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CAQ Funds 3 Academic Research Studies on Auditing

June 22, 2010

The Center for Audit Quality’s Research Advisory Board has picked three scholarly auditing-related research projects to fund this year.

The CAQ issued a request for proposals last December asking for research projects related to auditing that it could fund (see CAQ to Provide $200,000 to Fund Audit Research).  In response, it received more than 30 proposals addressing topics such as audit quality, fraud deterrence and detection, professional judgment and professional skepticism.

The AICPA-affiliated group announced Tuesday that it has selected three research projects to fund: “Can Earnings Quality Research Tell Us Anything about Audit Quality?” by Jere Francis and Paul Michas of the University of Missouri; “The Impact of Engagement Quality Control Review Practices on Concurring Partner Objectivity,” by Jennifer Mueller, James Long and Duane Brandon of Auburn University; and “The Effect of Prevention and Detection Interventions on Fraud Dynamics in Organizations,” by Jon Davis and Heather Pesch of the University of Wisconsin.

The three projects sound worthwhile, at least judging by the titles, and it will be interesting to find out the results when the studies are ultimately published. Audit quality has become an important topic among investors and executives alike, and the CAQ has been a major force that has been pushing for improvements in that arena.

There have been some setbacks lately in Washington with the financial regulatory reform bill, which while not yet entirely settled in the House-Senate conference committee, appears to include a provision that would exempt smaller public companies from Sarbanes-Oxley Section 404(b) audits of internal controls. Companies with market caps under $75 million would be exempted from the requirements for outside audits of management assessment of their internal controls under the version of the legislation passed by the House. The CAQ is still fighting against the provision, dispatching yet another letter to the halls of Congress last week, co-signed by the CFA Institute and the Council of Institutional Investors, but probably in vain. House Financial Services Committee Chairman Barney Frank, D-Mass., has said he expects the provision to stay in the final version of the legislation.

Still, the CAQ is committed to doing what it can to improve the audit process, and the new academic research it is helping fund promises to advance that effort. As CAQ executive director Cindy Fornelli said in announcing the selected research projects, “Funding academic research on audit-related topics benefits audit quality and also provides increased opportunities for interaction between academics and practitioners.”

The research, while academic in origin, promises to provide real-world applications and value for auditors and practitioners alike.

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