Download or read book The Effect of Confirmation Bias on Auditors Risk Assessments written by Cory A. Cassell and published by . This book was released on 2019 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Experimental research in accounting provides extensive evidence that auditors' judgments are negatively affected by the use of heuristics. However, there is little research investigating whether the negative effects of using heuristics manifest in practice and survive the quality control processes that regulators and audit firms have in place to mitigate them. In this study, we focus on one such heuristic - confirmation bias - and identify a setting where the effects of auditors' use of this heuristic are likely to manifest. Our findings indicate 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. Consistent with expectations, we find that this effect is mitigated when the risk increase is likely to violate auditors' reasonableness constraint, when the client is highly visible or has high institutional holdings, and when the auditor is a Big Four or industry specialist auditor. Our study complements prior experimental research by providing evidence that auditors' use of heuristics has an economically significant effect on auditor judgments in practice and that the negative effects of using heuristics can survive the quality control processes that audit firms have in place.
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 Auditing written by Lawrence A. Ponemon and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 210 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book has been prepared for those readers who want to maintain their knowledge of current developments in the field of behavioral research as applied to auditing. The articles and papers presented in this volume were selected because they will contribute to the knowledge and advancement of not only the individual researcher or educator, but also of the profession. It is our belief that if research endeavors may be viewed as having stages of life, then the field of behavioral research in auditing is in its genesis. Almost twenty years ago, in speaking of the state of the art of psychology, William Hays expressed a most·appropriate thought: Experimental evidence is accumulating at a rapid rate in psychology, and efforts at constructing psychological theories with mathematical deductive power are constantly being made. However, it seems safe to say that it will be sometime before there are psychological laws and theories on a par with those of physics. The absence of a general theory does not imply that those relations are missing or unhpportant in psychology; the discovery and specification of relations is the process by which those theories are built. (Hays, 1973, p. 40.) In the first chapter, "Experimental Research and the Distinctive Features of Accounting Settings," Robert Libby presents an encompassing and knowledgeable summary of the changes that have taken place during the last decade in human information processing research in accounting and experimental economics as it relates to those issues.
Download or read book Auditor Judgments written by Karim Jamal and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: There are political, social and economic incentives embedded within the audit setting which provide stimuli for compliant behavior of subordinate auditors to that preferred by the superior auditor. This study examines this compliant behavior under conditions of accountability. Specifically, this study examines whether subordinate auditors, when they are held accountable for their decisions, align their views with those expressed by the evaluative audience;emtheir superiors. In addition, the degree of cognitive effort associated with this compliance is examined. An experiment involving 70 auditors from one Big 6 firm required the subjects to complete a preliminary risk assessment of inventory obsolescence for five separate inventory items. All auditors were informed that they might have to verbally justify their decision outcomes to the partner and/or the researchers. The risk assessments of the auditors' superior were manipulated. Generally, the risk assessments of the superior significantly influenced the subordinates' risk assessments and the amount of cognitive effort exerted by the subordinate, accountable auditors.
Download or read book The Impact of Control Risk and Business Risk on Sample Evidence Evaluation written by Heather Marie Hermanson and published by . This book was released on 1993 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Confirmation Bias 120 Success Secrets 120 Most Asked Questions on Confirmation Bias What You Need to Know written by Judith Soto and published by Emereo Publishing. This book was released on 2014-10-09 with total page 210 pages. Available in PDF, EPUB and Kindle. Book excerpt: Break out of the Confirmation bias mold. There has never been a Confirmation bias Guide like this. It contains 120 answers, much more than you can imagine; comprehensive answers and extensive details and references, with insights that have never before been offered in print. Get the information you need--fast! This all-embracing guide offers a thorough view of key knowledge and detailed insight. This Guide introduces what you want to know about Confirmation bias. A quick look inside of some of the subjects covered: Belief perseverance - Biased interpretation, Inductive reasoning - Biases, Informational listening - Potential Hindrances, Fraud in parapsychology - Questionable validity of parapsychology research, Freethought, Group-think, Decision-making - Cognitive and personal biases, Reid technique - Process, Pseudoarcheology - Description, List of cognitive biases, Network theory in risk assessment, List of statistics articles - C, Clairvoyant - Scientific reception, List of biases in judgment and decision making, Social psychology - Social cognition, Attitude polarization, Index of psychology articles - C, Pseudoscientific, Thematic Apperception Test - Procedure, Woozle effect - Origin of the term, definition of the effect, and related notions, Peter Cathcart Wason, Intuition (MBTI) - Reliability, Confirmation bias - Informal observation, Sanjay Gupta - Michael Moore dispute, John Stuart Mill, Psychokinesis - Explanations in terms of bias, Birth order - Personality, Epistemic closure - Epistemic closure in U.S. political discussion, Social psychology (psychology) - Social cognition, Naive realism (psychology), Momentum investing, Decision maker - Cognitive and personal biases, Parapsychology - Evaluation, Astral projection - Scientific reception, Experimental techniques - Avoiding false positives, and much more...
