When Is the Averaging Effect Present in Auditor Judgments?

2020 ◽  
Vol 37 (1) ◽  
pp. 277-296
Author(s):  
Tamara A. Lambert ◽  
Marietta Peytcheva
Keyword(s):  
Auditor Judgments

The Influence of Client Corporate Social Responsibility Performance Information on Auditor Judgments

2020 ◽  
Author(s):  
L. Emily Hickman ◽  
Jane Cote ◽  
Debra L. Sanders ◽  
T.J. Weber
Keyword(s):  
Corporate Social Responsibility ◽  
Significant Influence ◽  
Environmental Performance ◽  
Risk Assessments ◽  
Performance Information ◽  
Auditor Judgments ◽  
Different Dimensions ◽  
Client Risk ◽  
Corporate Social ◽  
Performance Results

Our experiment, with 106 practicing auditors, tests whether audit judgments are influenced by client CSR performance, individual auditors' views of CSR, and auditors' perceptions of client risk induced by CSR performance. Results indicate auditor judgments are less (more) conservative for clients with positive (negative) environmental performance. We find that client risk assessments mediate the link between environmental performance and account-level judgments. In contrast, results indicate that socially-oriented performance has no overall significant influence on audit judgments in our experiment. Overall, our results indicate that different dimensions of CSR and the salience of the CSR issue can have differential effects on audit judgments.

scholarly journals PERBEDAAN TUJUAN AUDITOR ATAS TINGKAT OVERCONFIDENCE PERTIMBANGAN AUDITOR (STUDI EKSPERIMENTAL)

2017 ◽  
Vol 17 (2) ◽  
pp. 234
Author(s):  
Nungki Kartikasari ◽  
Bambang Subroto ◽  
Aulia Fuad Rahman
Keyword(s):  
Empirical Finding ◽  
Motivated Reasoning ◽  
Calibration Method ◽  
Repeated Measure ◽  
Business Faculty ◽  
Legal Risks ◽  
Measure Design ◽  
Auditor Judgments ◽  
Cochran Test ◽  
Client Relations

The purpose of this study is to investigate and provide empirical finding about the effect of accuracy, directional and combined goals on overconfidence level in auditors judgments. This study tested the motivated reasoning theory in audit context. Overconfidence level in auditor judgments was measured by calibration method. Calibration method is used by measures the level of accuracy and confidence in auditor judgments in the obsolescence inventory case. This experiment used repeated measure design. The design of this experiment was conducted by given the treatment of accuracy (a condition to avoid the legal risks and sanctions), directional (a condition to emphasizing the importance of good client relations) and combination (a condition to combining get along and accuracy goals) goal to the participants and measuring the overconfidence level in every goal. The hypothesis testing in this study used cochran test. This study used laboratory experiment with participants auditor from join program students of Economics and Business  Faculty,  University  of  Brawijaya. The result of this study shows that auditors judgments are overconfidence in all goals (accuracy, directional and combined). The result of this study was inconsistent  with  motivated reasoning theory.

Testing the Effect of Risk Attitude on Auditor Judgments Using Multiattribute Utility Theory

1993 ◽  
Vol 8 (1) ◽  
pp. 91-110 ◽  
Author(s):  
Timothy A. Farmer
Keyword(s):  
Risk Aversion ◽  
Internal Control ◽  
Utility Theory ◽  
Risk Preference ◽  
Risk Attitude ◽  
Test Results ◽  
Multiattribute Utility ◽  
Multiattribute Utility Theory ◽  
Auditor Judgments ◽  
The Individual

The scaling constant of multiattribute utility functions derived for each of 15 practicing auditors was used to measure risk attitude for the subjects. The risk preference or risk aversion indicated by this metric allowed categorization of the auditors to test for an effect of risk attitude on audit judgments. The sample showed both risk aversion and risk preference among the auditors. The correlations among auditor evaluations of hypothetical internal control compliance test results were generally high and were different for audit seniors than for audit managers. Risk attitude was not found to explain the differences across rank nor the individual differences in consensus.

