Paper by Isenberg Professor Explores Interactions between Auditors and Managers-Clients

Behavioral audit research by Isenberg accounting professor Bradley Bennett has struck a resonant chord with the accounting profession.*  In August, Bennett and his coauthor, Richard Hatfield of the University of Alabama, were honored at the annual national meeting of the American Accounting Association with the AAA/Deloitte Wildman Medal. The award recognizes a publication considered by the accounting profession to have made “the most significant contribution to the advancement of the practice of public accountancy.”

An assistant professor at Isenberg for more than three years, Bennett teaches auditing to undergraduates and graduate students and a behavioral accounting research seminar to Ph.D. students. His own research interests focus on auditing issues and topics.

According to Bennett, there’s usually a mismatch in age, experience, and knowledge between the typically youngish auditors (i.e., staff-level auditors) and the managers at client firms with whom they interact. Those managers are often older, more knowledgeable, and more experienced. That discrepancy, his research demonstrates, can prove intimidating for staff auditors, influencing their data-collection decisions and their subsequent testing decisions. More specifically, the predicament reduces the likelihood that staff-level auditors will ask managers for additional audit evidence.

That’s a big deal for public accounting, emphasizes Bennett, because skepticism is critical to an auditor’s independence and effectiveness. The authors’ research, he adds, found that managers whose personalities and actions were themselves intrinsically intimidating were not the driving force behind the auditors’ behaviors. That allowed the researchers to isolate the mismatch in age, experience, and knowledge as the causes behind the reduced evidence gathering.

Bennett and his coauthor also found that the mode of communication between auditors and managers made a difference: Auditors were more likely to request additional information from managers when using email than in face-to-face interactions.

A Painstaking Study

Bennett’s research went beyond typical behavioral studies, which restrict themselves to survey data or questionnaire-type experiment format. In addition to online case materials, it deployed an experiment that staged one-on-one meetings between proxies for staff-level auditors and their manager-clients. The proxies—M.S. accounting students with auditing experience—proved fitting substitutes to their real-life counterparts, having limited work experience similar to that of staff auditors. So did the two managers—a former CFO and a recently retired accountant—who as experimental confederates in the study, provided information to the auditors just as would real-life managers.

The experiment, Bennett added, posed additional challenges, like fitting all the meetings into a day-and-a-half window and avoiding chance contact among the “auditors.”

The experiment dates from 2008, when Bennett was a first-year Ph.D. student at the University of Alabama. After the authors presented their paper at several conferences and submitted it for publication in 2010, it was accepted for publication by The Accounting Review in 2012 and appeared in the journal’s January 2013 issue. Since then (and added exposure to thousands of attendees at the AAA meetings in August), it has attracted growing attention. That includes inquiries from two of the Big 4 Accounting firms and the Public Company Accounting Board, which oversees audits in protecting investors and the public interest.

With recently secured funding, Bennett and his colleague are conducting follow-up research that is taking a closer look at outcomes accompanying face-to face versus online communications. “We’re especially interested in what gets lost when you don’t have visual and other cues that characterize face-to-face meetings,” Bennett remarks. “All and all, this research stream has yielded challenges and rewards that as a first-year Ph.D. student I could never have anticipated.”

*Read Professor Bennett's paper, "The Effect of the Social Mismatch between Staff Auditors and Client Management on the Collection of Audit Evidence,"  here.