Discussant's response to "An Exploratory analysis of the determinants of audit engagement resource allocations";

              Discussant's Response to "An Exploratory Analysis of the Determinants of Audit Engagement Resource Allocations"
Jane E Mutchler
Pennsylvania State University
Introduction
The authors provide a thought-provoking analysis of the determinants of labor hour allocations on audit engagements and I thank Raj for asking me to serve as a discus­sant.
I view my role as one of providing a critical analysis of the research. Thus, although I do believe the research is interesting and important, my comments center on ways in which the research could be made even more interesting and useful. I begin by focussing on the lack of motivation for the research question and on the rela­tion
between this research and the O'Keefe, Simunic and Stein (OSS; 1992) work.1 Finally, I provide detailed comments on the research design and data analysis.
Importance of the Question
This paper is an extension of earlier work by O'Keefe, Simunic and Stein. In the OSS work, the authors provide four reasons why research investigating the determi­nants
of the allocation of audit hours is important.
1. To validate previous work on the determinants of audit fees,
2. To increase the power of tests for "learning effects" and "knowledge spillovers,"
3. To aid in understanding the supply side of the market for audit services, and
4. To fuel the interest of those who want to analyze the audit production process.
In the paper being reviewed, there is no discussion of the importance of the ques­tion.
One of the reasons I enjoy auditing research is that it has the potential to have real-world effects. As I was reading this paper, I kept asking myself, what effect will this have on practice? This paper describes characteristics of resource allocation deci­sions.
Is the purpose an academic exercise or is there potential for audit firm impact? Is the question interesting in and of itself? Is the question interesting as a test of economic theory? Is this theory-building research? Will the results allow as to set standards for the most efficient and/or effective allocation of labor resources? Would one expect differences across firms? The auditing firm that provided the data did so at a cost. What were they expecting from the analysis?
Whatever the case, in making attempts to bridge the research-practice gap, the research should be motivated by discussing its direct or indirect effects on practice.
Relation With Previous Research
There are three basic differences between this paper and the OSS paper. First the authors focus on total domestic hours while OSS combine foreign and domestic hours. Second, this paper investigates different functional forms of the client size relationship
1 Oss used the same sample and focused on similar issues.
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