Framing effects and output interference in a concurring partner review context: Theory and exploratory analysis;

              Framing Effects and Output Interference in a Concurring Partner Review Context: Theory and Exploratory Analysis
Karla M. Johnstone
University of Connecticut
Stanley F. Biggs
University of Connecticut
Jean C. Bedard
Northeastern University
INTRODUCTION
A quality control procedure mandatory for audit firms in the SEC practice section is concurring partner review. The specific actions taken by the concurring partner in conducting the review, however, vary across audit firms. Some firms encourage a consultative role where the concurring partner and the engagement partner routinely interact to discuss the major decisions involved in the planning, conduct, and final review of the audit (Jamal et al. 1995). Other firms advocate an advisory role in which the concurring partner explores key judgments made by the engagement partner and verifies that no oversights or errors have been made (Jamal et al. 1995). Still other firms advocate an investigative role in which the concurring partner has no input in the planning or conduct of the audit and serves only to "ensure that auditing standards and SEC requirements have been fulfilled and that the audit report is appropriate in the circumstances" (Johnson et al. 1991, p. 80).
The key factor that differentiates each of these roles is the type of interaction that takes place between the engagement partner and the concurring partner. When assuming a consultative role, the engagement partner and concurring partner engage in a significant amount of interactive problem solving and decision making. In assuming an advisory role, the concurring partner reviews the most difficult audit issues in a relatively independent fashion and interacts with the engagement partner on only a limited basis. The investigative role implies almost no decision making or problem solving interaction between the engagement partner and the concurring partner. In fact, "the SEC has interpreted the role of a concurring partner as being independent and almost adversarial (emphasis added) with respect to the engagement partner" (Jamal et al. 1995, p. 6). It is unclear whether the alternative levels of interaction evidenced across concurring partner review roles will impact decision making, problem solving, and the outcome of the concurring partner review process.
For example, consider a case where an audit client has a material and unusual source of revenue and the appropriate revenue recognition process is not clear. The concurring partner, whether assuming a consultative, advisory, or investigative role, must aid in the resolution and/or evaluate the solution ultimately chosen. To be successful, the concurring partner must generate possible solutions that are acceptable under GAAP and acceptable to the client. To generate such solutions the concurring partner must access considerable technical knowledge and must engage in appropriate creative thinking.
There are many possible impediments to the effective performance of the concurring partner in this case. For example, the creativity of a concurring partner may be inhibited by the revenue recognition solution already suggested by the engagement partner. The inability to generate creative solutions in this situation is related to a psychological phenomenon, output interference, which has been the subject of considerable research in both psychology and auditing. "Output interference is a psychological concept that implies that whatever is thought about first interferes with, and thus inhibits, later thoughts about an issue" (Moser 1989, p. 433). This paper explores the notion that the level and type of interaction between the engagement partner and the concurring partner may impact
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