Effects of Technical Department's Advice, Quality Assessment Standards, and Client

Justifications on Auditors' Propensity to Accept Client-Preferred Accounting Methods,

Terence Bu-Peow Ng, Premila Gowri Shankar, Nanyang Technological University

INTRODUCTION:

The key focus of the accounting profession and regulators is always improving the quality of
accounting information provide to the clients. So standards have been introduced both in U.S.
and internationally to require auditors to consult knowledgeable individuals within the firm to
help resolve contentious/ difficult issues. In this study, the writers examine whether and how
auditors’ use of advice (provided by a knowledgeable colleague) is jointly affected by the
performance evaluation focus of their superior and preferences of the client (in terms of their
attitude toward accounting method quality). Consultation with other experts within the audit
firm, including personnel from the firm’s technical department, constitutes an important part of
an audit firm’s quality control mechanisms and is widely used for resolving ambiguous or
contentious accounting issues encountered by auditors. The results of this study show that a
focus on technical expertise causes auditors to increase (decrease) their support for the client’s
aggressive method when the advice recommends supporting (not supporting) the client’s method.
These results highlight the critical role played by advice-givers and the quality of advice
rendered by them on auditors’ decisions, and also suggests potential costs and benefits arising
from differences in performance evaluation focus.

STRENGTH:
Scope: one of the main aspects of this study is that the writers provided a wide range of views of
theories and previous findings. The authors used 34 references to provide evidence to support
their research.
Relevance: the research is highly relevant to real world problems. It is good for testing the
efficacy of a quality assessment standard, which requires auditors to assess the appropriateness,
not just acceptability, of client’s accounting methods; it also provides an opportunity for auditors
to use the advice to bolster their support for the client-preferred method.
Arrangement: the article was well written, the writers used easy language to understand even for
non-accounting professional, and the article was not that lengthy that one can get bored easily.
Each paragraph was related to the previous literature.

WEAKNESSES:
Illustrations: the writers could improve the article by having more graphs, tables and pictures to
make it more interesting to readers. The writers’ elaborated prior research by developing
hypothesis test, and they could be better by showing their results in the form of chart, which is
more easily understandable especially for ordinary reader.
Source: The research was limited in term of getting data; they examine the effects of advice
received from a single source i.e., the audit firm’s technical department. However, there are
different sources of advice within the firm with which auditors can potentially consult to other
sources of advice.

RECOMMENDATIONS:
I would recommend that the research could get better by adding more tables, graphs and charts.
More statistical data could make the article more understandable.
The hypothesis tests were consists of only three questions per test and researchers asked those
questions to 126 participants (seniors, managers, supervisors) from two big4 firms in Singapore,
which I think is very small size of sample, and responses could be different from US. I would
have preferred that this research was done in USA with the large size of sample, so that most of
the CPA firms can get benefit of this research.