A comparison of human resource allocation across auditing firms: The effects of structured audit technology and environment.

Abstract

This dissertation reports the results of a field experiment comparing personnel assignments across measures of audit structure in high and low complexity environments. Objectives of the research included (1) testing relevant hypotheses derived from the auditing literature, (2) establishing the continuing existence of "structure" differences across large auditing firms, (3) describing how large auditing firms might allocate their human resources to audit a typical, medium-sized manufacturing client, and (4) providing partial evidence on the relative human resource input "efficiency" of structured audit approaches. Two versions of an audit case, representing high and low-complexity environments, were distributed to audit managers from four large public accounting firms. The primary experimental task solicited managers' judgments of experience levels required for the performance, and for the initial supervision/review, of a list of 19 judgment-oriented audit tasks. A secondary task solicited budgeted personnel assignments for staffing the hypothetical audit by audit area. Additionally, two raters analyzed the audit guidance materials of each participating firm to provide task-level structure ratings. Consistent with a "knowledge-sharing" role of structured approaches, managers from firms employing relatively more structured approaches for performing judgment-oriented audit tasks assigned less experienced auditors both to perform and to supervise/review those tasks than did managers from firms employing less structured approaches. Additionally, firms employing relatively structured approaches budgeted fewer hours for supervision/review, but not for performance, of audit procedures. Somewhat consistent with the notion that complex auditing issues require more seasoned professional judgment for their resolution, the high-complexity audit environment motivated the allocation of slightly more experienced personnel to perform procedures, but not necessarily to supervise/review them. However, managers budgeted significantly more audit hours both to performance and to supervision/review in the relatively complex environment. Finally, contrary to expectations related to a diminished structure/environment "fit" in the high-complexity case, the difference in experience levels budgeted between the two cases was generally greater within unstructured firms than within structured firms, indicating that unstructured firm managers generally responded to greater environmental complexity with a greater increase in required minimum experience levels than did structured firm managers.