When Do Auditors Use Specialists’ Work to Improve Problem Representations of and Judgments about Complex Estimates?

Posted: 15 Sep 2016 Last revised: 8 Sep 2017

Multiple version iconThere are 2 versions of this paper

Date Written: August 14, 2017

Abstract

Auditors are more likely to identify misstatements in complex estimates if they recognize problematic patterns among an estimate’s underlying assumptions. Rich problem representations aid pattern recognition, but auditors likely have difficulty developing them given auditors’ limited domain-specific expertise in this area. In two experiments, I predict and find that a relational cue in a specialist’s work highlighting aggressive assumptions improves auditors’ problem representations and subsequent judgments about estimates. However, this improvement only occurs when a situational factor (e.g., risk) increases auditors’ epistemic motivation to incorporate the cue into their problem representations. These results suggest auditors do not always respond to cues in specialists’ work. More generally, this study highlights the role of situational factors in increasing auditors’ epistemic motivation to develop rich problem representations, which contribute to high quality audit judgments in this and other domains where pattern recognition is important.

Keywords: Accounting estimates, audit quality, engagement risk, fair value, pattern recognition, source credibility, specialist

Suggested Citation

Griffith, Emily Elaine, When Do Auditors Use Specialists’ Work to Improve Problem Representations of and Judgments about Complex Estimates? (August 14, 2017). Available at SSRN: https://ssrn.com/abstract=2837962 or http://dx.doi.org/10.2139/ssrn.2837962

Emily Elaine Griffith (Contact Author)

University of Wisconsin - Madison ( email )

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,282
PlumX Metrics