Effects of Discussion of Audit Reviews on Auditors' Motivation and Performance

One important purpose of audit review is to provide feedback and on-the-job training (Libby and Luft 1993), but we know very little about the effectiveness of review as a feedback mechanism. Firms have recently been moving to including discussion of performance and audit findings as part of the review procedure (Rich et al. 1997). The purpose of this field survey is to explore whether the addition of such discussion to the review feedback process enhances preparers' subsequent performance. By examining survey responses from both reviewers and preparers from actual audit engagements, we find that incorporating discussion of performance with written review notes does enhance preparers' motivation to improve performance. However, experience moderates the effect of discussion on performance improvement as perceived by the reviewer. While discussion resulted in better performance for less experienced auditors, it appears to actually diminish performance improvement for more experienced preparers