Course Outline

ADMI 861B – RESEARCH IN AUDITING

Ph.D. Course
Winter 2021
Credits: 3

Instructors:

Sophie Audousset-Coulier, PhD, CPA, CGA

sophie.audousset@concordia.ca

Chiraz Ben Ali, PhD

chiraz.benali@concordia.ca

Cedric Lesage, PhD

Lawrence S. Bloomberg Chair
cedric.lesage@concordia.ca

Alexey Lyubimov, PhD

alexey.lyubimov@concordia.ca

Elisabeth Peltier, PhD

elisabeth.peltier@concordia.ca

Course hours:
Thursdays 8:45-11:30

Location:
On-line through Zoom
Course schedule

Date Topic

1 01/14 Introduction to the auditing research field

Cedric Lesage
2 01/21 Audit process: Audit planning, risk assessment, materiality, misstatement detection and
fraud detection
Sophie Audousset-Coulier
3 01/28 Audit fees, audit market and competition
Elisabeth Peltier
4 02/04 Audit quality: independence, non-audit services, audit tenure and auditor rotation
Cedric Lesage
5 02/11 Audit quality: competence, expertise and industry specialization
Elisabeth Peltier
6 02/18 Auditor reputation, auditor choice, auditor change
Cedric Lesage
7 02/25 Auditor behavior, judgment and decisions
Cedric Lesage
Replication study due date: Tables 1 to 3

Winter Break
8 03/11 The auditing profession
Sophie Audousset-Coulier
Feedback on Replication study Tables 1 to 3.

9 03/18 Auditor-client relationships

Alexey Lyubimov
Research proposal: draft (3 pages) due date

10 03/25 Audit regulation, litigation against auditors and auditor liability

Alexey Lyubimov
Feedback on Research proposal draft

11 04/01 Audit and ethics

Cedric Lesage
Replication study due date: Tables 4 and 5

12 04/08 Audit and Governance

Chiraz Ben Ali

13 04/15 Oral presentation of research proposals

Sophie Audousset-Coulier, Chiraz Ben Ali, Cedric Lesage, Elisabeth Peltier and Alexey
Lyubimov

Research project paper due date: April, 30, 2021

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Course Description

The purpose of this Auditing Research seminar is to help students develop a foundation for
reading, evaluating and producing scholarly research in the domain of auditing and assurance.
During the seminar, we will read and critique research papers on a variety of auditing topics. With
regards to each article covered, we will pay particular attention to the significant and unique
contribution of the research question, logical and coherent development of the theoretical-
empirical background, appropriate and valid design of the research process, rigorous and
complete analysis of the data, and meaningful and insightful discussion of the research findings.
We will also discuss various alternative ways in which the author(s) might have approached the
research question, and consider the generation of future research topics arising from each article’s
findings.

Purpose of the seminar and learning objectives

Upon the conclusion of the course you should be able to:

1. Develop a deep understating of auditing and assurance theory and research;
2. Gain significant understanding of relevant and current auditing and assurance topics and issues;
3. Learn how to apply auditing and assurance research methods;
4. Know how to critically evaluate auditing and assurance research; and
5. Demonstrate your knowledge by developing a viable research proposal in the domain of
auditing and assurance.

To reach this learning objectives the instructors will:

- Introduce students to the fundamental areas of research in auditing and present current trends.
- Introduce students to a range of research methodologies and statistical methods used in
auditing research and guide them in the application of a quantitative method using a paper
replication.
- Stimulate the students’ ability to critically evaluate the quality of research in auditing.
- Supervise the development of a research projects in auditing, possibly leading to a selection of
topics for dissertation work.
- train students on oral presentation and discussion of research papers(conference format)
- Introduce students to the publication process.

Course requirement

It is assumed that each student has a basic working knowledge of the auditing process and the
main provisions of the Canadian/International Auditing Standards and of the Sarbanes-Oxley Act,
at least at the level of the standard undergraduate course. It could be helpful throughout the course
to refer to a textbook for details on current auditing standards. During our second class we will
explain to students how to get access to relevant technical resources (auditing textbooks and audit
standards).

