Using Decision Aids to Improve Auditors' Conditional Probability Judgments

Posted: 22 Aug 1998

See all articles by Sarah E. Bonner

Sarah E. Bonner

University of Southern California

Robert Libby

Cornell University - Samuel Curtis Johnson Graduate School of Management

Mark W. Nelson

Cornell University - Samuel Curtis Johnson Graduate School of Management

Abstract

Prior research provides evidence that auditors encounter difficulty in applying the error frequencies they have experienced to judgments of the probability that an audit objective is violated given a particular transaction cycle. This may occur because of a mismatch between the organization of the judgment task (in which transaction cycle is the more important organizing dimension) and the organization of auditors' knowledge (in which audit objective is the more important organizing dimension). We performed an experiment to test the effectiveness of two decision aids in counteracting this difficulty: (1) a checklist-style decision aid which facilitates knowledge retrieval and (2) a decomposition-and-mechanical-aggregation decision aid which facilitates both knowledge retrieval and aggregation. Our results indicate that the checklist aid improved the degree to which auditors' judgments reflected their experienced frequencies to a small degree, but that the mechanical-aggregation aid improved auditors' judgments to a great extent, completely counteracting the effect of the mismatch in dimension importance between task organization and knowledge organization.

JEL Classification: D63, M41

Suggested Citation

Bonner, Sarah E. and Libby, Robert and Nelson, Mark W., Using Decision Aids to Improve Auditors' Conditional Probability Judgments. Available at SSRN: https://ssrn.com/abstract=2509

Sarah E. Bonner (Contact Author)

University of Southern California ( email )

Marshall School of Business
Los Angeles, CA 90089-0441
United States
213-740-5025 (Phone)
213-747-2815 (Fax)

Robert Libby

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-3348 (Phone)
607-254-4590 (Fax)

Mark W. Nelson

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

448 Sage Hall
Ithaca, NY 14853
United States
607-255-6323 (Phone)
607-254-4590 (Fax)

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