Download or read book Examining the Sleeper Effect in Auditors Evaluations of Audit Evidence written by Jennifer B. McCallen and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Current auditing standards require auditors to consider qualifications of the source (e.g., credibility and competence of management) in assessing the quality (e.g., reliability) of audit evidence, especially in subjective audit areas. However, while auditing standards stress the importance of the evaluation of management, they do not prescribe how auditors should effectively identify and incorporate relevant information about the source into evidence evaluation. Psychology research highlights that credibility is multi-dimensional and, more importantly, competence is context-specific. That is, an expert in one area may lack the necessary knowledge and background in other areas. Recent research in psychology has identified a phenomenon called the "sleeper effect for the source", which explains how even a weak message's persuasiveness can increase over time if it is initially associated with a credible source. Using an experiment, I find that current auditing practices regarding management competence assessments result in auditors ignoring context-specific competence and relying on weak audit evidence when provided by a credible source. Specifically, I find that auditors are subject to a sleeper effect of the source when evaluating audit evidence. This effect results in a reliance on overall source credibility assessments and a dissociation of a source's context-specific competence from the audit evidence. I also identify an audit documentation intervention that assists auditors in identifying and incorporating context-specific competence into evidence evaluations and moderates the sleeper effect.

Download or read book How the Sleeper Effect Influences Auditors Evaluations of Audit Evidence written by Jennifer McCallen and published by . This book was released on 2020 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: Auditing standards require auditors to consider management sources when evaluating evidence. However, standards are silent on how auditors should identify and incorporate relevant source information into evidence evaluation, despite the source's importance to evidence evaluation. The “sleeper effect of the source,” a psychological phenomenon, occurs when the persuasiveness of a weak message increases over time when delivered by a credible source. Research highlights that credibility is multi-dimensional and, importantly, competence, one dimension of credibility, is context-specific. An expert in one area may lack knowledge in other areas. Using an experiment, we find that when a credible source provides weak evidence, auditors are subject to a sleeper effect. Current audit practices regarding management assessments result in auditors focusing on overall credibility, as opposed to context-specific competence, when evaluating evidence. We propose and test a documentation intervention that aids auditors in incorporating context-specific competence into evidence evaluations and moderates the sleeper effect.

Download or read book Behavioural Aspects of Auditors Evidence Evaluation written by Magda Abou-Seada and published by Routledge. This book was released on 2017-11-22 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt: This title was first published in 2003. Based on psychological research, auditing studies have focused on 'belief revision' as a way of understanding how auditors evaluate evidence. Moreover a belief revision process is consistent with US auditing standards. UK standards on the other hand do not appear to give guidance on the process to follow when evaluating evidence. Research in the US indicates that auditors do in fact follow a belief revision process in accordance with US standards. Employing survey research (based on personal interviews with a number of experienced UK auditors) this book demonstrates how auditors prefer to be described as following the open mind approach. Building on the findings of the interviews the book then describes an experimental study to investigate the differences between the belief revision and open mind approaches in terms of their effect on the efficiency and effectiveness of the audit process. The book concludes that the belief revision approach would improve the efficiency of the audit process without affecting its effectiveness or outcomes.

Download or read book The Effects of Contrasts in Account level Fraud Risk Assessments on Auditors Evidence Evaluation written by Grace Ngonidzashe Mubako and published by . This book was released on 2012 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt: Evidence from research in psychology and auditor judgment has shown that perceptions that form early in a sequential judgment process can influence subsequent judgments. Auditing Standard 12 requires auditors to identify fraud risk factors and assess the risk of fraud as part of the process of assessing overall misstatement risk. While it is expected that fraud risk assessments should have a bearing on overall risk assessments, it is possible that perceptions formed from assessments of fraud risk can negatively affect the evaluation of any evidence reviewed thereafter. Because different classes of transactions may be affected by fraud risk factors in different ways, fraud risk assessments may differ across classes of transactions. These differences may make subsequent auditor judgments susceptible to the contrast effects bias, where subjects overreact to the differences such that the fraud risk assessments influence auditor judgment more than they should. This study examines whether auditors who learn that fraud risk is low for one class of transactions immediately after examining a class of transactions that has high fraud risk, can overreact to the contrast such that they reduce their sensitivity to evidence that suggests increased misstatement risk. The study also examines whether these contrast effects can be mitigated by acquiring information about fraud risk assessments later in the sequence of evidence, after auditors have reviewed and assimilated evidence related to other risks. The study finds that, as predicted, auditor judgments are influenced by contrast effects. Auditors who examined classes of accounts for which fraud risk assessments were different were less sensitive to evidence suggesting increased risk in accounts that had been identified as having low fraud risk. However, contrary to predictions, these contrast effects were not mitigated by evidence order.

