Confirmation Bias and Auditor Risk Assessments: Archival Evidence

2021 ◽  
Author(s):  
Cory A. Cassell ◽  
Stuart Dearden ◽  
David Rosser ◽  
Jonathan Shipman
Keyword(s):  
Decision Making ◽  
Quality Control ◽  
Confirmation Bias ◽  
Judgment And Decision Making ◽  
Risk Assessments ◽  
Risk Increase ◽  
Audit Firms ◽  
Auditor Judgments ◽  
History Of ◽  
Increase In Risk

Judgment and decision making research suggests that auditors’ judgments are negatively affected by the use of heuristics. However, there is little research investigating whether such biases survive the quality control processes that regulators and audit firms implement to mitigate them. We investigate this by identifying a setting where one such bias – confirmation bias – is likely to manifest. Consistent with confirmation bias influencing observable audit outcomes, we find that auditors with previous experience auditing a client with a history of low risk followed by an increase in risk do not adequately respond to the higher level of risk. This effect is mitigated when the risk increase is likely large enough to violate auditors’ reasonableness constraint and when the client is highly visible or has strong external monitors. Our study complements prior experimental research by providing archival evidence that auditors’ use of heuristics has a significant effect on auditor judgments.

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.

Offender-Centric Policing in Cases of Rape

2021 ◽  
pp. 002201832110274
Author(s):  
Philip NS Rumney ◽  
Duncan McPhee
Keyword(s):  
Decision Making ◽  
Domestic Violence ◽  
Police Officers ◽  
Sexual Offending ◽  
Confirmation Bias ◽  
Missed Opportunities ◽  
Predatory Behaviour ◽  
Investigative Tool ◽  
Care And Support ◽  
History Of

The article explores the idea of ‘offender-centric’ policing in cases of rape, with its focus on suspect and offender admissions and behaviours. It features discussion of 11 cases, illustrating offender-centric pathways to charge or conviction, the challenges facing complainants, suspects and police officers, along with missed opportunities to focus on a suspect’s behaviour. The importance of victim care and support is discussed, and it is argued that victim care should accompany an offender-centric approach to rape investigation. It is also argued that there are potential dangers with offender-centric tactics, specifically, that without due care it may become a self-confirming investigative tool influenced by confirmation bias which may lead to flawed decision-making. The article concludes by arguing that offender-centric policing has benefits in those cases with suspects who engage in predatory behaviour, have a history of previously undisclosed sexual offending and domestic violence and other problematic behaviours. It also has value in focusing the attention of investigators on what steps were taken by a suspect to ascertain the complainant’s consent. While the offender-centric approach cannot address all investigative challenges in rape cases, it is a useful addition to existing strategies.

Group Judgment and Decision Making in Auditing: Research in the Time of COVID-19 and Beyond

2021 ◽  
Author(s):  
Tim D. Bauer ◽  
Kerry A. Humphreys ◽  
Ken T. Trotman
Keyword(s):  
Decision Making ◽  
Virtual Teams ◽  
Financial Reporting ◽  
Audit Committee ◽  
Judgment And Decision Making ◽  
Team Members ◽  
Group Judgment ◽  
Audit Firms ◽  
Research Questions ◽  
New Research

The COVID-19 pandemic has fundamentally changed the ways auditors work and interact with team members and others in the financial reporting process. In particular, there has been a move away from face-to-face interactions to the use of virtual teams, with strong indications many of these changes will remain post-pandemic. We examine the impacts of the pandemic on group judgment and decision making (JDM) research in auditing by reviewing research on auditor interactions with respect to the review process (including coaching), fraud brainstorming, consultations within audit firms, and parties outside the audit firm such as client management and the audit committee. Through the pandemic lens and for each auditor interaction, we consider new research questions for audit JDM researchers to investigate and new ways of addressing existing research questions given these fundamental changes. We also identify potential impacts on research methods used to address these questions during the pandemic and beyond.

