Professor Liu Feng from the Accounting Development Research Center/School of Management of Xiamen University and his team members Dr. Ye Fan from Xiamen National Accounting Institute and Dr. Shi Wen from Zhejiang University of Finance and Economics collaborated on a paper entitled "Audit Style: An Exploratory Analytical Framework", which was published in Audit Research.
Audit is a means of "increasing trust" invented by human society, which widely exists in various types of organizations in human society, such as enterprises and non-profit organizations.
Although the academic research on auditing is quite in-depth, the final product of auditing is highly standardized, and the auditing process is a black box. Therefore, the research on auditing quality is particularly challenging.
The existing research on audit quality mainly focuses on audit reports and financial reports jointly issued with audit reports, forming a relatively rich academic literature and viewpoints, such as inferring audit quality according to audit opinions and the quality of audited financial reports.
In this paper, we try to use "style" to cut in and "audit style" to see through the audit process, so as to provide a feasible perspective for opening the "black box" and better understanding and depicting the audit quality.
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Style is a widely used word. "People are like people" and "words are like people" refer to the existence and significance of style. In the field of art, style refers to the representative style of works of art as a whole, such as French impressionist painting style and China traditional literati painting style; It can also generally refer to the style, concept and so on of an era, a nation, a genre or a person. In fact, doctors, lawyers, analysts, fund managers and other professions that involve more professional judgment all have style problems in their work. A popular analogy is that in the face of the same case, even if it is just a cough, different doctors may give different diagnosis and treatment methods. Because doctors' cognition and experience of symptoms and drugs, conservative or radical attitude, and even personal morality are different, that is, the doctor's diagnosis and treatment style. Moreover, there is not necessarily right or wrong in this style, and the final effect of different means may be to get rid of the disease.
In the field of economic management, there have been discussions about leadership styles, such as transformational, transactional, sincere and public servant styles, as well as investment styles and executive management styles. In enterprise management and investment decision-making, different styles determine different economic consequences. Even at the critical moment of enterprise development, style will determine the survival and future development direction of the enterprise.
So, do auditors also have a variety of styles? At present, there is little academic discussion on this topic. However, this may be a topic that is discussed more and easily perceived in reality. For example, when students apply for a job, the first big probability they perceive is the style of the accounting firm at the presentation, from the overall working culture of the enterprise to the style of dressing and talking in small details. In addition, they also want to know the practice mode, team atmosphere and career development model of the firm. Furthermore, job seekers may also want to know what kind of service quality will be produced by different practice styles of firms, such as the ranking of firms with different styles, the differences between the top four international firms and the top ten local firms, or look at the recent punishment records, which is enough for job hunting decisions. Therefore, when a lot of research focuses on audit quality, we might as well take a step forward and pay attention to the audit practice process.
Based on this, this paper studies: What is the audit style? What can a style contain? How to study? On the basis of reviewing audit style and related research, this paper tries to describe the whole picture of audit style and bring it into a complete analytical framework, thus providing a new perspective different from traditional fields such as audit quality and audit fees.
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On the basis of previous literature, after discussion and analysis, this paper tries to give the definition and analysis framework of audit style:
(1) Audit style is a unified and unique audit work rule adopted by a group of auditors in their practice. The rules here include both formal explicit provisions and informal consensus (such as firm system, teamwork model, personal quality, etc.), thus promoting this group of auditors to form a certain behavior model. Finally, the difference of audit style will be reflected in the economic consequences of audit (such as comparability of financial statements, audit fees, audit adjustments, key audit matters, etc.).
(2) Uniform rules refer to consistency, that is, a group of auditors are consistent in the choice of audit methods, professional judgments and even preferences (consistency within the group). A group of auditors with the same style will have similar audit economic consequences.
(3) Unique rule refers to the preference problem, that is, one group of auditors has unique preferences (different between groups) in terms of audit method selection, professional judgment and customer selection compared with other groups of auditors. Preference is diversified and personalized, and many types can be distinguished. Different groups of auditors with different style preferences may form diversified audit economic consequences.
(4) In a broad sense, the audit style may be contingency, that is, influenced by the characteristics of the audited customers and the external environment in which the auditors are located, which leads to a group of auditors failing to consistently adopt their inherent audit style, but adopting different styles because of the customers and the environment.
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Next time, you also try to "draw a picture" of your auditor to see what his/her style is. Perhaps, this can help you better understand the audit activities, and expect to better describe the audit process, or, to open the "black box" of the audit process.
