During an audit, management frequently serves as an information source for auditors gathering evidence. Reliance on management's expertise requires auditors to exercise an adequate level of professional skepticism, because management is not an objective information source. In this respect, professional guidance urges auditors to maintain a skeptical mind-set since management's financial reporting incentives may lead to instances when it attempts to persuade the auditor into accepting a preferred accounting treatment. This study investigates how auditors' behavior when providing input on planning decisions common to an audit can influence an auditor's mind-set, and how this mind-set then influences the persuasiveness of subsequently encountered management information. My predictions are motivated by psychology theory on behavioral mind-sets, which indicates that in the course of completing a task, a mind-set can be activated that carries over and influences an individual's behavior in a subsequent, unrelated situation.
In a 2x2 experiment, 83 experienced auditors participated in an update meeting with the engagement partner and then made preliminary internal control evaluations. I manipulated the activation of different mind-sets (bolstering or counter-arguing) during the audit update meeting; I also manipulated the severity of the control deficiency (high or low) during the subsequent internal control evaluation task. I hypothesized that the behavior of providing arguments either supporting or opposing common scheduling arrangements during a planning meeting with the engagement partner can activate a mind-set that then influences the persuasiveness of information subsequently received from the client. The increased severity of the deficiency was expected to mitigate the role of mind-sets in the audit environment.
The results support my expectations. Auditors who developed a bolstering mind-set during a planning meeting rated the adequacy of management's internal control explanation higher and made internal control assessments indicative of lower risk than auditors who developed a counter-arguing mind-set. I also find that the impact of an auditor's mind-set is attenuated when auditors evaluate a control problem potentially indicative of a material weakness (i.e., higher severity). These results indicate that routine audit planning tasks altered an auditors' skeptical mind-set, which impacted the persuasiveness of management information, even though the update meeting was unrelated to the internal control assessment. However, as the severity of the identified deficiency increased, risk sensitivity mitigated the auditors' mind-set effects, as their professional skepticism was naturally heightened. These results have important audit implications given the importance of maintaining appropriate levels of professional skepticism throughout an audit, especially amid recent concerns that auditors, at times, fail to do so. The findings also inform the psychology and behavioral mind-set literatures by extending the generalizability of prior studies while also establishing the boundaries of this stream of research by examining different levels of severity. / Ph. D.
| Identifer | oai:union.ndltd.org:VTETD/oai:vtechworks.lib.vt.edu:10919/51820 |
| Date | 01 November 2013 |
| Creators | Brown, Jeffrey Owen |
| Contributors | Accounting and Information Systems, Bhattacharjee, Sudip, Popova, Velina K., Carlson, Kevin D., Brown, Robert M., Salbador, Debra A. |
| Publisher | Virginia Tech |
| Source Sets | Virginia Tech Theses and Dissertation |
| Detected Language | English |
| Type | Dissertation |
| Format | ETD, application/pdf |
| Rights | In Copyright, http://rightsstatements.org/vocab/InC/1.0/ |
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