Counteracting the Directional Influence of Incentives on Auditor Judgment
48 Pages Posted: 6 Mar 2018 Last revised: 6 Jan 2021
Date Written: April 10, 2020
Auditing standards require auditors to be objective in their judgment. However, certain incentives inherent in the auditing environment motivate auditors to adopt a directional goal and to prefer incentive-consistent audit conclusions over others, undermining auditor objectivity. I predict and find that making auditors’ intrinsic motivation for their work salient counteracts the directional influence of incentives on auditor judgment. I show that the counteracting effects are achieved by salient intrinsic motivation prompting auditors to search for relatively more evidence that contradicts their incentive-consistent audit conclusion, to evaluate acquired evidence as being less supportive of their incentive-consistent conclusion, and to integrate the evidence into their judgment to a greater extent. The results indicate that salient intrinsic motivation that focuses auditors on the intrinsic rewards of a task can mitigate the negative impact of motivated reasoning on audit quality, a challenging issue that has constantly concerned regulators, practitioners, and academics.
Keywords: directional incentives, intrinsic motivation, motivated reasoning, information search, information evaluation
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