Download or read book An Examination of the Impact of Individual Risk Attitudes and Perceptions on Audit Risk Assessment written by Douglas A Clarke and published by . This book was released on 1987 with total page 700 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Auditors Risk Assessments written by Theodore J. Mock and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This experimental study replicates, using U.S. audit practitioners, Fukukawa and Mock (2011) who investigated the effects of probability-based vs. belief-based risk assessments and positive vs. negative assertions on auditor judgments. Most results are consistent with the prior study: (1) Significant differences between probability-based and belief-based risk assessments are observed.(2) Assessed risks are significantly higher and relatively more skeptical when negatively vs. positively stated assertions are provided.(3) When the belief-based assessments are transformed into probabilities using a method proposed by Cobb and Shenoy (2006) and compared with the probability-based risk assessments, the difference is not statistically significant.Some results do not replicate, particularly when the risk assessments after audit evidence is provided are examined. However, in general, the U.S. results are more consistent with expectations. Overall, this study corroborates the key results of Fukukawa and Mock (2011).
Download or read book Using an Expert System to Debias Auditor Judgment written by Danielle R. Lombardi and published by . This book was released on 2012 with total page 233 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the audit profession, judgment and decision making are essential parts of successfully completing an audit. Judgment is a crucial element of the audit process, especially with recent increase in audit regulations. At every step of the audit, auditors are required to make several complex judgments. Psychology and audit research demonstrate that auditors are susceptible to numerous biases, two of which are exacerbated by the accountability inherent in the audit environment. Since the nature of the audit environment requires auditor accountability, this dissertation examines two biases that have been shown to be exacerbated by accountability - the dilution effect and acceptability heuristic bias. This dissertation consists of three separate essays. Two of this dissertation's essays experimentally examine whether use of an expert system as a decision aid in developing less experienced auditor judgment mitigates these two biases - the dilution effect (Chapter 2) and the acceptability heuristic (Chapter 3) - on auditor judgment in a complex task (fraud risk assessment). An expert system was chosen as the decision aid because research has demonstrated that expert systems have a high level of accuracy, resulting in more appropriate judgments made by less experienced auditors. The third essay is an exploratory study using process tracing that analyzes the decision making process of less experienced auditors using the expert system in an environment without and with judgment bias present - the dilution effect. The first essay experimentally examines whether an expert system assists less experienced auditors in making lower fraud risk assessments and mitigates the dilution effect. The dilution effect is a judgment bias which occurs when too much focus is spent on irrelevant information. This bias is exacerbated in auditors when they are knowingly held accountable to their superiors. A solution has yet to be offered to materially reduce this bias. The second essay experimentally examines whether the use of an expert system as a decision aid mitigates acceptability heuristic. The acceptability heuristic is the shifting towards the preferences of another and adopting a position that is deemed socially acceptable. This bias predominantly occurs when auditors are knowingly held accountable to their superiors. Prior studies have shown less experienced auditors who are aware of the views of audit partners, will align their judgments to agree with that of the partners'. This negative auditor judgment bias has been an area researchers have vastly studied, yet a method to reduce it has not been offered in the literature. The third essay is an exploratory analysis which uses process tracing to analyze the thought processes of less experienced auditors in making decisions in an environment where a judgment bias occurs - the dilution effect. This essay used a subset of participants from the dilution effect study (Chapter 2) and during the experiment, participants were asked to think aloud to gain further insight into the dilution effect. The think aloud process also captures factors about the process of using the expert system which contributed towards the mitigation of this bias. Auditor decision making process with and without the use of an expert system will be captured both within and between the participant groups.
