Disclosure Checklists and Auditors’ Judgments of Aggressive Accounting

35 Pages Posted: 15 Feb 2013 Last revised: 8 Apr 2020

See all articles by Marcel Van Rinsum

Marcel Van Rinsum

RSM Erasmus University

Victor S. Maas

University of Amsterdam - Amsterdam Business School

David Stolker

Independent

Date Written: March 1, 2017

Abstract

This study investigates if auditors who feel accountable to management (as opposed to the audit committee) are more susceptible to pro-client bias after using a disclosure checklist. We theorize that the use of a disclosure checklist, even though it is uninformative about the aggressiveness of the accounting methods used, can influence auditors’ judgments of the acceptability of aggressive reporting by inducing a less critical state of mind. We propose that this less critical state of mind is reflected in higher levels of pro-client bias, particularly when management is the appointing party. Our experimental data for two cases, obtained from experienced auditors working at a Big Four audit firm, support this prediction. Our findings imply that threats to auditor independence are more subtle than has often been assumed.

Keywords: checklist; auditor independence; pro-client bias; audit judgment; aggressive accounting

Suggested Citation

Van Rinsum, Marcel and Maas, Victor S. and Stolker, David, Disclosure Checklists and Auditors’ Judgments of Aggressive Accounting (March 1, 2017). European Accounting Review (2018), Vol. 27, No. 2, 383-399., Available at SSRN: https://ssrn.com/abstract=2218408 or http://dx.doi.org/10.2139/ssrn.2218408

Marcel Van Rinsum (Contact Author)

RSM Erasmus University ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Victor S. Maas

University of Amsterdam - Amsterdam Business School ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

David Stolker

Independent ( email )

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