Making Sense and Learning from Errors in the Auditing Environment

68 Pages Posted: 17 Jun 2019 Last revised: 9 Feb 2021

See all articles by Anna Gold

Anna Gold

Vrije Universiteit Amsterdam; Norwegian School of Economics (NHH)

Oscar van Mourik

Vrije Universiteit Amsterdam

Philip Wallage

VU University Amsterdam; University of Amsterdam - Business School

Arnold Wright

Northeastern University - Accounting Group

Date Written: December 22, 2020

Abstract

Auditor errors are of concern since they reflect deviations from expectations, plans or goals and can thereby potentially impair audit quality. Audit firms have powerful mechanisms in place to prevent errors from occurring, such as the review process. However, all errors cannot be prevented; thus, it is important to make sense of errors — i.e., identify, analyze, and learn from errors — to prevent them from re-occurring. The overriding research question we address is: how do the sensemaking processes of error cognition, emotions, and culture along with the tenets of error management affect the ways in which auditors learn from errors? We integrate the sensemaking framework advanced by Catino and Patriotta (2013) along with the tenets from error management. Our analysis of 22 semi-structured interviews with auditors at multiple ranks reveals that auditors recognize the importance of openness; in practice, however, communication and sharing of errors is rare and there is an inadequate understanding of what constitutes an error. Further, several organizational barriers limit openness and consequential learning from errors such as the negative emotions associated with errors, organizational factors (e.g., excessive focus on error prevention), and the looming presence of audit regulatory oversight.

Keywords: auditor errors; learning from errors; sensemaking; error management; cognition; emotions; culture

JEL Classification: M14, M42, M44

Suggested Citation

Gold, Anna and van Mourik, Oscar and Wallage, Philip and Wright, Arnold, Making Sense and Learning from Errors in the Auditing Environment (December 22, 2020). Available at SSRN: https://ssrn.com/abstract=3395273 or http://dx.doi.org/10.2139/ssrn.3395273

Anna Gold (Contact Author)

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 598 25 92 (Phone)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

Oscar Van Mourik

Vrije Universiteit Amsterdam ( email )

Netherlands

Philip Wallage

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
31 6 5120 6178 (Phone)

University of Amsterdam - Business School ( email )

Faculty of Economics and Econometrics
Roetersstraat 11
1018 WB Amsterdam
Netherlands
31 6 5120 6178 (Phone)

Arnold Wright

Northeastern University - Accounting Group ( email )

406 Hayden Hall
United States

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