Download or read book Auditing Teams written by Mara Cameran and published by Routledge. This book was released on 2017-03-31 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent audit failures which have rocked financial markets worldwide have accentuated the need for a better understanding of the link between risk, control and audit quality; as well as emphasising the need to open the "black box" of the ways auditing firms actually function. Reflecting these imperatives, Auditing Teams unravels the organizational and management issues in audit firms that are key to achieving effectiveness in service provision. Specifically, this key research reflects upon the relevance and dynamics of auditing teams and their impact on auditing quality, and specifically responding to the recent claim from regulators which highlights auditing team characteristics as the source of wide variations in quality. By leveraging different perspectives – auditing, management accounting, organization and psychology – to investigate auditing teams and basing on evidence collected from the professional world, this book will provide a unique insight into the role of auditing teams on audit quality. It will be of great interest to scholars and advanced students in auditing, as well as to practitioners and regulators in the field.
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 Fraud and Going Concern Risk on Auditors Assessments of the Risk of Material Misstatement and Resulting Audit Procedures written by Allen D. Blay and published by . This book was released on 2007 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study uses audit file data to analyze the association between the auditors' preliminary assessments of going-concern and fraud risk and the planning and performance of the financial statement audit. We analyze the association between the above risks and the auditor's assessment of the risk of material misstatement (RMM) within the revenue cycle, and examine whether going-concern and fraud risk assessments have an effect on the persuasiveness, timing and extent of audit evidence gathered. Our results indicate that both fraud risk and going-concern risk are significantly related to RMM. Our results also indicate that although the effect of fraud risk is fully mediated by the RMM, moderate going-concern risk remains significantly related to our proxies for the persuasiveness and timing of audit evidence, even after controlling for RMM.
Download or read book A Reexamination of the Dilution of Auditor Misstatement Risk Assessments written by Suzanne M. Perry and published by . This book was released on 2015 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many external parties such as investors, creditors, and regulatory agencies, use a company's financial statements in their decision-making. In doing so, they rely on audit opinions on whether financial statements are fairly stated. However, evidence suggests that there are factors in the audit environment that influence auditor judgments. For example, nondiagnostic client information dilutes auditor judgments when compared to judgments based on diagnostic information alone, especially for less experienced auditors (Hackenbrack 1992; Hoffman and Patton 1997; Glover 1994; Shelton 1999). High time pressure conditions mitigate this effect by refocusing auditor attention toward relevant client information, therefore reducing the impact of nondiagnostic information (Glover 1994, 1997). This research study examines other common audit environment factors to determine if they too influence audit judgment results. An online questionnaire of 149 auditors, CPAs and other accounting professionals indicate that the inclusion of nondiagnostic client information results in a significant change in auditor judgments. The direction of this change follows a theorized pattern; risk assessments that were initially high are reduced, while those that were initially low are increased. Significance was not consistently found for a workload and PCAOB effect on auditor judgment. However, a comparison of the absolute value of dilution effect means across conditions reveals some trending for the proposed unwanted effect of high workload, and the beneficial effect of PCAOB guidance. These results have important implications for auditing research and practice. It extends previous archival research on workload effects and uses a unique questionnaire design to reexamine workload pressures in a behavioral setting. The results of hypothesis testing on workload pressure and PCAOB guidance, although lacking consistent statistical significance; exhibit trends that agree with proposed theoretical relationships. Tests on the effects of nondiagnostic information show strong statistical support for previous studies in the area of psychology and audit. This study's greatest contribution suggests that audit pressures do not produce equivalent effects on auditor judgment; time pressure improves audit judgment, while workload pressure does not (Glover 1994, 1997). These results can be explained by examining the relationship between stress and audit judgment performance (Choo 1995, Yerkes and Dodson 1908). Different types and different degrees of audit pressures may correspond to different levels of audit pressure. Low to moderate levels of audit pressure, such as the level of time pressure used in Glover's (1994, 1997) study improve audit performance. Higher audit pressures, such as high workload during an auditor's busy season, may lower audit performance.
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 effects of industry specialization on auditors inherent risk assessments and second order uncertainty written by Mark Hedin Taylor and published by . This book was released on 1996 with total page 126 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book AICPA Professional Standards Accounting written by American Institute of Certified Public Accountants and published by . This book was released on 1974 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
