Research at Gies

Gathering Knowledge, Powering Innovation

At Gies Business, we promise our students that an education is just the start – that here they can discover their purpose. Our faculty are at the center of that promise, guiding students to challenge assumptions, to be inventive, and to develop their own style. Our exceptional faculty conduct cutting-edge research that regularly impacts industry and helps business decisions get made.

Gies Business Research Lab

The Gies Business Research Lab is dedicated to supporting Gies faculty in performing groundbreaking research on business decision making, focused on addressing critical societal needs through the transfer and application of knowledge, and we are committed to fostering industry-leading research than can help organizations and individuals make effective, efficient decisions. Your participation in research helps us create knowledge and shape the future decision-making practices of businesses and organizations around the world.

As part of the Business Research Lab panel, you would be invited to participate periodically in research studies on topics in accounting, organizational management, or marketing. For more information, contact Jen Themanson, Coordinator, at busresearchlab@illinois.edu.

Data Science Research Service

The Data Science Research Service (DSRS) drives research within the Gies College of Business by assisting students, faculty, and staff with their data science, machine learning, computational infrastructure, and data acquisition needs. The DSRS works as a component of the Gies Disruption initiative in efforts to make Gies the most technologically-forward and data-capable business college in the world.

For more information about how to utilize this service, visit go.gies.illinois.edu/DSRSresearch.

Research Stories

Gies research identifies auditors with wise-thinking dispositions

May 27, 2021, 08:23 AM by Aaron Bennett
Some auditors are better than others at sniffing out when a higher risk of fraud exists and at taking steps to address it, new research coauthored by Gies College of Business Professor Mark Peecher shows.

Some auditors are better than others at sniffing out when a higher risk of fraud exists and at taking steps to address it, new research from Gies College of Business shows.

Gies Professor Mark Peecher partnered with Ira Solomon (Tulane), former Gies PhD student Billy Brewster (Texas State) and current Gies PhD student Alex Johanns to coauthor the paper “Do Stronger Wise‐Thinking Dispositions Facilitate Auditors’ Objective Evaluation of Evidence When Assessing and Addressing Fraud Risk?” The paper is an open-access article in-press at Contemporary Accounting Research

The study answers a call from regulators, practitioners, and academics to identify auditors who are better than others at objectively evaluating and responding to evidence that increases the risk of fraud. To identify better performing auditors, it introduces wise-thinking dispositions (WTDs) to the accounting literature, along with a simple questionnaire that measures variation in the strength of auditors’ WTDs.

Mark_Peecher_hs“Our study reveals that auditors with stronger WTDs are evidence-based auditors. How high they assess fraud risk and what actions they plan to address fraud risk are both evidence-based,” said Peecher (left), the Deloitte Professor of Accountancy at Gies. “For auditors with weaker WTDs, unfortunately, differences in underlying evidence do not seem to matter.”

In their studies, differences between stronger versus weaker WTD auditors exist regardless of whether or not and how auditors are prompted to be skeptical of management’s numbers. And, the differences show up both when auditors try to size up a last-minute journal entry by management that generates a positive earnings surprise and also when evaluating a claim by management that their goodwill asset has not been impaired, which enables them to avoid a write-down.

Another key finding is that the strength of auditors’ WTDs varies considerably. “At one level, we had hoped that nearly all auditors would be strong wise thinkers. At another level, our study is more important because it shows a lot of variation across auditors. Evidence-based decision making by auditors is critical to audit firms and investors alike,” Peecher said. “Auditors can’t dig deeply for possible fraud on every engagement. Think of it as the way medical doctors engage in triage. They don’t have the resources to run expensive tests on every patient as if there always is a high morbidity risk. Likewise, auditors can’t dig deeply on every line item on every audit. Wiser thinking auditors better prioritize where and how to dig deeply for further evidence.”

Does the study lead the researchers to recommend that accountancy firms avoid hiring or promoting auditors with weaker WTDs?

“No. The lesson of this research is not that public accounting firms need to quit hiring people who don’t do well on a 22-item wise-thinking questionnaire. A more appropriate starting point for audit firms is that it likely would be valuable to learn about who are the stronger and weaker wise thinkers on their audit teams. Stronger wise-thinkers may well pull everyone along,” Peecher said.

The research has opened a dialogue at Gies about how business schools could teach students to have wise-thinking dispositions.

“It seems rather remarkable that otherwise really intelligent people, including those who’ve gotten good grades, can still have weaker WTDs, which prevents them from reacting to differences in evidence when assessing and taking actions to address risks,” Peecher said. “The good news is that there may be a way to train people to be wiser.”

Peecher explained it is not the same way faculty teaches technical knowledge, such as where there are rules for how to book revenue, but more likely can be accomplished with an acculturation model that encourages students to actively question things.

 

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