Intuition versus Analytical Thinking and Impairment Testing

Posted: 16 Oct 2019

See all articles by Christopher J. Wolfe

Christopher J. Wolfe

Texas A&M University - Department of Accounting

Brant E. Christensen

University of Oklahoma

Scott D. Vandervelde

University of South Carolina - Darla Moore School of Business

Date Written: September 10, 2019

Abstract

We examine the use of intuition versus analytical thinking in auditor risk assessment using a task that requires auditors to assess a group of impairment indicators. We expect that auditor intuition, rooted in the subconscious, more likely reacts to impairment indicator risk than does auditor analytical thinking. Results from two different experiments support this expectation for less-experienced audit seniors. These seniors are more likely to assess step-zero impairment indicators as signaling potential impairment when prompted to think intuitively versus analytically. In contrast, a third experiment finds that experienced seniors are more likely to assess step-zero impairment indicators as signaling potential impairment when prompted to think analytically versus intuitively. This is consistent with the more experienced, but still non-expert seniors possessing developed analytical thinking, but struggling to effectively use their intuition. Our results inform theory by suggesting under what conditions auditor intuition and analytical thinking produce differential risk sensitivity. Further, our results inform practice, given regulators’ stated focus on auditor skepticism and impairment assessments.

Keywords: Auditing, Intuition, Impairment testing, Risk Assessment, Skepticism

JEL Classification: M4, M42

Suggested Citation

Wolfe, Christopher J. and Christensen, Brant E. and Vandervelde, Scott D., Intuition versus Analytical Thinking and Impairment Testing (September 10, 2019). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3465778

Christopher J. Wolfe (Contact Author)

Texas A&M University - Department of Accounting ( email )

430 Wehner
College Station, TX 77843-4353
United States

Brant E. Christensen

University of Oklahoma ( email )

Norman, OK 73019-4004
United States

Scott D. Vandervelde

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States

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