Judging Auditors Technical Knowledge

Abstract:     
We examine how accurately auditors assess their own technical knowledge, and that of their subordinates. The accuracy of these assessments likely affects audit planning, task assignment, and promotion decisions. We find auditors are overconfident in their own and in their subordinates' knowledge and that optimism in subordinates' knowledge increases as the knowledge-gap between supervisors and subordinates increases. This optimism stems primarily from supervisors' reliance on their own knowledge to assess subordinates' knowledge and secondarily from insufficient adjustments for the knowledge-gap between them and their subordinates. Thus, if supervisors better assessed their own knowledge, assessments of subordinates' knowledge likely would improve.

JEL Classifications: M40, M49

Accepted Paper Series