Auditor Mindsets and Audits of Complex Estimates

Posted: 3 Mar 2016

See all articles by Emily E. Griffith

Emily E. Griffith

University of Wisconsin - Madison

Jacqueline S. Hammersley

University of Georgia - J.M. Tull School of Accounting

Kathryn Kadous

Emory University - Goizueta Business School

Donald Young

Indiana University - Kelley School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2015

Abstract

Auditors experience significant problems auditing complex accounting estimates, and this increasingly puts financial reporting quality at risk. Based on analyses of the specific errors that auditors commit, we propose that auditors need to be able to think more broadly and incorporate information from a variety of sources in order to improve audit quality for these important accounts. We experimentally demonstrate that a deliberative mindset intervention improves auditors’ ability to identify unreasonable estimates by improving their ability to identify and incorporate into their analyses contradictory information from diverse parts of the audit and improving their ability to think critically about the evidence. We perform additional analyses to demonstrate that our intervention improves auditor performance by causing them to think differently rather than simply to work harder. We demonstrate that critical thinking can improve the identification of unreasonable estimates and, in doing so, we provide new directions for addressing audit quality issues.

Keywords: Accounting estimates, audit quality, fair value, impairment, mindset, professional skepticism

JEL Classification: M40, M41, G10

Suggested Citation

Griffith, Emily Elaine and Hammersley, Jacqueline S. and Kadous, Kathryn and Young, Donald, Auditor Mindsets and Audits of Complex Estimates (March 1, 2015). Journal of Accounting Research, Vol. 53, No. 1, 2015, Available at SSRN: https://ssrn.com/abstract=2741157

Emily Elaine Griffith (Contact Author)

University of Wisconsin - Madison ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Jacqueline S. Hammersley

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States

Kathryn Kadous

Emory University - Goizueta Business School ( email )

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

Donald Young

Indiana University - Kelley School of Business ( email )

1309 East Tenth Street
Indianapolis, IN 47405-1701
United States

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