Brian W. Carpenter

Sampling and the abstraction of knowledge in the auditing profession: An extended institutional theory perspective

Abstract Statistical sampling has long been interpreted as a technical means for enhancing the efficiency and effectiveness of independent audits. This article subjects this interpretation to closer scrutiny from the perspective of institutional theory and the sociology of the professions. The article examines the role of statistical sampling as a social phenomenon complicit in modifying and controlling the accounting professions abstract system of knowledge. In so doing, the discussion provides a more thorough understanding of the roles of sampling in the auditing profession, and it extends the institutional theory perspective by examining the role of group interest in the institutionalization process.

Early debt extinguishment transactions and auditor materiality judgments: A bounded rationality perspective

Abstract Critics have characterized bond refundings and in-substance defeasances as managerial tactics that artificially inflate reported earnings during periods of rising interest rates, and various accounting and auditing pronouncements suggest that such transactions be subjected to more stringent materiality criteria. Extending work that interprets audit judgment formation as a cognitive phenomenon, this study examines hypothesized relationships between materiality judgments and the size and nature of these debt transactions, client earnings trend, and experience of the auditor. Proceeding beyond this cognitive orientation, the study then interprets judgment formation as a social-behavioral phenomenon by examining the applicability of the bounded rationality perspective to auditing. The results obtained from an experiment involving 212 practitioners at the ranks of partner, manager and senior suggest that the size of item, earnings trend and nature of transaction influence materiality judgments, as mitigated by an auditors experience. Further, quantitative and qualitative, interview-based evidence suggests the usefulness of viewing audit judgment processes as boundedly rational, social-behavioral phenomena.