Dr. Kimberly Walker Receives CAQ Research Funding
June 7, 2021
Kimberly Walker is a new assistant professor in the ACIS department. She recently graduated with her Ph.D. from the University of Wisconsin- Madison. Her research interest includes exploring the effects of audit technologies on auditor judgments and decisions. Two of her research projects were selected by the Center of Audit Quality (CAQ) for funding.
The purpose of the CAQ is to enhance investor confidence and public trust in the global capital markets by fostering high-quality performance by public company auditors. One way that the CAQ meets this objective is through its Access to Audit Personnel Grant program. This grant program seeks to provide researchers with access to audit staff to support high-quality audit research. The grant program is highly selective, with only a few grant proposals being selected each year for funding.
Given the increased usage of audit and emerging technologies being used by the external auditor and the audit client during the audit process, it is important to understand the impact these technologies have on auditor judgment and audit quality. The CAQ requested proposals that contribute to our understanding of how technology affects auditor judgments when completing specific audit tasks.
Dr. Walker's first winnning proposal is entitled Data Analytics and Skeptical Actions: The Countervailing Effects of False Positives and Consistent Rewards for Skepticism and is coauthored with Dereck Barr-Pulliam from the University of Louisville, Joseph F. Brazel from North Carolina State University and Jennifer B. McCallen from the University of Georgia.
Professional skepticism plays a fundamental role in the audit process and plays a vital role when auditors draw conclusions based on the audit evidence obtained throughout the audit process. This research project explores how audit evidence derived from a data analytic tool, with varying rates of false-positive, influences auditors’ ability to exercise professional skepticism when completing substantive analytical procedures. The authors also explore whether and how rewarding auditors for engaging in professional skepticism influences auditors’ judgments and if rewarding auditors for engaging professional skepticism counteract any adverse effects when using data analytic tools.
Dr. Walker explains, "Using an experiment, we observe that when false positive rates are higher, auditor skepticism levels are low. We also find that consistent rewards for skepticism significantly improve the skepticism of auditors. However, the positive effect of rewards is limited in that we only see improvements in skepticism when the false positive rate is lower. Our current findings highlight the importance of improving the calibration of analytic tests to reduce false positives and the need for a culture change where appropriate skepticism is consistently rewarded in order for audit firms to use analytic tools effectively."
For this CAQ award, the authors are going to further examine how more effective calibration of analytic tests and, in turn, very low false-positive rates impact auditor skepticism and if the need for consistent rewards is diminished in such settings.
Dr. Walker's second winning proposal is entitled The Effect of Clients’ usage of Artificial Intelligence on Auditors' Judgments and Decisions and is coauthored with Sudip Bhattacharjee and Karneisha Wolfe, both from Virginia Tech.
Analysts forecast that nearly 40% of audit clients worldwide utilize AI technology. Along the same vein, companies are increasingly utilizing artificial intelligence (AI) to improve their accounting processes' accuracy, with AI inputs often used to augment human judgment when calculating accounting estimates. Furthermore, regulators caution that clients' use of advanced technologies to produce financial information may affect how auditors assess the accuracy, reliability, and completeness of audit evidence (PCAOB 2020). Therefore, it is important to examine if the determinants of clients' AI usage impact auditors' judgments.
The purpose of this study is to examine how a client's use of AI in its accounting processes influences its external auditors' judgments and decision-making. Dr. Walker states, "We also examine whether clients' emphasizing (i.e., a persuasion tactic) that they use their AI system extensively influences auditors' reliance on the system and subsequent judgments. The results from this study will provide insight into how auditors' judgments are influenced by emerging technologies used by the client, which could impact the effectiveness and efficiency of financial statement audits."