Upward Performance Appraisals for Audit Teams: Professional Development That Is Simple

By Wooten, Thomas C.; Brown, Brian K. | The CPA Journal, November 1998 | Go to article overview

Upward Performance Appraisals for Audit Teams: Professional Development That Is Simple


Wooten, Thomas C., Brown, Brian K., The CPA Journal


The competition of the last decade continues to shrink the profit margins on most traditional audit services. CPA firms are forced to make continuous improvement in the delivery of the audit product in order to remain competitive. Both technical and administrative aspects of the audit process are areas that should be examined to make the audit more efficient and increase the audit team's productivity. One improvement that can help bring about this change is a feedback system that gives professional staff the opportunity to review their team leaders. Although performance evaluations are not new to audit teams, reverse, or upward, performance appraisal systems are not the norm. An upward performance appraisal system is a process by which individuals receive performance feedback from peers and subordinates. An increasing number of service firms are using upward performance appraisals to improve the communication, development, and productivity of employees.

Good Fit for Audit Engagements

Accounting professionals on an assurance engagement are prime prospects for the use of upward performance appraisals. Auditing engagements are often staffed with an array of professionals including a partner, a manager, an in-charge, and one or more staff auditors. Performance appraisals are usually directed downward, with subordinates being evaluated by their superiors. The staff auditors are evaluated periodically by the in-charge (usually at the end of an engagement); the incharge is evaluated by the manager, and the manager is evaluated by the partner. This traditional type of performance appraisal is very useful. The superiors in each of these evaluation situations have much practical and professional experience in understanding the roles of their respective subordinates. However, the traditional performance appraisal is a onesource, one-way evaluation and is incomplete. Using an upward performance appraisal taps multiple employee perspectives. The result is better information for improving the management of the audit engagement and possibly finding significant efficiency and savings.

Some firms have been reluctant to attempt upward appraisals because of employee skepticism and perceived administrative costs. It goes against tradition and comfort to let subordinates evaluate their superiors. However, it is not difficult to design an inexpensive, simple, and fair appraisal system that will allow audit supervisors to increase their managerial effectiveness while improving communication among the professional staff of the firm.

Evaluating the In-Charge Auditor

An illustration of the development of an upward performance system for use with the in-charge/staff auditor relationship will make this clear. Over the course of a year, an in-charge auditor may supervise numerous staff professionals on many different engagements. The in-charge is often responsible for guiding audit engagements and staff after only a few years of work experience. The in charge auditor acquires management skills through a combination of on-the-job training and perhaps continuing professional education programs. Given the nature of the audit task, managers or partners may not spend significant time monitoring the day-to-day activities and management skills of the in-charge auditor. The partners and managers often see only the final output and are concerned ultimately with whether the job was done accurately and on time. Since the managers and partners are not present to provide daily feedback, there is a need for a mechanism by which in-charge auditors can better develop their management and teamwork skills.

Scope of the System

Organizations typically design appraisal systems for one of several reasons, such as employee development, employee training, compensation decisions, and promotion decisions. It is difficult to design an appraisal system that meets all of these goals. Under an appraisal system used both in making compensation decisions and in motivating employees to be honest about their development needs, for example, the employee may hide weaknesses in an attempt to appear as impressive and knowledgeable as possible to receive the maximum raise. …

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