This study tests the influence (upon analytical procedures judgment)
of having auditors focus on explanations from an error vs. non-error dominated
list of explanations. The audit judgment studied was the probability of
misstatement due to error or irregularity, based on an unexpected fluctuation
in the inventory turnover ratio. A laboratory experiment was conducted
using experienced audit seniors and managers, in varied client environments.
As predicted by interference and availability theory, having auditors focus
on errors from an error dominated list resulted in an increase in auditors'
likelihood assessment of error. On the other hand, having auditors focus
on non-errors from a non-error dominated list did not significantly decrease
auditors' likelihood assessment of error. Results suggest that focusing
auditor attention on externally generated errors can make error hypotheses
more available and increase the subsequent likelihood assessment of error,
and focusing auditor attention on externally generated non-errors does
not significantly lower error availability.
| Return to BRIA 1997 Contents |
The accountants' ethical decision-making process occurs in a contextually
rich environment which includes the moral imperative of a particular issue
(i.e., moral intensity), the values systems of moral agents, and professional
influences such as the American Institute of Certified Public Accountants'
Code of Professional Conduct. Jones (1991) theorized that issue characteristics,
collectively called moral intensity, affect the agent's decision process.
Weber (1993) suggests that values may also affect the agent's response
to an ethical dilemma. This paper explores the relationship between a moral
agent's values system and his or her perceptions of moral intensity. Results
indicate that among issues of lower moral intensity, the accountant's values
preferences influence perceptions of moral intensity. These results imply
that differences in individuals' values preferences are most likely to
influence the ethical decision-making process when dealing with issues
for which there is a lower moral imperative.
| Return to BRIA 1997 Contents |
Financial analysts often make predictions concerning annual earnings, and there is evidence to suggest that some provide more accurate forecasts than others. Despite their importance as both users of information and agents for its dissemination in financial markets, little is currently known about the factors which cause these differences in financial analysts' forecast accuracy. This study provides evidence on this issue by addressing three research questions. First, does ability affect performance in a financial forecasting task? If so, does the effect persist after controlling for experience? Finally, does a decision aid mitigate the effect of ability on earnings forecasting performance?
The results show that two measures of ability, perceptual ability and
tolerance for ambiguity, were significantly related to earnings forecasting
accuracy. Moreover, these effects were very persistent and not easily overcome
by either experience or a decision aid. The decision aid was moderately
successful at reducing the effect of tolerance for ambiguity, but not perceptual
ability. Suggestions for future research and practical implications are
discussed.
| Return to BRIA 1997 Contents |
This study examines the effect of audit firm structure, control risk
and task-related experience on auditors' decisions to project sample errors
to the population or to treat sample errors as isolated occurrences. One
hundred forty-one practicing auditors from five Big 6 firms evaluated six
error scenarios and indicated whether they would project or isolate each
error. Results indicated that greater audit firm structure and task-related
experience were associated with increased likelihood of projection. Control
risk was not related to error projection. These results contribute to a
growing body of research attempting to understand the auditor's judgment
process in evaluating sample evidence.
| Return to BRIA 1997 Contents |
Accounting decision problems require decision makers to not only recognize
decision rules but to also apply such decision rules to solve complex problems.
This study examines the effects of justification conditions and individuals'
general experience and training on problem-solving performance, and whether
these effects are contingent on task complexity. Three hundred twelve subjects
(145 MBA and 167 undergraduate business students) participated in a laboratory
experiment. MBA and undergraduate students were treated as two different
subject groups because of their differences in general experience and training.
Subjects were randomly assigned to a justification or a no-justification
condition and were asked to respond to two sets of three problems. The
first set tested their understanding of three basic decision rules. The
second set tested their application of the decision rules to solve three
complex accounting problems. The results show that general experience and
training significantly affected performance. Surprisingly, a justification
requirement increased effort but did not significantly improve performance,
regardless of task complexity.
| Return to BRIA 1997 Contents |
Although probabilistic reasoning is an appropriate approach to consider uncertainty, prior research has found little evidence that auditors use explicit probabilistic reasoning processes. In this study, two Bayesian and one Classical judgment models are derived for a task where 12 auditors evaluated the likelihood of a material error. Evidence of use of these models comes from two sources: verbal protocols and comparisons with predictions based on the three models.
The protocol evidence indicates that seven subjects exhibit reasoning
consistent with a Bayesian representation and five with a Classical Statistical
representation. However, in aggregating the evidence, those employing a
Bayesian representation were found to make risk judgments most consistent
with a Classical model. By examining two phases of uncertainty evaluation,
this study is able to isolate behavior in the representation phase from
that in the aggregation phase. The results suggest a need for training
or decision aids in the aggregation phase.
| Return to BRIA 1997 Contents |
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.
| Return to BRIA 1997 Contents |