The persuasiveness of audit evidence: the case of accounting policy decisions

Article Abstract:

A study is conducted to examine how auditors assess the persuasiveness of evidence in accounting situations where there is no authoritative guidance on what accounting treatment to use. It tests the hypotheses that auditors will rely more on precedents when there are many similarities between the precedents and the current problem situation, when precedents come from multiple sources rather than from a single source, and when the precedents are consistent with the client's position. It also tests the hypothesis that auditors' judgments will be more influenced by precedents than by the client's position if this position is contrary to precedents. Three experiments were conducted involving practicing managers and partners of a major accounting firm in Canada. The findings are discussed.

Evaluation, Evidence (Law), Judgment, Judgment (Psychology)

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An examination of the descriptive validity of the belief-adjustment model and alternative attitudes to evidence in auditing

Article Abstract:

Auditors' alternative attitudes to evidence have not been sufficiently investigated in the academic and professional auditing communities. To fill this vacuum, a study was conducted on auditors' attitudes to evidence, using the belief-adjustment framework designed by Hogarth and Einhorn (1992). The descriptive validity of this model was first established before the explicit examination of alternative attitudes was conducted. Findings revealed that auditors have a greater tendency of making a confirmation, which means that they have more sensitivity to evidence confirming the initial hypothesis. Moreover, this confirmation-proneness is found over two experience levels and over contexts with and without abnormalities.

Beliefs, opinions and attitudes, Auditors, Evidence, Statistical, Statistical evidence (Law)

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The effects of information availability on the benefits accrued from enhancing audit-firm reputation

Article Abstract:

A laboratory experiment was conducted to determine how audit prices, number of contracts and the resulting audit profits are affected by market setting and reputation. It tested the hypotheses that audit firms that implement measures to improve their reputation are in a better position to charge quality-assuring prices, will win more contracts and will generate more profits in perfect ex-post quality information markets than in markets wherein quality is evaluated based on audit opinion and failure information. The study used Klein and Leffler's (1981) reputation model, which assumes the immediate availability of perfect information about audit quality to clients.

Economics, Accounting firms, Accounting services, Public opinion, Corporate image, Information theory, Information theory in economics

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