Audit efficiency: The impact of positive surprise

This study develops a model of factors that are likely to contribute to audit efficiency when a surprise occurs between audit planning and substantive testing that signals an opportunity to reduce audit procedures. The competitive environment for audit services creates strong incentives for audit firms to conduct audits more efficiently while not sacrificing audit effectiveness. Surprises, defined as unexpected changes in the audit environment, are a common feature of audits. A positive surprise signals the opportunity to reduce the extent of audit testing leading to audit efficiency. The performance of individual staff accountants is examined.;The model of factors contributing to audit efficiency is drawn from the audit environment and individual auditor characteristics. The first environmental variable is clarifying communication provided by the supervisor when work is assigned to the staff person. The second environmental variable is the inclusion of analytical procedures as substantive tests. The individual characteristic is the auditor's tendency to mechanically process information.;A field experiment is used to assess the relative importance of clarifying communication, the use of analytical procedures as substantive tests, and the tendency toward mechanical processing associated with audit efficiency. The experimental task requires staff accountants to complete substantive test procedures for additions to property, plant, and equipment. Clarifying communication and the use of analytical procedures as substantive tests are manipulated at two levels resulting in a 2 x 2 factorial design. Tendency toward mechanical processing is measured using the Short Need for Cognition Scale and serves as the covariate in the analysis of covariance (ANCOVA).;Supervisor behavior was directly, although not significantly, related to audit efficiency as participants who received clarifying communication performed more efficiently than those who received non-clarifying communication. Analytical procedures indirectly influenced audit efficiency as participants who performed the procedure were more likely to consult with the supervisor regarding the surprise. Consultation with the supervisor was related to audit efficiency as participants who consulted with the supervisor regarding the surprise selected significantly fewer additions for testing. Although not statistically significant, the results for the mechanical processing variable showed that participants who were mindful information processors performed more efficiently.