Knowledge structure and the estimation of conditional probabilities in audit planning

Article Abstract:

The relationship between knowledge structure and audit judgment was examined. In particular, the study sought to establish whether the difference between how auditors structure their knowledge of financial statement errors and how audit planning tasks are structured has a negative impact on the auditors' ability to draw on previous experiences when making conditional probability judgments and audit planning decisions. Forty-seven auditors from one of the Big Six accounting firms participated in the study. The results were not in agreement with the general conclusion of previous accounting studies that structure enhances audit judgment. In fact, findings indicated that incompatibility between knowledge structure and task structure may serve to undermine the auditors' ability to access and use previous experiences to make judgments.

Knowledge, Theory of, Epistemology, Judgment, Judgment (Psychology)

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Using decision aids to improve auditors' conditional probability judgments

Article Abstract:

Checklist aids and decomposition-and-mechanical-aggregation aids are decision aids that help counteract the difficulty encountered by auditors in applying experienced error frequencies to judgments of the probability that an audit objective is transgressed in a specific transaction cycle. The decomposition-and-mechanical-aggregation aids support knowledge retrieval as well as aggregation while the checklist aids assist only in knowledge retrieval. A study testing the effectiveness of the two shows that a checklist aid somewhat enhanced auditors' judgements while the mechanical-aggregation aid significantly improved the judgments of auditors. In fact, the latter fully counteracted the impact of the task organization-knowledge organization mismatch.

Accounting, auditing, & bookkeeping, Accounting & Auditing Services, Accounting, Tax Preparation, Bookkeeping, and Payroll Services, Auditors, Probabilities, Probability theory

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Expert measurement and mechanical combination in control reliance decisions

Article Abstract:

Two groups of senior auditors were used to test previous research regarding whether mechanical combination and expert measurement can be used to eradicate bias and increase consensus in control reliance decisions. The groups analyzed a series of auditing cases by either making component judgments or making global control reliance decisions of the validity of the individual controls and compliance tests. Component judgments of the first group of auditors were combined mechanically into an overall judgment. Research results indicate that the mechanically combined component judgments were more like those provided by a group of experts, on average, and they also had a higher level of consensus than the global judgments.

Standards

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