Joint Impact of Materiality Guidance and Justification Requirement on Auditors’ Planning Materiality

31 Pages Posted: 18 Oct 2015

See all articles by Juthathip Audsabumrungrat

Juthathip Audsabumrungrat

Chulalongkorn University

Sompong Pornupatham

Chulalongkorn University

Hun-Tong Tan

Nanyang Business School, Nanyang Technological University

Date Written: October 17, 2015

Abstract

In this study, we examine a setting where over-reliance on structured materiality guidance leads to less appropriate materiality assessments by auditors, and investigate whether a justification requirement in the absence of accountability mitigates this effect. Results from our experiment show that audit managers make less conservative and less appropriate planning materiality assessments in the presence of structured materiality guidance, but that this detrimental effect is mitigated by the need to justify their judgments. Our study on the joint effect of these two features extends current literature on materiality judgments and has implications for audit practice.

Keywords: planning materiality, structured guidance, justification

JEL Classification: C91, M4

Suggested Citation

Audsabumrungrat, Juthathip and Pornupatham, Sompong and Tan, Hun-Tong, Joint Impact of Materiality Guidance and Justification Requirement on Auditors’ Planning Materiality (October 17, 2015). Available at SSRN: https://ssrn.com/abstract=2675704 or http://dx.doi.org/10.2139/ssrn.2675704

Juthathip Audsabumrungrat

Chulalongkorn University ( email )

Bangkok 10330
Thailand

Sompong Pornupatham

Chulalongkorn University ( email )

Bangkok 10330
Thailand

Hun-Tong Tan (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

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

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