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Pedagogical Approach

Class will meet on Zoom once each week for 2h30 hours. The key to a meaningful and interesting
seminar experience is class participation, and thus each student is expected to make a significant
contribution to the discussion of each of the readings. By “significant” contribution, we mean
both the quantity and quality of comments that you make. This implies that papers must be read
carefully prior to class. Also, you may benefit from reading other research on which the authors
of the assigned papers rely heavily. This will improve your ability to make comparisons across
studies, and provide you with material for questions and comments that will enliven class
discussion.

Your grade will be determined as follows: Class participation, presentations and discussions
(25%), replication of an archival study (25%) and a research proposal (oral 10%, written 40%).

1) Class participation, presentation and discussion (25%)

During each class, all students are required to read all the papers listed in the “Papers for in-class
discussion” section of the detailed schedule (see below) and to be prepared to discuss the paper
intelligently. For each paper discussed in class, you are required to turn in at the beginning of the
session your prep work outlining the two main strengths and the two main weaknesses that you
have identified from your reading. The report is due by Wednesdays 8:00 PM, and feedback will
be given by Fridays, 8:00 PM.

In addition, a conference-type presentation and discussion activity will be organized as follows:

1) One of the assigned papers will be formally presented in a professional conference-type
presentation (15 minute max) by an appointed student; and
2) Another assigned paper will be formally discussed in a professional conference-type discussion
(10 minute max) by another appointed student.
Presenters and discussants are also responsible for searching for current working papers on the
topic to include in their presentation/discussion of the assigned paper.
Detailed guidelines for efficient reading, presenting and discussing of papers will be provided in
Session 1. The objective of this process is to 1) train you for formal presentations/discussions; 2)
to improve your critical mindset; and 3) to identify viable questions for research to extend the
literature.

2) Archival study replication (25%)

By group of two (or three), students are required to replicate the findings of a recent archival
paper. This year, the assigned paper is: Lesage C., Shan Z. (2019) Auditor's Expertise and the
Trade-off between Accrual-based and Real Earnings Management, Working Paper, available on
Moodle.
Your replication work is due Session 7 (Tables 1-3) and Session 11 (Tables 4-5). Each group will
submit a methodological package describing the replication of the study that includes all
information necessary to replicate the published empirical results, i.e. original data set, Stata code,
tabulation of results and an explanatory note (a ‘read-me’ file) that describes the package content
and explains how to reproduce the numerical results in the article (see King, G. 1995.
“Replication, Replication”. PS: Political Science and Politics, 28 (September): 443–499.).

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The objective of this work is to 1) improve your competencies in archival data analysis – data
collection using the main research databases, data coding and variable calculations, data analysis
and results interpretation; 2) to learn how to work in a group on research work (as a first hand
experience of co-authorship)

3) Research proposal (50%: written report (40%) + oral presentation (10%))

You are required to turn in and present a research proposal for a study related to a topic in the
domain of auditing and assurance. The proposal should: 1. Identify clearly the research question;
2. Motivate its relevance and interest; 3. Articulate the expected contributions; 4. Offer a brief
overview of the related literature and hypotheses; 5. Present and explain the methodology and
research design; and 6. Identify the appropriate data source and statistical methods.

Your proposal should be 10 to 15 pages in length (double-spaced, one-inch margins, 12-point

font).
It is advised to talk to your instructors about possible topics early in the term, to give you
maximum opportunity to prepare a good proposal. The hope is that these proposals will become
papers for you, and if so, you will have a good start on the front end of the paper from this class
exercise. A draft of your research proposal including a summary of the topic, motivations,
research question(s) and theory (3 pages) is due Session 9. A formal oral presentation will be
made in class during the last session (Session 13). Final version of the research paper is due on
April 30, 2021. You are expected to consider feedback received during the oral presentation to
improve your final research paper.
Failure to submit the research paper on time will result in an incomplete grade.

