The reliability of accounting estimates
On Thursday 4 June 2020 Kyrre Kjellevold will hold a trial lecture on a prescribed topic and defend his thesis for the PhD degree at NHH.
Prescribed topic for the trial lecture:
Incentives of Financial Intermediaries
Trial lecture:
14:45, Jebsen Centre / Zoom video conference, NHH
Title of the thesis:
Summary:
The thesis utilizes different research methodologies to answer research questions of relevance for auditors’ work and the reliability of accounting estimates.
The first essay is a literature review that investigates how management’s choice of engaging one or several valuation experts impact the reliability of their fair value estimates. The literature review finds that even if the engagement of valuation experts is associated with more reliable fair value estimates, economic incentives, conflict-of-interests and strategic behaviour may influence the valuation experts’ objectivity and work. The essay further identifies important research questions left unanswered in the literature.
The second essay is a field study of valuation experts’ and auditors’ monitoring effectiveness of fair value estimates. Through interviews with Norwegian valuation experts and audit partners the study finds that valuation experts are not immune to management pressure and several influence tactics are documented. Furthermore, as valuation experts strategically guard their private information (e.g., valuation models or non-client specific information) auditors are forced to rely on external, and potentially biased, information sources to evaluate the objectivity and reliability of the valuation experts. While auditors often request that clients engage several experts to alleviate concerns about conflicts-of-interest, management seems to anticipate this and strategically controls information flow between the specialists to create more persuasive evidence.
The third essay is an experimental study of auditors’ skeptical actions. We identify the audit apprenticeship model as a source of relative power, which we theorize will increase felt responsibility and thus lead to more skeptical action, even when auditors face high perceived personal risk. We find that auditors assigned a novice versus a peer for assistance recognize the power disparity and feel more responsibility – including the responsibility to model quality behavior. However, we find no evidence that this increased felt responsibility led to higher quality actions when auditors are faced with time pressure.
Defense:
16:15, Jebsen Centre / Zoom video conference, NHH
Members of the evaluation committee:
Professor Frøystein Gjesdal (chair of the committee), Department of Accounting, Auditing and Law, NHH
Professor Helen Brown-Liburd, Rutgers University
Professor Natalia Kochetova, Saint Mary’s University, Canada/NHH
Supervisor:
Professor Aasmund Eilifsen, Department of Accounting, Auditing and Law, NHH