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

51 Pages Posted: 9 Aug 2010 Last revised: 14 Nov 2014

See all articles by Kathryn Kadous

Kathryn Kadous

Emory University - Goizueta Business School

Justin Leiby

University of Illinois at Urbana-Champaign

Mark E. Peecher

University of Illinois at Urbana-Champaign; University of Illinois College of Law

Date Written: August 16, 2012

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.

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

JEL Classification: M40, M41, M49, G19

Suggested Citation

Kadous, Kathryn and Leiby, Justin and Peecher, Mark E., How Do Auditors Weight Informal Contrary Advice? The Joint Influence of Advisor Social Bond and Advice Justifiability (August 16, 2012). Emory Public Law Research Paper No. 10-116, Emory Law and Economics Research Paper No. 10-75, Available at SSRN: https://ssrn.com/abstract=1656070 or http://dx.doi.org/10.2139/ssrn.1656070

Kathryn Kadous (Contact Author)

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
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404-727-4967 (Phone)

Justin Leiby

University of Illinois at Urbana-Champaign ( email )

1206 S 6th St
Champaign, IL 61822
United States
2173007825 (Phone)

Mark E. Peecher

University of Illinois at Urbana-Champaign ( email )

Gies College of Business
1206 South Sixth Street
Champaign, IL 61820
United States
217-333-4542 (Phone)
217-244-0902 (Fax)

University of Illinois College of Law ( email )

504 E. Pennsylvania Avenue
Champaign, IL 61820
United States

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