Second Partner Review: An Experimental Investigation

25 Pages Posted: 4 Apr 2002

See all articles by Robert R. Tucker

Robert R. Tucker

Fordham University - Accounting Area

Ella Mae Matsumura

University of Wisconsin-Madison - Department of Accounting and Information Systems

Multiple version iconThere are 2 versions of this paper

Date Written: Undated

Abstract

This paper uses experimental economic methods to test the effects of second-partner reviews and the availability of sampling information on the competence and independence reflected in the engagement partner's audit reports. The results support the hypotheses, which are based on the analytical predictions of Matsumura and Tucker (1995). Reporting bias was reduced, but not eliminated, by adding second-partner reviews and/or the availability of additional sample information. One unexpected result was that second partners, whose incentive scheme was designed to promote unbiased reporting, exhibited reporting bias, and, in one cell, exhibited more bias than the "biased" engagement partner they were monitoring.

When not subject to second-partner reviews, engagement partners were strategic in their reporting, but not in their sampling decisions. With the introduction of second-partner reviews, the situation reversed. The effects of client pressure became evident in sampling, but were less pronounced in reporting.

Keywords: second partner review, experimental economics, game theory, audit reporting, sampling

JEL Classification: M40, C70, C90

Suggested Citation

Tucker, Robert R. and Matsumura, Ella Mae, Second Partner Review: An Experimental Investigation (Undated). Available at SSRN: https://ssrn.com/abstract=304402 or http://dx.doi.org/10.2139/ssrn.304402

Robert R. Tucker

Fordham University - Accounting Area ( email )

Graduate School of Business
113 W. 60th Street
New York, NY 10023
United States
212-636-6121 (Phone)

Ella Mae Matsumura (Contact Author)

University of Wisconsin-Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States
608-262-9731 (Phone)
608-265-6040 (Fax)

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