The Effect of Information Choice on Auditors' Judgments and Confidence

40 Pages Posted: 25 Jun 2011 Last revised: 2 Mar 2018

See all articles by Steven D. Smith

Steven D. Smith

Brigham Young University

William B. Tayler

Brigham Young University

Douglas F. Prawitt

Brigham Young University

Date Written: August 5, 2015

Abstract

Previous research finds that individuals place more weight on information when they choose to obtain it than when they acquire it without explicit choice. We examine whether litigation risk and auditor experience influence auditors’ susceptibility to this information choice effect. In our experiment, auditor participants evaluate the likelihood of an inventory obsolescence issue for a hypothetical client subsidiary. We find that in a high litigation risk setting, less-experienced auditors weight information they choose to acquire more heavily than do less-experienced auditors who acquire the same information without choice. Further, we predict and find that auditors choosing to acquire information are more confident in their judgments than auditors who acquire the same information without choice. Interestingly, the effect of choice on confidence is exacerbated by experience, and is especially pronounced when litigation risk is high. Our study contributes to the auditing, management, and psychology literatures on information choice, with practical and theoretical implications for judgment and decision-making in accounting settings.

Keywords: information pursuit, litigation risk, confidence, experience, consequentiality

JEL Classification: M40, M41, M49

Suggested Citation

Smith, Steven D. and Tayler, William B. and Prawitt, Douglas F., The Effect of Information Choice on Auditors' Judgments and Confidence (August 5, 2015). Available at SSRN: https://ssrn.com/abstract=1872387 or http://dx.doi.org/10.2139/ssrn.1872387

Steven D. Smith

Brigham Young University ( email )

531 TNRB
Provo, UT 84602
United States
801-422-1969 (Phone)

William B. Tayler (Contact Author)

Brigham Young University ( email )

Brigham Young University
519 TNRB
Provo, UT 84602
United States
(801) 422-5972 (Phone)
(801) 422-0621 (Fax)

Douglas F. Prawitt

Brigham Young University ( email )

Provo, UT 84602
United States
801-422-2351 (Phone)

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