Aleksandra B. Zimmerman

THE MATCHING PRINCIPLE REVISITED

This paper reassesses the significance of the concept of matching expenses to revenues as an accounting principle. We compare and contrast the historical views of authoritative bodies and the various scholars and practitioners who analyze this subject, drawing implications for future standard setting. Through this historical retrospective on matching, which includes a review of more contemporary research and thought, we find that matching as an approach to income measurement can be helpful in forecasting earning power. Consequently, we conclude that matching should be retained as a long-standing fundamental accounting principle in standard-setting and in practice.

Audit-Office Non-CPA Composition and Audit Outcomes

In this study, we examine whether the personnel composition of Big 4 firm offices, in terms of availability of non-accounting professionals, is associated with office-level audit quality and auditor independence. The non-CPA personnel of accounting firm offices primarily consist of three groups: assurance and tax staff aspiring to be CPAs, consulting/advisory professionals, and administrative personnel. Recent developments in accounting and auditing suggest that during the past decade, auditors have increasingly come to rely on various types of non-audit experts/specialists, particularly when auditing complex aspects of client engagements. Such specialists include actuaries, valuation specialists, engineers, lawyers, environmental specialists, forensic accountants, IT specialists, and data analytics professionals, among others. We hypothesize and find that a greater presence of non-CPAs at the office-level is associated with higher audit quality, suggesting that greater access to non-CPAs, particularly non-audit specialists, translates to higher audit quality. Further, we do not find that a greater non-CPA presence reduces office-level audit engagement independence. This study contributes to the literature by providing evidence that office audit quality is not just a function of office-level CPAs but also the availability of non-CPAs to support the audit engagement teams.

The Joint Impact of Management Expressed Confidence and Response Timing on Auditor Professional Skepticism in Client Email Inquiries

Purpose - While academic research has been conducted on auditors’ ability to exercise professional skepticism in face-to-face client interviews, little is known about auditors’ application of professional skepticism in email communication with the client. The purpose of this paper is to examine the factors that impact auditor professional skepticism during client inquiries conducted through email. Design/methodology/approach - A 2 × 2 between-subjects experiment was conducted with 69 undergraduate and graduate auditing students as surrogates for auditors. The experimental design crossed two levels of client expressed confidence (high and low) and two levels of client response timing to the auditor’s email inquiry (earlier than expected and later than expected). Findings - Results indicate that management expressed confidence moderates the influence of management response timing on auditor professional skepticism and that auditor perceptions of client credibility mediate this interactive effect. When the client’s response is low in confidence, auditors perceive a later-than-expected response from the manager as less credible than an earlier-than-expected response, which leads to less reliance on management explanations, which signifies more skepticism. However, when confidence is high, response timing does not impact perceptions of the client’s credibility. Practical implications - The results imply that junior auditors should be vigilant of how communication cues in client emails may impact their judgments. Even though management response timing and expressed confidence should not influence auditor skepticism Originality/value - This study contributes to the literature on professional skepticism by addressing the Public Company Accounting Oversight Board’s concerns about the need for auditors to exercise more professional skepticism in practice, particularly in an environment in which computer-mediated communication is increasing at a fast pace; and assists practitioners in better understanding the factors that influence the degree of skepticism auditors exercise when collecting audit evidence through email. The study should be of interest to audit firms, as it provides evidence on whether auditors use nonverbal cues such as chronemics, or time-related messages, in email communication to judge management and evidence reliability and credibility.