The Effects of Client Identity Strength and Professional Identity Salience on Auditor Judgments

2014 ◽  
Vol 90 (1) ◽  
pp. 95-114 ◽  
Author(s):  
Tim D. Bauer
Keyword(s):  
Professional Identity ◽  
Social Identity Theory ◽  
Cost Effective ◽  
Auditor Independence ◽  
Identity Salience ◽  
Professional Skepticism ◽  
Auditor Tenure ◽  
Auditor Judgments ◽  
Audit Regulation ◽  
Cost Effective Alternative

ABSTRACT Considerable recent audit regulation, both proposed and mandated, and accounting research has focused on auditor independence threats arising over long auditor tenure. Psychology research, however, suggests independence threats also likely arise when auditor tenure is short because auditors can quickly develop a strong client identity, raising questions about the effectiveness of mandatory audit partner or firm rotation to address independence concerns. Relying on Social Identity Theory, I examine mechanisms for promoting auditor independence that can be implemented regardless of auditor tenure or rotation. I conduct two experiments in a setting with no prior auditor-client history. As predicted, auditors who identify more strongly with their clients, by sharing their values, agree more with the client's preferred accounting treatment, unless the salience or arousal of their professional identity is heightened. Further, as predicted, heightening professional identity salience increases professional skepticism. My results provide an improved understanding of the joint effects of identity strength and salience on auditor judgments and suggest a cost-effective alternative to auditor rotation to maintain auditor independence, even when auditor tenure is short.

Facilitating the application of auditors’ underlying skeptical disposition

2020 ◽  
Vol 33 (1) ◽  
pp. 34-56
Author(s):  
Jahanzeb Khan ◽  
Noel Harding
Keyword(s):  
Design Methodology ◽  
Audit Quality ◽  
Future Research ◽  
Relative Importance ◽  
Content Type ◽  
Professional Skepticism ◽  
Schwartz Value Survey ◽  
Auditor Judgments ◽  
The Relationship ◽  
Practical Implications

Purpose Motivated by ongoing calls for auditors to exercise an elevated level of professional skepticism, this paper aims to examine the relationship between basic human values (values) and an underlying skeptical disposition (trait skepticism). Understanding the values that are associated with levels of trait skepticism will help in the design of audit environments that make the application of an underlying skeptical disposition more likely. Design/methodology/approach A survey was administered in which 140 postgraduate auditing students responded to the Schwartz value survey to measure the relative importance of different values, and the Hurtt trait skepticism scale to measure trait skepticism. The relative importance of the ten values was regressed against trait skepticism. Findings This study finds that the importance placed in the values of tradition and power, relative to other values, is negatively associated with levels of trait skepticism. Research limitations/implications The use of postgraduate auditing students as participants may limit the generalizability of the study’s findings. Practical implications Qualified by the need for future research to test the generalizability of the findings to an audit practitioner sample, the results of this study suggest that auditors with higher levels of trait skepticism may experience negative affect in environments that emphasize values of power and tradition. To the extent that current audit environments emphasize tradition and power, the results may help explain why trait skepticism is not consistently reflected in audit judgments and actions. Originality/value The affective implications of the environment within which auditors exercise professional skepticism is emerging as an important area by which to understand and improve audit quality. By identifying the values that those with a high skeptical disposition place relatively less importance in, this study informs an understanding of the circumstances where an underlying skeptical disposition is more or less likely to be reflected in auditor judgments and actions.

An Examination of Different Performance Outcomes in an Analytical Procedures Task

2003 ◽  
Vol 22 (2) ◽  
pp. 219-235 ◽  
Author(s):  
Wendy J. Green ◽  
Ken T. Trotman
Keyword(s):  
Information Search ◽  
Performance Outcomes ◽  
Hypothesis Generation ◽  
Single Experiment ◽  
Search Patterns ◽  
Similar Information ◽  
Auditor Judgments ◽  
Analytical Procedures ◽  
Generation Information ◽  
Hypothesis Evaluation

In order to improve auditor judgments, it is first necessary to understand and evaluate what successful auditors do differently than those who are less successful. This study uses a computerized research instrument to examine in a single experiment the hypothesis generation, information search, hypothesis evaluation, and final judgment stages of the analytical procedures process. The inclusion of a criterion variable and the ability to search for additional evidence allows the study to examine in which of the various stages of analytical procedures auditors make less-than-optimal judgments. Of the 82 participants, 24 selected the correct cause, 19 never generated the correct cause as a hypothesis, and 39 generated the correct cause as a hypothesis but ended up not selecting it. The incorrect participants were divided into two categories: those who incorrectly selected the inherited hypothesis and those who incorrectly selected another self-generated non-error as the cause. The former group showed deficiencies in both information search and hypothesis evaluation compared to the correct group. The second incorrect group had similar information search patterns to the correct participants but had inferior hypothesis evaluation. These findings therefore lend support to the suggestion by Asare and Wright (2003) that not only is hypothesis generation important, but also information search and hypothesis evaluation are important.

