping outside our profession to look for new ideas. <em>Mindset: Changing the Way You Think to Fulfil Your Potential </em>is a book that was written by a well-regarded psychology professor and has sold more than a million copies. The book’s central premise is that people tend toward one of two mindsets: a fixed mindset, which sees ability as inborn and largely unmodifiable; and a growth mindset, which sees ability as something people can develop by making persistent effort and learning new strategies. The present book review begins with explaining the two mindsets. Then, questions about mindset are answered. Next, in the review’s longest portions, suggestions from the book which might be useful for teachers are shared. These suggestions may help students become more successful learners, not to mention better people overall. Finally, the reviewer recommends that when the author and her colleagues do further work on mindsets, they might wish to examine mindsets through a more collective, sociological perspective than from an individual, psychological view.</p>

scholarly journals Performance appraisal and premature sign-offs and underreporting of chargeable time of external auditors – internal benchmarking of experience and gender

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rabih Nehme ◽  
Amir Michael ◽  
Alcheikh Edmond Kozah
Keyword(s):  
Performance Appraisal ◽  
Performance Appraisals ◽  
Content Type ◽  
External Auditors ◽  
Audit Firms ◽  
Internal Benchmarking ◽  
And Gender ◽  
The Uk ◽  
Level Of Experience ◽  
Big Four

PurposeThe research paper investigates auditors' dysfunctional behaviors in relation to performance appraisals. It explores the dysfunctional audit behavior (DAB) differences among experienced/inexperienced and male/female auditors when expecting performance appraisals, how their perception of DAB changes and how their reactive-outcomes vary.Design/methodology/approachThe survey comprises statements pulled from performance appraisal templates used by the Big Four audit firms in the UK. The sample has been tested during two different periods to highlight variations in the perception of DAB.FindingsExperienced auditors become more tolerant of DAB compared to their perception when they were inexperienced. Inexperienced male auditors are generally more accepting of DAB compared to their inexperienced female counterparts. Experienced female respondents continue to be less accepting of DAB.Originality/valueThe study associates performance appraisal procedures with DAB. The analysis examines the perception of dysfunctional behavior according to the level of experience auditors (males and females) accumulate over time.

scholarly journals MODERN PROBLEMS OF AUDIT SERVICES IN UKRAINE

2020 ◽  
pp. 86-92
Author(s):  
T. Zhukova ◽  
K. Iermolenko ◽  
I. Plikus
Keyword(s):  
Financial Statements ◽  
Practical Experience ◽  
Professional Organizations ◽  
Existing Problems ◽  
Audit Market ◽  
Audit Firms ◽  
Number Of Factors ◽  
The Cost ◽  
Audit Activity ◽  
Big Four

Today, audit activity in Ukraine has a number of contradictions and misunderstandings. Lack of practical experience of auditors and the necessary resources, as well as a tight market lead to the fact that some audit firms do not perform their work well. The article reveals the shortcomings of audit activity, a number of factors influencing them, the situation and prospects for changes and development in the future, and the ways to solve existing problems. The analysis of the audit services market in Ukraine showed positive trends. Today we observe how it has expanded significantly and encompassed all areas of economic activity. The article provides a comparative description of the audit market by the total number of audit activity subjects (SAD) in 2014 - 2018. The audit market is proved to be suffering from changes in the country. The decrease in the number of audit activity subjects is associated primarily with tightening the requirements for auditors and changes in legislation, but this did not affect the volume of services provided. The problems of the market monopolization under the "Big Four" are noted. In fact, the audit of state-owned enterprises was handed over to four companies, which make up 0.4% of the total number of audit entities in Ukraine. It is emphasized that audit companies have shortcomings and unresolved issues, which include the lack of a unified audit program, the pricing of audit services, the insufficient number of methodological developments for audit control, the cost of certification of auditors, and the lack of guidelines for computerizing the audit. It is noted that the main areas of audit development in Ukraine include creating the mechanism for applying ISAs, developing the methodology for auditing financial statements of enterprises by industry, deepening cooperation between Ukrainian professional audit organizations with international and European professional organizations of accountants, auditors, developing a pricing mechanism for audit services, and improving the quality control of providing the audit services.

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