A Field Study of the Effects of Eliminating Time Entry on Audit Timeliness and Related Auditor Perceptions

• In Event: Managing Auditor Behavior

Abstract

In their audit practices, public accounting firms traditionally use a billable time entry (BTE) model to assist in budgeting engagements, evaluating personnel, and determining audit fees. While this approach has benefits, prior research has identified drawbacks such as time budget pressure and ensuing incentives to underreport time. However, relatively little research examines alternative budgeting models. We conduct a multi-method field study to examine the effects of an alternative, No-BTE model that a large, regional public accounting firm recently implemented on a trial basis. The results from proprietary audit engagement data indicate the No-BTE model increases the duration of financial statement audits. Survey results indicate auditors who participated in the no-BTE model trial program perceive that it can improve elements of audit quality. In addition, the no-BTE model reduces apprehension over performance evaluations, improves work-life balance, and increases motivation to provide value-added services to clients. Thus, both the firm that implemented the no-BTE trial program and other interested firms should evaluate the additional time it took to complete audits with potential benefits such as increased audit quality and additional fees from value-added services. We offer implications for practice and suggestions for future research on this novel approach to auditing.

Authors

• Erin Michelle Hawkins, Clemson University

• Andrew H Newman, University of South Carolina

• Jesse C Robertson, University of North Texas

• Chad Matthew Stefaniak, University of South Carolina

• Jeremy Vinson, Clemson University