Academic Integrity

The Academic Code of Conduct at Concordia University states that “the integrity of University
academic life and of the degrees, diplomas and certificates the University confers is dependent
upon the honesty and soundness of the instructor-student learning relationship and, in particular,
that of the evaluation process. As such, all students are expected to be honest in all of their
academic endeavors and relationships with the University" (Undergraduate Calendar, section
17.10).
All students enrolled at Concordia are expected to familiarize themselves with the content of this
Code. You are strongly encouraged to visit the following web address:
http://www.concordia.ca/academicintegrity , which provides useful information about proper
academic conduct.
The most common offense under the Academic Code of Conduct is plagiarism which the Code
defines as “the presentation of the work of another person as one’s own or without proper
acknowledgement.”
This could be material copied word for word from books, journals, internet sites, professor’s
course notes, etc. It could be material that is paraphrased but closely resembles the original
source. It could be the work of a fellow student, for example, an answer on a quiz, data for a lab
report, a paper or assignment completed by another student. It might be a paper purchased
through one of the many available sources. Plagiarism does not refer to words alone - it can also
refer to copying images, graphs, tables, and ideas. “Presentation” is not limited to written work. It
also includes oral presentations, computer assignments and artistic works. Finally, if you translate

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the work of another person into French or English and do not cite the source, this is also
plagiarism.

In simple words:
Do not copy, paraphrase or translate anything from anywhere without saying where you obtained
it!
(Source: http://www.concordia.ca/students/academic-integrity.html)

Disclaimer
In the event of extraordinary circumstances beyond the University's control, the content and/or
evaluation scheme in this course is subject to change.

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Detailed schedule

Week 1: Introduction to the auditing research field

Introduction to the course and overview of audit research topics and methodologies

Further readings:

Seminal papers
Jensen, Michael C., and William H. Meckling. 1976. Theory of the firm: Managerial behavior,
agency costs and ownership structure. Journal of Financial Economics (3-4): 305-360.
Watts, Ross L.; Zimmerman, Jerold L. 1983. Agency problems, auditing, and the theory of the
firm: some evidence. Journal of Law & Economics. 26(3): 613-633.

Literature reviews
DeFond, M. L., and Zhang, J., 2014. A review of archival auditing research. Journal of
Accounting & Economics. 58(2/3): 275-326.
Humphrey, C. 2008. Auditing Research: A Review across the Disciplinary Divide. Accounting,
Auditing & Accountability Journal. 21(2): 170-203.
Lesage, C., Wechtler H. 2012. An Inductive Typology of Auditing Research. Contemporary
Accounting Research. 29 (2): 487-504
Michael K. P. and Gendron Y. 2015. Qualitative Research in Auditing: A Methodological
Roadmap. Auditing: A Journal of Practice & Theory, 34(2): 147-165.

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Week 2: Audit process: Audit planning, risk assessment, materiality, misstatement detection
and fraud detection

Papers for in-class discussion:

Acito, A.A., Burks, J.J. and Johnson, W.B. 2019. The Materiality of Accounting Errors:
Evidence from SEC Comment Letters. Contemporary Accounting Research. 36(2): 839-
868.
Bik, O., and Hooghiemstra, R. 2018. Cultural differences in auditors’ compliance with audit firm
policy on fraud risk assessment procedures. Auditing: A Journal of Practice & Theory. 37
(4): 25–48.

Further readings:

Literature review
Amiram, D., Bozanic, Z., Cox, J.D. Dupont, Q., Karpoff, J. M and Sloan, R. 2018. Financial
reporting fraud and other forms of misconduct: a multidisciplinary review of the
literature, Review of Accounting Studies 23: 732.

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Week 3: Audit fees, audit market and competition

Papers for in-class discussion:

Barua, A., Lennox, C., Raghunandan, A. 2019. Are audit fees discounted in initial year audit
engagements?, Journal of Accounting and Economics,
https://doi.org/10.1016/j.jacceco.2019.101282.
Keune M. B., Mayhew B.W., Schmidt J.J. 2016. Non-Big 4 Local Market Leadership and its
Effect on Competition, The Accounting Review, 91(3): 907–931.

Further readings:

Seminal paper
Simunic, D. A. 1980. The pricing of audit services: Theory and evidence. Journal of Accounting
Research, 18(1): 161-190.

Literature Reviews
Causholli, M., De Martinis, M., Hay, D., and Knechel, R. W. 2010. Audit markets, fees and
production: Towards an integrated view of empirical audit research. Journal of Accounting
Literature, 29: 167–215.
Hay, D., Knechel, W.R. and Wong, N. 2006. Audit Fees: A Meta-Analysis of the Effect of
Supply and Demand Attributes. Contemporary Accounting Research, 23(1): 141-192.
Hay, D. 2013. Further evidence from meta-analysis of audit fee research. The International
Journal of Auditing, 17(2): 162–176.

