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SUMMARY: This study examines the engagement quality review (EQR) process from the perspective of the review partner. A questionnaire was administered to 127 audit partners in public accounting firms, experienced in performing EQRs. The questionnaire covered the elements, associations, and contextual features surrounding the EQR process. Partners recalled an engagement of their choosing where they acted in the role of review partner and where the review process involved direct negotiation or discussions with the engagement partner to resolve one or more issues. The results provide a comprehensive picture of a typical EQR; the issues involved, the process, and the outcomes that may result. Taken together, the results describe a professional, collegial, non-adversarial process, primarily focused on the objective of resolving difficult and complex client accounting issues. The ultimate resolution of the issue giving rise to the interaction may be a reflection of the suggestions of the reviewing partner or the engagement partner; frequently it is a new and synergistic solution.
Keywords: engagement quality review; partner interaction; review partner.
INTRODUCTION
The importance of engagement quality review (hereafter, EQR) has been explicitly recognized by regulators and professional standards as an essential component of audit quality control (Sarbanes-Oxley Act, U.S. House of Representatives 2002, Sec 103; European Commission 2002; AICPA 2004; CICA 2005a, 2005b).1 The purpose of this study is to systematically examine and provide insights into the EQR process. More specifically, we focus on EQR where the process involves direct interaction between the reviewing partner and the engagement partner in order to resolve an issue or issues that arise in the course of the review.
The questionnaire used in this study was adapted from Gibbins et al. (2001), who developed their questionnaire as an application from the negotiation literature in cognitive and social psychology to examine auditor-client interactions. Their questionnaire was modified in this study to incorporate the salient features of the audit setting in EQR. The use of such a framework to study the review process brings coherence and rigor to the examination and analysis, including, if appropriate, the investigation of the relationships between the different dimensions of the process. However, the negotiation literature often characterizes negotiation as an adversarial process (see Wall and Blum [1991] for a comprehensive review). It was not our intent...