Kinney Presents at Treasury Department

Hearing on Auditing Profession 

By Rob Meyer

William R. Kinney, Jr., professor in the Department of Accounting, lent his expertise to a U.S. Treasury Department committee on the auditing profession June 3 in Washington D.C.

The Treasury Department established the Advisory Committee on the Auditing Profession to examine the sustainability of a strong and vibrant auditing profession.

Kinney unfortunately brought bad news regarding the current state of independent audit scholarship at the university level.

"The decline of scholarly studies of auditing on campuses is almost complete," Kinney said. "This is true at The University of Texas at Austin as well. When I was [young] practitioners were anxious to get the latest thinking on campus to try to get new ways of solving emerging practice problems, whether it involved statistics or behavioral science, because humans don't process information nearly as well as we think we do."

In lamenting the loss of scholarly research, Kinney discussed the important role auditing research played in the past .

"Large audit firms shared audit practices with professors through audit manuals, training sessions, journal articles and audit methods conferences," he said. "They often provided access to firm data such as audit adjustments, fees and audit labor hours, as well as access to personnel for participation in research studies."

Kinney continued, "The contact improved classroom instruction for new entrants to the auditing profession and it also facilitated independent research about the effectiveness and efficiency of alternative auditing practices. In turn, the research brought insights and solutions to auditing practice problems using concepts from psychology, judgment decision making, economics, political science, governance, statistics, game theory and computer science."

However, after about 1990, Kinney said the contact between professor and practitioner declined. "Some observers believe the decline was due to audit firms’ increasing concerns about litigation," he said. "Others attribute it to cost and perceived competitive disadvantage, while some say it reflected de-emphasis of auditing in the mid-1990s."

The lack of recent behavioral research in the audit process, Kinney said, is cause for the greatest concern.

"Behavioral audit process research conducted largely before 2000 shows that auditors exhibit at least a dozen known and substantial judgment biases when making accounting and auditing judgments," he said. "These biases are strong enough to appear in laboratory settings without real world pressures and without incentives to please others."

The text of Kinney's presentation and a full video archive of the hearing are available by visiting the links on the right.