Auditing the Audit

As an undergrad at Wake Forest, Dr. Lauren Reid never intended to pursue business. She had aspirations to study medicine or perhaps law, but her father encouraged her to take some prerequisite courses for the School of Business, just to explore her options.

“I took my first accounting class, and I just got it,” she says. “It was a new language, and it just clicked.” 

Reid decided to major in accountancy, as well as pursue a master’s degree in the discipline at Wake. After graduation, she took a job as an external auditor at Ernst & Young, and after a couple of years, Reid decided to pursue a Ph.D. in business administration from the University of Tennessee, where she immersed herself in auditing research.

Following a three-year stint as an accounting professor at the University of Pittsburgh, Reid returned to Wake in 2018, where she now serves as Associate Professor of Accountancy.

At Wake, Reid has continued her focus on auditing research, specifically the effects of audit regulation, as well as the influence of corporate governance on financial reporting. She prefers research with real-world implications versus theoretical projects.

“I can have an academically rigorous project that also has impact,” Reid says. “It can have a direct impact on regulators, especially if the regulatory change is still in the proposal phase.”

For instance, Reid focused her dissertation on changes to audit reporting implemented in the United Kingdom. Similar regulations were enacted several years later in the United States under the Public Company Accounting Oversight Board.

“At the time of my research, the change had been made in the U.K., and it was being considered in the U.S.,” she says. “The two countries aren’t identical, but we have enough similarities that analyzing what happened in the U.K. could give insight on how those changes might look in our country.”

Governmental oversight isn’t the only regulatory aspect Reid studies. Her research also looks at corporate governance in auditing, particularly the relationship between the auditor and a company’s leadership.

“Part of my interest is just trying to see how it’s functioning,” she says. “The auditor is supposed to monitor management, but who pays the auditor? The auditor is usually employed by the audit committee, and a lot of times they defer to management. So there’s a natural tension created by the way that relationship is set  up.”

Reid also looks at the impact of other relationships on audit quality. She currently has a working paper that evaluates the influence of school ties in the auditing process. (“Partner-Client School Ties and Audit Quality after U.S. Partner Identification” with Feng Guo, Nam Ho, and Chan Li)

“If the audit partner went to the same university as someone in management or on the audit committee, does that impact audit quality?” she says. “Because there are two sides, they’re either going to provide higher quality because they have easier knowledge transfer, or it could be, ‘Oh, I’m just going to turn a blind eye because I trust this person who also went to my school.’”

Reid says that while accounting may seem black-and-white, her research often incorporates sociological

approaches to gain a deeper understanding of auditing issues.

“I tend to use archival methodology because that’s how I was trained, but I’ve also realized that sometimes you have to actually run an experiment and use more behavioral methods to figure out answers to some questions,” she says.

That research approach also translates to the work Reid does with students in the classroom. She says understanding these relationships allows students to navigate the auditing process more successfully, whether they’re the auditor, a company manager or an individual investor.

“They have to understand some of the nuances of those relationships and how they impact the end product,” she says. “Showing our students those nuances and having deeper discussions about what’s really behind the numbers is important.”

Sharing these insights with students feels full-circle for Reid, who credits her experience as an undergraduate and master’s student at Wake Forest with setting the standard for her career.

“The professors I had as a student here are the reason I ended up pursuing this career,” she says. “The high-quality experience I had at Wake made me want to provide that same future to students.”

Dr. Lauren Reid

Lambert Family Accounting Faculty Fellow; Associate Professor

(336) 758-5374 |

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