Auditor's assessments of the likelihood of error explanations in analytical review
Article Abstract:
Psychological research reveals that people have a tendency of overestimating the likelihood of a hypothesized cause because typically, they do not consider alternative explanations. The effect of alternative explanations on auditors' judgments during analytical reviews was researched by conducting two experiments with auditors from Big Eight accounting firms. The research was conducted to determine whether the availability of alternative explanations decreases the initial judgments of auditors as to the likelihood of a hypothesized causes. Research results revealed that when alternative explanations are available to auditors, there is a decrease in their perceptions of the likelihood of a hypothesized cause. Varying the number of alternative explanations affected the degree that likelihood assessments were decreased, but variations in the strength of alternatives had no effect.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1990
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Effectiveness of rectification in audit sampling
Article Abstract:
The effectiveness of rectification in audit sampling was researched. Rectification is the process by which auditors calculate a modified upper bound on the remaining errors in an unsampled population after correlating the errors observed in the sample. The magnitude of rectification was researched for three common dollar-unit sample selection methods: cell selection, random, and systematic. Results for expected error amounts were obtained for the sample sizes of 65, 150, and 300, and for 32 different populations. The risks of incorrect rejection were analyzed in terms of sampling with and without rectification. Research results reveal that rectification significantly reduces the risk of incorrect rejections for the 150 and 300 sample sizes.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1991
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Explanation and counterexplanation during audit analytical review
Article Abstract:
The use of explanation and counterexplanation in the decision making of auditors performing analytic reviews is examined. The use of explanation is shown to increase the ability of auditors to track possible incorrect causes of fluctuations encountered in analytic reviews. On the other hand, the failure of auditors to engage in counterexplanation in the documentation of the causes of fluctuations is shown to influence audit effectiveness. The results have significant implications on how analytic reviews are structured.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1992
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