Auditor attention to and judgments of aggressive financial reporting

Article Abstract:

The factors that influence auditors' attention to and judgment of the likelihood of aggressive financial reporting in the financial statements of their clients were examined. One hundred audit seniors and managers were asked to assess whether attention and judgment can indeed be affected by the risk of misstatement and corroboration of that risk. The findings indicate that auditors pay greater attention to financial statement accounts with aggressive reporting when the risk of misstatement is assessed to be high rather than low. The results suggest that a high assessed level of risk for an account raises auditors' skepticism about its financial reporting. It was also found that auditors' attention to and judgment of the possibility of aggressive reporting in low-risk accounts intensify only if aggressive reporting in a high-risk account had been discovered prior to the examination of the low-risk accounts.

Financial Personnel, Accounting and auditing, Financial statements, Corporation reports, Company reports, Attention (Psychology), Financial occupations, Attention

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Expertise and auditors' judgments of conjunctive events

Article Abstract:

Auditors' experience and memory are studied in relation to auditors' judgments as to the appropriate auditing procedures to follow in light of certain internal control situations at audit client companies in five experiments involving two populations (experienced and student auditors) and two internal control scenarios (cash receipts and sales recording errors). The study results are not applicable to actual audit practice but do indicate that: (1) auditor judgments can only be understood in the context of the auditor knowledge base; (2) experiments can be designed to illustrate the relationship between experience-based knowledge and judgment; and (3) the feature-matching characteristics of the experiment designs can be applied outside the area studied. The experiments and their designs are described and related to earlier research performed by K. Fiedler, D. Kahnemen, and A. Tversky.

Memory, Experiential learning

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Experience and the ability to explain audit findings

Article Abstract:

Audit decision tasks are performed by different auditors with various levels of experience, and differential assignments have a substantial economic effect. More experienced auditors receive higher salaries due to the presumption of their higher level of performance. The effect of experience on the ability to explain audit findings was investigated. Research analyzed how differences in the content and structure of auditors' knowledge affected their audit decisions in terms of efficiency. Research results indicated a potential benefit from using more experienced auditors to explain audit results. More experienced auditors found a larger number of plausible errors to explain audit results.

Analysis, Knowledge, Theory of, Epistemology

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