This paper investigates the effects on auditors' judgments of being held accountable to superiors in their firm. The specific audit judgment task studied is fraud risk assessment presence both relevant and irrelevant information. Although auditors routinely encounter information when assessing fraud, normatively, only former should affect judgments. However, prior research (Hackenbrack [1992]) has demonstrated that are influenced by information; i.e., they subject dilution effect (Nisbett,...

ABSTRACT: The Public Company Accounting Oversight Board recently reported that its inspections show auditors fail to effectively modify their standard audit procedures in response fraud risk. Prior academic research is consistent with this finding. Our study examines the effects of two interventions on auditors' planning decisions a high-fraud-risk setting: strategic reasoning and brainstorming groups. Both are predicted lead more planned procedures. We use panel experts identify effective...

ABSTRACT: Auditors often receive summary information or conclusions from management about account balances internal controls. They must then gather evidence to assess whether this is fairly stated. In such situations, can be considered the “first mover” and auditor “second mover.” When auditors are second mover, they vulnerable curse of knowledge bias—the inability ignore previously processed (Fischhoff 1977). Specifically, because could incorrect biased, arrive at an independent evaluation...

Abstract We provide a list of points to consider ( PTC s) help researchers self‐assess whether they have addressed certain common issues that arise frequently in accounting research seminars and reviewers’ editors’ comments on papers submitted journals. Anticipating addressing such can researchers, especially doctoral students junior faculty members, convert an initial empirical idea into thoughtful carefully designed study. Doing this also allows outside readers more beneficial feedback...

SUMMARY Continuous auditing increases the coverage and frequency of analysis a firm's activities, has been touted as powerful fraud deterrence detection technique, but we identify examine potential unintended consequence. When continuous is accompanied by more timely notifications to auditees exceptions control rules, information revealed about system's capability flag rules. Therefore, if system weak fraud-detection capability, early notification that did not detect fraudulent transaction...

ABSTRACT Prior research suggests that audit seniors' judgments are sometimes biased by their affect toward (i.e., feeling of personally liking or disliking) client personnel. We examine how experienced reviewers respond when reviewing an preparer's judgment appears to be the a client's controller. In our experiment, provided with inconsistent workpapers. then effect providing versus not cue about positive negative find despite reviewers' belief biases judgment, who informed do rely less on...

The Public Company Accounting Oversight Board recently reported that its inspections show auditors fail to effectively modify their standard audit procedures in response fraud risk. Prior academic research is consistent with this finding. Our study examines the effects of two interventions on auditors' planning decisions a high-fraud-risk setting: strategic reasoning and brainstorming groups. Both were predicted lead more modifiy planned procedures. we use panel experts identify effective...

ABSTRACT Conventional economics assumes workers provide the same effort under penalty contracts and economically equivalent bonus contracts. However, prior research finds that although prefer contracts, they more Given these findings, prevalence of in practice is puzzling. If yield worker effort, why would employers not use them often? We conduct experimental labor markets to test whether finding than (i.e., contract frame effect) persists when can choose their know employer intentionally...

Auditors often receive summary information or conclusions from management about account balances internal controls. They must then gather evidence to assess whether this is fairly stated. In such situations, can be considered the first mover and auditor second mover. When auditors are they vulnerable curse of knowledge bias - inability ignore previously processed (Fischhoff 1977). Specifically, because could incorrect biased, arrive at an independent evaluation item in question (e.g. year...

This study addresses auditors' role in determining the quality of their client's fair value classification judgments for investment securities under ASC 820. The standard requires companies to classify assets into one three levels (i.e., Level 1, 2, or 3) and there is often significant subjectivity whether a particular security should be classified as 2 3. We examine how auditors react management's preferred that pre-test indicates could reasonably either test experienced respond skeptically...

SUMMARY Auditors often fail to effectively modify their standard audit procedures in response fraud risk. Two interventions, strategic reasoning (i.e., considering how the client may be concealing a from auditor) and brainstorming groups, have been suggested help auditors design better detection procedures. This paper summarizes recent study (“Do Strategic Reasoning Brainstorming Help Change Their Standard Audit Procedures Response Fraud Risk?” [Hoffman Zimbelman 2009], The Accounting...

The author of this paper had the relatively rare opportunity to test a new standard's effects on auditors' judgments before standard went into effect. SAS No. 82 will require auditors assess risk fraud separately, whereas current (SAS 53) requires only an assessment overall misstatement, which includes both misstatements due and those unintentional errors. tests whether decomposition two subparts (i.e., one for errors) makes more salient auditors, increasing processing factors. This...

ABSTRACT We conduct an experiment in the securities-based crowdfunding setting to investigate whether some investors avoid accounting information for psychological reasons, even when they understand is useful their decision-making. Results suggest who experience relatively more discomfort working with quantitative are less likely acquire financial statements of a potential investment. Importantly, this effect incremental any investors' ability (i.e., numeracy) and attenuates intervention...

We provide a list of Points to Consider (PTCs) help researchers self-assess whether they have addressed certain common issues that arise frequently in accounting research seminars and reviewers’ editors’ comments on papers submitted journals. Anticipating addressing such can researchers, especially doctoral students junior faculty members, convert an initial empirical idea into thoughtful carefully designed study. Doing this also allows outside readers more beneficial feedback rather than...

Prior research suggests that audit seniors’ judgments are sometimes biased by their affect toward (i.e., feeling of personally liking or disliking) client personnel. We examine how experienced reviewers respond when reviewing an preparer’s judgment appears to be the a client’s controller. In our experiment, provided with inconsistent workpapers. then effect providing versus not cue about positive negative find despite reviewers’ belief biases judgment, who informed do rely less on judgment....

We conduct an experiment in the securities-based crowdfunding setting to investigate whether some investors avoid accounting information for psychological reasons, even when they understand is useful their decision-making. Results suggest who experience relatively more discomfort working with quantitative are less likely acquire financial statements of a potential investment. Importantly, this effect incremental any investors’ ability (i.e., numeracy) and attenuates intervention designed...

Many organizations have responded to their increasingly complex and data-intensive environment by replacing traditional manual internal auditing systems with automated continuous systems. We examine a subset of auditing, known as controls monitoring, in which auditees are provided early frequent notification discrepancies discovered the monitoring system. Such generally believed be beneficial at deterring fraud. Our study examines whether there is also potential downside notification....