The Intersection of Family Business and Audit Research: Potential Opportunities

2010 ◽  
Vol 23 (3) ◽  
pp. 216-229 ◽  
Author(s):  
Andrew J. Trotman ◽  
Ken T. Trotman
Keyword(s):  
Decision Making ◽  
Corporate Governance ◽  
Family Business ◽  
Audit Quality ◽  
Internal Audit ◽  
Family Businesses ◽  
Judgment And Decision Making ◽  
Theoretical Frameworks ◽  
Audit Judgment ◽  
Auditor Judgments

Previous research has illustrated the importance of family businesses and significant differences between family and nonfamily businesses. Such differences will likely affect auditing for family versus nonfamily businesses. The authors emphasize experimental research labeled as “audit judgment and decision making research.” They argue that some aspects of people, tasks, and environment are different between family and nonfamily businesses and that these differences affect auditor judgments. A range of theoretical frameworks applicable to auditing research related to family businesses are considered. The authors suggest potential research opportunities related to auditor judgments, auditor—client negotiations, the demand for auditing, audit quality, corporate governance, and internal audit.

The Impact of Strategic-Positioning Information on Auditor Judgments about Business-Process Performance

2004 ◽  
Vol 23 (2) ◽  
pp. 71-88 ◽  
Author(s):  
Brian Ballou ◽  
Christine E. Earley ◽  
Jay S. Rich
Keyword(s):  
Business Process ◽  
Levels Of Analysis ◽  
Process Performance ◽  
Business Risk ◽  
Strategic Positioning ◽  
Small Problem ◽  
Auditor Judgments ◽  
The Impact ◽  
Process Level ◽  
Level Analysis

Strategic-systems auditing (SSA) approaches require auditors to perform analyses of their clients at two levels (i.e., strategic and business-process levels) when conducting audits (e.g., Bell et al. 2002; Lemon et al. 2000). One advantage of using SSA approaches is that through these analyses, auditors gain a complex systems understanding of the client. This understanding enhances decision making in part by recognizing that small actions can have big effects that increase overall business risk (Jacobson 2001; Richmond 2000). This study examines how the two levels of analysis in SSA impact auditor judgments regarding small changes in a business process that can have big (risk-increasing) effects. Specifically, we predict that when strategic-positioning information (contained within the strategic-level analysis) indicates a client is typical of others in its industry, information at the business-process level regarding a small problem in a business process will be weighted less than when the strategic-positioning information indicates the client is atypical. Results support this contention. This behavior may have implications for the effectiveness of SSA approaches under certain conditions.

Effects of Differences in National Culture on Auditors' Judgments and Decisions: A Literature Review of Cross-Cultural Auditing Studies from a Judgment and Decision Making Perspective

2013 ◽  
Vol 33 (2) ◽  
pp. 141-164 ◽  
Author(s):  
Christine Nolder ◽  
Tracey J. Riley
Keyword(s):  
Decision Making ◽  
Cultural Differences ◽  
Judgment And Decision Making ◽  
Cross Cultural ◽  
Future Research ◽  
Probability Judgments ◽  
Cross Cultural Differences ◽  
Multicultural Environment ◽  
Audit Firms ◽  
Auditor Judgments

SUMMARY: Motivated by the growing cultural diversity of new hires in audit firms, this paper reviews the literature on cross-cultural differences in auditors' judgment and decision making (JDM). The overarching aim of the review is to summarize the current state of knowledge and compare our understanding of cross-cultural auditors' JDM with the broader cross-cultural JDM research in psychology to stimulate applied research. We develop a framework that categorizes those auditor judgments and decisions most likely affected by cross-cultural differences. The categories include auditors' confidence, risk and probability judgments, risk decisions, conflict decisions, and ethical judgments. We contribute to the cross-cultural audit research in four ways. First, we provide a framework by which future research can be synthesized within auditing and compared with psychology. Second, we recommend specific research questions to respond to both the gaps in extant literature and the changing multicultural environment of audit firms. Third, we advocate for an alternative theoretical approach beyond the examination of cultural traits. Finally, we argue that bicultural auditors represent an unexplored boundary condition on prior findings that warrants more immediate attention from audit researchers.

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