Download or read book Modeling External Auditors Evaluations of Audit Risk and the Effect of the Task Environment on Consensus written by Frank Alan Orth Buckless and published by . This book was released on 1989 with total page 554 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Effects of Irrelevant Information and Minor Errors in Client Documents on Assessments of Misstatement Risk and Sample Size written by Edward Lynch and published by . This book was released on 2017 with total page 200 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three studies. The first study conducts a 2 by 2 experiment to examine how auditors are influenced by the presence of irrelevant information and minor errors (i.e., "dirty documents") when reviewing audit evidence produced by the client. This study tasks 97 public accountants to review audit evidence and finds some evidence that dirty documents influence an auditor's assessment of the likelihood of account misstatement and the appropriate sample size. In order to demonstrate the usefulness of eye-tracking and to help generate potential research topics, the second study reviews extant literature in other disciplines where eye-tracking technology is applied to various judgment and decision-making contexts. This study suggests how eye-tracking can enhance extant accounting research. Illustrative examples of promising research opportunities (extending extant research) are provided. In addition, this study identifies how eye-tracking can be applied to more contemporary decision making and educational circumstances. The third study extends the first experiment through the use of eye-tracking technology. This study utilizes the same 2 by 2 experiment as the first study, but in this case records the eye movements of 43 auditing students while they review the audit evidence. The eye-tracking technology provides additional detail as to the specific evidence participants' focus on during their review. This study finds that participants focus their attention differently depending on whether irrelevant information or minor errors were present.

Download or read book A Study of Factors which Affect Audit Evidence Accumulation written by John Neal Kissinger and published by . This book was released on 1974 with total page 694 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Impact of Inconsistent Evidence Documentation on Third party Perceptions of Audit Quality and Judgements of Auditor Liability written by Casey Joseph McNellis and published by . This book was released on 2011 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Effect of Nondiagnostic Evidence and Accountability on Auditor Judgment written by Sandra W. Shelton and published by . This book was released on 1994 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Influence of Information Order Effects and Trait Professional Skepticism on Auditors Belief Revisions written by Kristina Yankova and published by Springer. This book was released on 2015-02-10 with total page 321 pages. Available in PDF, EPUB and Kindle. Book excerpt: Kristina Yankova addresses the question of what role professional skepticism plays in the context of cognitive biases (the so-called information order effects) in auditor judgment. Professional skepticism is a fundamental concept in auditing. Despite its immense importance to audit practice and the voluminous literature on this issue, professional skepticism is a topic which still involves more questions than answers. The work provides important theoretical and empirical insights into the behavioral implications of professional skepticism in auditing.

Download or read book The Influence of Inspection Focus on Auditor Judgments in Audits of Complex Estimates written by Amy Christine Tegeler and published by . This book was released on 2017 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Public Company Accounting Oversight Board (PCAOB) seeks to influence auditor behavior and judgments through its inspections. I conduct an experiment that studies how an inspection's focus on procedural implementation versus judgment quality influences an auditor's mindset, which in turn affects auditor judgments. Drawing on mindset theory, I predict and find a procedural inspection focus leads to an implemental mindset, while a judgment quality focus leads to a deliberative mindset. An implemental mindset is characterized by a narrow focus and selective information processing, while a deliberative mindset is characterized by open-mindedness, objective information processing, and cautious decision-making. I predict a deliberative mindset improves an auditor's ability to identify relevant information and objectively incorporate it into their judgments. However, I also predict a deliberative mindset undermines auditor confidence reaching a conclusion, potentially undermining audit quality. I study the effects of mindset on an auditor's evaluation of a complex estimate when the estimate is aggressively biased versus unbiased to interpret the effects of mindset on auditor judgments under different contexts. I find a conditional indirect effect of inspection focus on auditor judgment through mindset, such that judgment-focused deficiencies activate a deliberative mindset, which in turn leads auditors to assess a biased estimate as less reasonable than implemental auditors. I do not find persuasive evidence of deliberative auditors being overly cautious in their judgments of an unbiased estimate or in their decision-making. This study contributes to literature examining how regulators can influence auditor judgments through the inspection process and the effects of mindsets on auditor judgments and decisions.

Download or read book Auditor Evaluation of Others Credibility written by Eldar Maksymov and published by . This book was released on 2016 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: I synthesize the extant behavioral literature examining auditor evaluation of others' credibility published in six top accounting journals over the last three-and-a-half decades. I adapt the original definition of credibility by Hovland, Janis, and Kelley (1953): the extent of perceiving someone as competent and trustworthy. Audit guidance requires auditors to consider credibility of management, internal auditors, and staff, yet the research literature on auditor evaluation of others' credibility is fragmented and scarce, limiting our understanding of determinants and consequences of auditor evaluations. I develop a framework for analysis of research on auditor evaluation of others' credibility and review extant literature by types of examined effects (determinants of credibility vs. consequences of credibility) and by examined credibility components (competence, trustworthiness, or both). Throughout the literature review I suggest areas for future research.

