How Do Auditors Weight Informal Contrary Advice? The Joint Influence of Advisor Social Bond and Advice Justifiability

Abstract:     
Auditors frequently seek informal advice from peers to improve judgment quality, but the conditions under which advice improves auditor judgment are poorly understood. We predict and find evidence of a trust heuristic among auditors receiving advice from advisors with whom they share a social bond. This heuristic is especially evident among non-specialists, who weight advice according to its justifiability when it is received from a weaker social bond advisor, but fail to objectively assess the overall quality of advice received and weight it heavily when it comes from a stronger social bond advisor, regardless of its justifiability. Specialists, while less prone to the trust heuristic in advice weighting, show inconsistencies in advice weighting and their assessments of advice quality. In particular, specialists discount better justified advice from stronger social bond advisors, despite rating this advice as being of relatively high quality. This defensiveness likely arises from an aversive social comparison process attributable to the high ego-relevance of a task within one’s specialization. Future research is warranted to corroborate or refute this possibility.

Number of Pages in PDF File: 51

Keywords: Key Words: Advice, Fair Value, Trust Heuristic, Auditor Judgment, Audit Quality, Justifiability

JEL Classification: M40, M41, M49, G19

working papers series