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Week 4: Audit quality: independence, non-audit services, audit tenure and auditor rotation

Papers for in-class discussion:

Bratten, Brian; Causholli, Monika; Omer, Thomas C. 2019. Audit Firm Tenure, Bank
Complexity, and Financial Reporting Quality, Contemporary Accounting Research, 36(1):
295-325.
Johed, G., Catasús, B. 2018. Auditor Face-Work at the Annual General Meeting. Contemporary
Accounting Research. 35(1): 365–393.

Further readings:

Seminal papers
DeAngelo, L. 1981. Auditor Size and Audit Quality. Journal of Accounting & Economics, 3(3):
183-199.
DeAngelo, L. 1981. Auditor Independence, Low Balling, and Disclosure Regulation. Journal of
Accounting & Economics, 3(3): 113-127.
Simunic, D. 1984. Auditing, Consulting, and Auditor Independence. Journal of Accounting
Research, 22(2): 679-702.

Literature reviews
Francis, J. R. 2011. A Framework for Understanding and Researching Audit Quality. Auditing: A
Journal of Practice & Theory, 30(2): 125-152.
Knechel, W. R., Krishnan, G. V., Pevzner, M., Shefchik, L. B., and. Velury, U. K. 2013. Audit
Quality: Insights from the Academic Literature. Auditing: A Journal of Practice & Theory,
32(S1): 385-421.

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Week 5: Audit quality: reputation, competence, expertise and industry specialization

Papers for in-class discussion:

Beck, M.J., Gunn, J.L. and Hallman, N. 2019. The geographic decentralization of audit firms and
audit quality. Journal of Accounting and Economics, 68(1) p.101234.
Contessotto, C., Knechel, R. W. and Moroney, R. 2019. The Association between Audit Manager
and Auditor-In-Charge Experience, Effort and Risk Responsiveness, Auditing: A Journal of
Practice & Theory, 38 (3): 121-147.

Further readings

Christensen, B., Glover, S., Omer, T., Shelley, M. 2016. Understanding Audit Quality: Insights
from Audit Professionals and Investors. Contemporary Accounting Research, 33(4): 1648-
1684.
Minutti-Meza M. 2013. Does Auditor Industry Specialization Improve Audit Quality? Journal of
Accounting Research, 51(4): 779–817.

Week 6: Auditor choice, auditor change, auditor rotation

Papers for in-class discussion:

Gold, Anna; Klynsmit, Patrick; Wallage, Philip; Wright, Arnold M. 2018. The Impact of the
Auditor Selection Process and Audit Committee Appointment Power on Investment
Recommendations. Auditing: A Journal of Practice & Theory, 37 (1): 69-87.
Reid, L., Carcello, Joseph V. 2017. Investor Reaction to the Prospect of Mandatory Audit Firm
Rotation. Accounting Review. 92 (1): 183-211.

Further readings:

DeFond, M. L., Erkens, D. H., and Zhang, J. 2017 Do Client Characteristics Really Drive the Big
N Audit Quality Effect? New Evidence from Propensity Score Matching, Management
Science. 63 (11): 3628-3649.
Francis, J., and Wilson, E. 1988. Auditor Changes: A Joint Test of Theories Relating to Agency
Costs and Auditor Differentiation. The Accounting Review, 63(4): 663-682.

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Week 7: Auditor behavior, judgment and decisions

Papers for in-class discussion:

Backof, A., Carpenter, T., Thayer, J. 2018. Auditing Complex Estimates: How Do Construal
Level and Evidence Formatting Impact Auditors' Consideration of Inconsistent Evidence?
Contemporary Accounting Research, 35 (4): 1798-1815
Bhattacharjee, Sudip; Moreno, Kimberly K.; Wright, Nicole S. 2019 The Impact of Benchmark
Set Composition on Auditors' Level 3 Fair Value Judgments. Accounting Review. 94(6): 91-
108.

