Effects of Exposure to Subsequently Invalidated Evidence on Judgments of Audit Workpaper Preparers and Reviewers

Posted: 30 Apr 2008 Last revised: 13 Aug 2008

See all articles by Seet-Koh Tan

Seet-Koh Tan

Nanyang Technological University (NTU) - Division of Accounting

Hun-Tong Tan

Nanyang Business School, Nanyang Technological University

Multiple version iconThere are 2 versions of this paper

Abstract

Auditors are routinely exposed to preliminary audit evidence that is subsequently found to be erroneous. In an experiment with auditors as participants, we show that subsequently invalidated evidence relating to a tender award to a client continues to influence auditors' interpretation of this evidence (in terms of their likelihood assessments of the client winning the tender), both for workpaper preparers and reviewers. This effect is mitigated for reviewers who have increased awareness that their judgments will be communicated to the preparer, but not for preparers with increased awareness of communication of their judgments to the reviewer. We find that these likelihood assessments mediate the effect of the invalidated evidence on auditors' going concern assessments.

Keywords: Subsequently invalidated audit evidence, Audit review process, Communication of audit judgments

JEL Classification: M41, M49, C91

Suggested Citation

Tan, Seet-Koh and Tan, Hun-Tong, Effects of Exposure to Subsequently Invalidated Evidence on Judgments of Audit Workpaper Preparers and Reviewers. Contemporary Accounting Research, Vol. 25, No. 3, 2008, Available at SSRN: https://ssrn.com/abstract=1127022

Seet-Koh Tan (Contact Author)

Nanyang Technological University (NTU) - Division of Accounting ( email )

Singapore, 639798
Singapore

Hun-Tong Tan

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore
+65 6790 4819 (Phone)
+65 6793 7956 (Fax)

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