Auditors' hypothesis testing in diagnostic inference tasks

Article Abstract:

Two major experiments were conducted to examine auditors' hypothesis testing during diagnostic inference. Specifically, the study investigated the soundness of incentives and how these affect auditors' question specification, which is part of the hypothesis testing process. Four different types of flawed reasoning were examined, namely, information proneness, affirmation proneness, and confirmation and disconfirmation proneness. The first experiment explored confirmation proneness when incentives reward truth discovery, while the second experiment investigated all four types of flawed diagnostic reasoning and manipulated the extent to which incentives reward the discovery of truth. The findings indicate that auditors become more confirmation prone when incentives reward efficiency, and become sound diagnosticians when incentives reward truth discovery.

Testing, Inference, Hypothesis, Hypothesis (Logic)

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Justification of decisions in auditing

Article Abstract:

A study is conducted to determine the impact of the expectation of the audit review process and of evidence that affirm or refute management's explanation on justifications of audit-planning decisions. Specifically, it examines how anticipation of the audit review affects the quantity of justifications and the information used to make such justifications. The study also explores the degree to which evidence concerning management explanation determines the amount and type of justifications. The results show that justification of auditing decisions are indeed affected by audit review process and the type of evidence available. It is found that the number of justifications is greater for auditors expecting a review than auditors with no such expectations. More justifications are also documented when auditors receive inaccurate or no evidence.

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The influence of auditors' justification processes on their decisions: a cognitive model and experimental evidence

Article Abstract:

A cognitive model on how justification processes affect the decisions of auditors and an experiment that shows how these processes impact on their assessments of client-provided explanations for account balance fluctuations and on their search for contending explanations are presented. The experiment studied the differences in the auditors' analytical procedures performance as it pertains to justifiee preferences and client integrity. Findings show that justifiee preferences affect the auditors' likelihood assessments and their perception of the environmental cues when making these assessments. However, the findings also indicate that negative levels of environmental cues lessen the impact of justifiee preferences.

Practice

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