Further readings:

Desai, N. K., and Gerard, G. J. 2013. Auditors' Consideration of Material Income-Increasing

versus Material Income-Decreasing Items during the Audit Process. Auditing: A Journal of
Practice & Theory, 32(2): 33-51.
Einhorn, H. J., and R. M. Hogarth. 1986. Decision making under ambiguity. Journal of Business,
59 (4): 225–250.
Peecher, M., and Solomon, I. 2001. Theory and experimentations in studies of audit judgments
and decisions: avoiding common research traps. International Journal of Auditing, 5(3):
193–203.

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Week 8: The auditing profession

Papers for in-class discussion:

Annisette, M. 2017. Discourse of the professions: The making, normalizing and taming of
Ontario's “foreign-trained accountant”, Accounting, Organizations and Society, 60: 37-61.
Carrington, T., Johansson, T., Johed, G. and Öhman, P. 2019. The Client as a Source of
Institutional Conformity for Commitments to Core Values in the Auditing
Profession. Contemporary Accounting Research, 36(2): 1077-1097.

Further readings:

Carter, C., Spence, C. 2014. Being a Successful Professional: An Exploration of Who Makes
Partner in the Big 4. Contemporary Accounting Research, 31(4): 949-981.
Guo, K. H. 2016. The Institutionalization of Commercialism in the Accounting Profession: An
Identity-Experimentation Perspective. Auditing: A Journal of Practice & Theory. 35(3): 99-
117.

Week 9: Auditor-client relationships

Papers for in-class discussion:

Acito, A.A.., Hogan, C.E. & Mergenthaler, R.D. (2018). The effects of PCAOB inspections on
auditor-client relationships. The Accounting Review, 93(2), 1-35.

Saiewitz, Aaron; Kida, Thomas. 2018. The effects of an auditor's communication mode and
professional tone on client responses to audit inquiries. Accounting, Organizations & Society.
65: 33-43.

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Week 10: Audit regulation, litigation against auditors and auditor liability

Papers for in-class discussion:

Aobdia, D. 2018. The Impact of the PCAOB Individual Engagement Inspection Process—
Preliminary Evidence. The Accounting Review 93(4): 53-80.
Shroff, N. (2020). Real effects of PCAOB international inspections. The Accounting Review,
95(5), 399-433.

Further readings

Seminal paper
Palmrose, Z.-V. 1997. Audit litigation research: do the merits matter? An assessment and
directions for future research. Journal of Accounting and Public Policy, 16(4): 355–378.

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Week 11: Audit and Ethics

Papers for in-class discussion:

Boiral, O., Heras-Saizarbitoria, I., Brotherton, M.-C., & Bernard, J. (2019). Ethical Issues in the
Assurance of Sustainability Reports: Perspectives from Assurance Providers. Journal of
Business Ethics, 159(4), 1111–1125.

Morales-Sánchez, Rafael; Orta-Pérez, Manuel; Rodríguez-Serrano, M. Ángeles (2020) The

Benefits of Auditors' Sustained Ethical Behavior: Increased Trust and Reduced Costs.
Journal of Business Ethics, 166 (2), 441-459.

Further readings:

Andiola, Lindsay M.; Downey, Denise Hanes; Westermann, Kimberly D. (2020) Examining
Climate and Culture in Audit Firms: Insights, Practice Implications, and Future Research
Directions. Auditing: A Journal of Practice & Theory, 39 (4), 1-29.

https://aaapublicinterest.org/2019/12/26/stop-the-madness-we-need-a-new-approach-to-split-off-
nonaudit-services-for-audit-clients/

Week 12: Audit and Governance

Papers for in-class discussion:

Barroso R., Ben Ali C., Lesage C. 2018. Blockholders’ Ownership and Audit Fees: The Impact of
the Corporate Governance Model, European Accounting Review, 27(1): 149-172
Forst A and Hettler B.R. 2019. Disproportionate Insider Control and the Demand for Audit
Quality. Auditing, A Journal of Practice & Theory, 38(1):171–91.

Further readings:

Ball, R., Kothari, S. P., & Robin, A. 2000. The effect of international institutional factors on
properties of accounting earnings. Journal of Accounting and Economics, 29(1), 1-51.

Week 13: Presentation of term papers (research proposals)

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