The Impact of Strategic Positioning Evaluation on Auditor Judgments About Business Process Performance
Posted: 15 Jul 2002
Date Written: Undated
Abstract
International accounting firms have implemented new audit methods that assess residual business risks to determine the nature and extent of substantive testing. Understanding strategic risks and the extent to which critical business processes mitigate or accentuate those risks is integral to these methods (Bell, Marrs, Solomon, and Thomas, 1997). However, little is known about how important task features of these new methods affect auditor judgments. We test the effects of changes in the strategic positioning for unrelated business processes (e.g., brand and image delivery) on auditors? evaluations of critical business process performance (e.g., the logistics and distribution process). Results suggest that auditors superficially process information about critical business process performance when a client?s strategic positioning in unrelated business processes is in line with industry norms, which leads to an apparent underweighting of problems present in the critical business process.
Keywords: audit methods, business risk, audit risk, expectancy violation
JEL Classification: M49, M19
Suggested Citation: Suggested Citation