Improving Auditors’ Review of Inconsistent Audit Evidence

54 Pages Posted: 20 Sep 2021

See all articles by Jacqueline S. Hammersley

Jacqueline S. Hammersley

University of Georgia - J.M. Tull School of Accounting

Justin Leiby

University of Illinois at Urbana-Champaign

Christy Nielson

University of Mississippi; affiliation not provided to SSRN

Date Written: September 2021

Abstract

We examine audit reviewers’ detection of conclusion deficiencies, which occur when preparers draw inappropriate inferences about the audit evidence set as a whole. These deficiencies are particularly concerning when the evidence set contains inconsistencies (i.e., items that do not uniformly support the client’s assertions). We argue that reviewers with a promotion focus detect more conclusion deficiencies than reviewers with a prevention focus. A promotion focus is a frame of mind that broadens attention and encourages big picture thinking, while a prevention focus narrows focus and encourages avoiding mistakes. In two experiments, we provide evidence that a promotion focus improves reviewers’ detection of conclusion deficiencies when considering inconsistent evidence. Specifically, we find that a promotion focus increases reviewers’ holistic thinking, documentation of inconsistencies among evidence items, and the communication of significant issues to the engagement manager, which increases the likelihood that the issues will be resolved appropriately.

Keywords: Audit review, inconsistent evidence, nonfinancial measures, red flags, regulatory focus

JEL Classification: M42

Suggested Citation

Hammersley, Jacqueline S. and Leiby, Justin and Nielson, Christy, Improving Auditors’ Review of Inconsistent Audit Evidence (September 2021). Available at SSRN: https://ssrn.com/abstract=3925542 or http://dx.doi.org/10.2139/ssrn.3925542

Jacqueline S. Hammersley (Contact Author)

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States

Justin Leiby

University of Illinois at Urbana-Champaign ( email )

1206 S 6th St
Champaign, IL 61822
United States
2173007825 (Phone)

Christy Nielson

University of Mississippi ( email )

Oxford, MS 38677
United States

affiliation not provided to SSRN

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