Can Auditors Pursue Firm-Level Goals Nonconsciously on Audits of Complex Estimates? An Examination of the Joint Effects of Tone at the Top and Management’s Specialist

The Accounting Review, Forthcoming

Posted: 22 Dec 2016 Last revised: 6 Feb 2020

See all articles by Jonathan Pyzoha

Jonathan Pyzoha

Miami University - Department of Accountancy

Mark H. Taylor

University of South Florida, Muma College of Business, Lynn Pippenger School of Accountancy

Yi-Jing Wu

Texas Tech University - Rawls College of Business

Date Written: January 29, 2020

Abstract

We examine whether tone at the top emphasizing firm-level commercial, audit quality, or both goals (balanced) can nonconsciously affect auditors' engagement-level tendency to accept management's estimates, and whether the effects differ if management engages a specialist. This study is motivated by academics' and regulators' increasing attention on firm-level tone at the top and concerns about management bias in audited estimates, especially when the evidence is prepared by management's specialist. We find firm-level goals can be pursued nonconsciously by auditors when performing a complex task. When management's specialist is absent, a balanced approach reduces auditors' tendency to agree with management's estimate compared to a commercial approach; however, it is less effective when management's specialist is present. We find an audit quality approach reduces auditors' tendency to accept management's estimate compared to a commercial approach, regardless of the absence/presence of a specialist. Our results have important implications for regulators and audit firms.

Keywords: Tone at the top; nonconscious goal pursuit; management’s specialists; complex estimates; firm-level quality control; audit quality goals

Suggested Citation

Pyzoha, Jonathan and Taylor, Mark H. and Wu, Yi-Jing, Can Auditors Pursue Firm-Level Goals Nonconsciously on Audits of Complex Estimates? An Examination of the Joint Effects of Tone at the Top and Management’s Specialist (January 29, 2020). The Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2888084 or http://dx.doi.org/10.2139/ssrn.2888084

Jonathan Pyzoha (Contact Author)

Miami University - Department of Accountancy ( email )

Miami University
800 E. High Street
Oxford, OH 45056
United States
513-529-3913 (Phone)

Mark H. Taylor

University of South Florida, Muma College of Business, Lynn Pippenger School of Accountancy ( email )

4202 E. Fowler Avenue
Tampa, FL 33620
United States
(813) 974-6516 (Phone)

Yi-Jing Wu

Texas Tech University - Rawls College of Business ( email )

703 Flint Avenue
Lubbock, TX 79409
United States
216-368-8895 (Phone)

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