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 Elaboration Likelihood Model: A Meta-Theory for Synthesizing Auditor Judgment and Decision-Making Research

2018 ◽  
Vol 37 (4) ◽  
pp. 169-186 ◽  
Author(s):  
Emily E. Griffith ◽  
Christine J. Nolder ◽  
Richard E. Petty
Keyword(s):  
Decision Making ◽  
Elaboration Likelihood Model ◽  
Judgment And Decision Making ◽  
Future Research ◽  
Elaboration Likelihood ◽  
Auditor Judgment ◽  
Motivational Interventions ◽  
Two Samples ◽  
Likelihood Model ◽  
History Of

SUMMARY Critics argue that audit research rarely impacts practice, in part due to challenges associated with synthesizing and interpreting research. We propose that using the Elaboration Likelihood Model (ELM) as a meta-theoretical framework can help in understanding the collective findings within auditor judgment and decision-making (JDM) research. Our goal is to demonstrate the utility of the ELM by interpreting the results of two samples of studies on client cooperation and auditors' moods. Our synthesis of client cooperation studies suggests cooperation on a current issue affects auditors' judgments only when auditors lack motivation to think carefully about the task. In contrast, a history of client cooperation tends to bias even highly motivated auditors' judgments. Our synthesis of mood studies suggests motivational interventions are necessary, but not sufficient, to mitigate mood's effects on judgments. Our ELM interpretations offer theoretical explanations for seemingly unrelated predictions and findings that can inform future research and practice.

The Confirmation Bias in Judgment and Decision Making

2013 ◽  
Vol 20 (7) ◽  
pp. 1080-1088
Author(s):  
Xiu-Liang WU ◽  
Fu-Ming XU ◽  
Wei WANG ◽  
Xiang-Yang MA ◽  
Hai-Min KUANG
Keyword(s):  
Decision Making ◽  
Confirmation Bias ◽  
Judgment And Decision Making

SEC Market Risk Disclosures: Implications for Judgment and Decision Making

2001 ◽  
Vol 15 (1) ◽  
pp. 49-70 ◽  
Author(s):  
Leslie Hodder ◽  
Lisa Koonce ◽  
Mary Lea McAnally
Keyword(s):  
Decision Making ◽  
Financial Reporting ◽  
Financial Statements ◽  
Market Risk ◽  
Quantitative Information ◽  
Judgment And Decision Making ◽  
Risk Assessments ◽  
Market Risk Disclosures ◽  
Risk Judgments ◽  
Risk Disclosures

In this paper, we draw on judgment and decision-making research to examine the behavioral implications of the SEC's Financial Reporting Release No. 48 on market risk disclosures. While these disclosures have been examined using archival data, no research has investigated how these disclosures might affect individual users of financial statements. The purpose of our paper is to draw on research in the judgment and decision-making arena to identify and analyze the behavioral implications of the new risk disclosures. We offer three conclusions. First, FRR No. 48 users may have more complex evaluations of risk than perhaps anticipated by the SEC. Second, the flexibility accorded firms in FRR No. 48 will adversely affect users' risk judgments. Third, because the Release does not require disclosure of certain quantitative information that is important to risk assessments, inappropriate risk assessments may result. We believe our insights can help others conduct research in this important area and can help the SEC when they revisit the disclosure requirements in FRR No. 48.

Elaborating the role of reflection and individual differences in the study of folk-economic beliefs

2018 ◽  
Vol 41 ◽  
Author(s):  
Kevin Arceneaux
Keyword(s):  
Decision Making ◽  
Individual Differences ◽  
Cognitive Processes ◽  
Evolutionary History ◽  
Behavioral Responses ◽  
History Of ◽  
Economic Beliefs

AbstractIntuitions guide decision-making, and looking to the evolutionary history of humans illuminates why some behavioral responses are more intuitive than others. Yet a place remains for cognitive processes to second-guess intuitive responses – that is, to be reflective – and individual differences abound in automatic, intuitive processing as well.

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