Download or read book An Examination of the Sensitivity of Independent Auditors to the Reliability of Audit Evidence written by James E. Rebele and published by . This book was released on 1985 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book When Is the Averaging Effect Present in Auditor Judgments written by Tamara A. Lambert and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Auditing standards task auditors with collecting sufficient appropriate evidence to form audit judgments. Yet cognitive psychology documents a robust finding in which people evaluate a bundle of relevant, directionally consistent evidence as though averaging the strength of the components. In consequence, a bundle of evidence may be viewed as weaker evidence than the bundle's strongest evidence item alone. We experimentally examine whether this averaging effect occurs in an audit context, and we test a potential moderator. In three independent mini-cases, we ask auditor participants to make judgments about going concern, internal controls, and fraud risk. We present auditors with unfavorable audit evidence relevant to each judgment, manipulating whether we present a single strong evidence item or bundle it with a weaker evidence item. We also manipulate the auditor's initial impression of the client's state. We find that experienced auditors succumb to the averaging effect, making more strongly unfavorable judgments in response to the single evidence item than the bundle, and that this bias is reduced when the observed evidence is inconsistent with the auditor's initial impression. We interpret our results as consistent with the dual-processing theory of cognition.

Download or read book Do Auditors Perceptions of Materiality Change in Response to Approaching Deadlines written by George Bradley Bennett and published by . This book was released on 2012 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examined the impact that deadline pressures have on auditors' perceptions of materiality. I use the context of the audit of Internal Controls over Financial Reporting (ICFR) to determine whether the year-end deadline impacts auditors' assessment of control deficiencies. I also considered how the perceived cause of the increased deadline pressure (i.e., whether the timing of testing is the auditor's fault) may further affect the auditors' judgment of significance. To evaluate these decisions, I used a 3x2 between-subjects experiment, manipulating time deadline pressure (low, high, and post-deadline) and the cause of the deadline pressure (auditor fault or not). I measured the auditors' assessment of the materiality of an identified control deficiency, as well as the amount of audit evidence the auditor would consider sufficient for retesting remediated controls. Findings suggest an interactive effect on auditors' materiality assessments of errors/deficiencies when they identify the error under high deadline pressure and the auditor is at fault for creating the higher pressure, resulting in a lower assessment of the errors' materiality under these conditions. Further, auditors are willing to test fewer items when the auditor is at fault for creating deadline pressure, as well as accepting a higher deviation rate for the sample (i.e., the auditors will accept more errors/deficiencies in fewer sample items). However, auditors increased their materiality judgments of identified errors when deadline pressure was no longer present (after year-end), even though incentives to issue an unqualified opinion still exist. This study extends existing literature by examining the temporal effects on materiality, specifically the auditor's perceptions and application of materiality. It also complements recent archival research examining consequences of adverse opinions on the audit of ICFR (e.g., Cassell et al., 2011; Hammersley et al., 2010) by considering how pressures and incentives to avoid such consequences influence the audit of ICFR.

Download or read book The Effect of Causally Related Arrangements of Audit Evidence on the Occurrence of Memory Conjunction Errors written by Amanda M. Grossman and published by . This book was released on 2007 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: When auditors are working on more than one client at once, they may be prone to accidentally attributing the evidence of one company to another company. One possible reason why auditors might misattribute evidence to the incorrect source company is a particular type of memory error known as memory conjunction error, which occurs when information from different sources is improperly combined in memory as originating from only one source. This study examines whether grouping going concern audit evidence from two companies according to causal connections reduces auditors' proneness to memory conjunction error. Audit evidence arranged to clearly display the causal connections among evidence items was expected to assist the auditors' memory in forming (a) distinctive representations of each company and (b) stronger bonds among the evidence items that pertain to a particular company. An experimental study, utilizing participants with auditing experience, was conducted to examine the effects of different organizational arrangements of going concern evidence on proneness to memory conjunction error. Contrary to expectations, the study results revealed that when going concern evidence was arranged according to causal connections, participants were more prone to memory conjunction error than when the going concern evidence was organized according to a traditional working paper format or randomly. The results suggest that when audit evidence is arranged in a causally relevant order, auditors are able to form distinctive representations of each company in memory but are unable to retain an accurate memory for precise evidence items.

Download or read book The Influence of Inspection Focus on Auditor Judgments in Audits of Complex Estimates written by Amy C. Tegeler and published by . This book was released on 2019 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: I conduct an experiment with professional auditors on how an inspection's focus on procedures performed versus judgment quality influences an auditor's mindset, and in turn, how that mindset affects auditor judgments and decisions. I study mindset effects on an auditor's evaluation of a complex estimate when the estimate is aggressively biased versus unbiased. I predict and find a conditional indirect effect of inspection focus on auditor judgment through mindset. I find judgment- (procedure-) focused deficiencies lead to a (an) deliberative (implemental) mindset, concerned with making a decision (planning how to achieve a goal). I find deliberative auditors assess a biased estimate as less reasonable than implemental auditors. I do not find evidence that deliberative auditors are conservative in their judgments over an unbiased estimate, nor overly cautious in their decision-making. This study contributes to literature examining how regulators can influence auditor judgments through the inspection process and the effects of mindset on auditor judgments and decisions.