Multiple Hypothesis Evaluation in Auditing

Posted: 24 Jul 2002  

Rajendra P. Srivastava

University of Kansas - Accounting and Information Systems Area

Arnold Wright

Northeastern University - Accounting Group

Theodore J. Mock

University of Southern California; University of California, Riverside

Multiple version iconThere are 2 versions of this paper

Abstract

In many audit tasks, auditors evaluate multiple hypotheses to diagnose the situation. Research suggests this is a complex task that individuals have difficulty performing. Further, there is little guidance in professional standards or literature dealing with the many complexities present in the audit environment.

Using probability theory, this study derives the appropriate revision of likelihoods for multiple hypotheses given different realistic audit conditions. The analysis shows that the relationships among the hypotheses dramatically impact the use of audit evidence and the resulting pattern of probability revisions. We also identify testable hypotheses to guide future research and discuss practice implications regarding ways to improve the effectiveness of analytical procedures.

Keywords: analytical procedures, multiple hypothesis evaluation, audit evidence

JEL Classification: M49

Suggested Citation

Srivastava, Rajendra P. and Wright, Arnold and Mock, Theodore J., Multiple Hypothesis Evaluation in Auditing. Accounting and Finance, Vol. 42, No. 3, November 2002. Available at SSRN: https://ssrn.com/abstract=312186

Rajendra Prasad Srivastava

University of Kansas - Accounting and Information Systems Area ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States

Arnold Wright

Northeastern University - Accounting Group ( email )

406 Hayden Hall
United States

Theodore J. Mock (Contact Author)

University of Southern California ( email )

Los Angeles, CA 90089-0441
United States

University of California, Riverside ( email )

Riverside, CA 92521
United States

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