Determinants of Audit Preparers' Workpaper Justifications

43 Pages Posted: 29 Apr 2005

See all articles by Premila Gowri Shankar

Premila Gowri Shankar

Nanyang Technological University (NTU) - Division of Accounting

Hun-Tong Tan

Nanyang Business School, Nanyang Technological University

Multiple version iconThere are 2 versions of this paper

Date Written: April 26, 2005

Abstract

Research indicates that justifiability of a decision is a key determinant of work quality. In this paper, we investigate whether and how the requirement for preparers to justify an audit conclusion to a reviewer with task preferences that are similar to or dissimilar from their explicitly stated initial task preferences determine the nature and extent of justifications documented in their workpapers, and how this effect is moderated by their technical and tacit managerial knowledge. Results of an experiment with auditors as participants indicate that auditors use different forms of justifications under different circumstances. Auditors with high tacit managerial knowledge and high technical knowledge have a higher proclivity to enumerate more pro vs. con reasons, and to consider a wider breadth of issues when they are required to justify their conclusions to reviewers with dissimilar task preferences. In contrast, high tacit managerial knowledge auditors required to justify to reviewers with similar initial task preferences have a greater tendency to employ an evidence framing approach, in which language is used to emphasize consistent evidence by downplaying associated inconsistent evidence. In additional analyses, we find that these three specific forms of justifications are positively associated with evaluations of work quality.

Keywords: Justification, tacit managerial knowledge, review process

JEL Classification: C91, M49

Suggested Citation

Gowri Shankar, Premila and Tan, Hun-Tong, Determinants of Audit Preparers' Workpaper Justifications (April 26, 2005). Available at SSRN: https://ssrn.com/abstract=710881 or http://dx.doi.org/10.2139/ssrn.710881

Premila Gowri Shankar (Contact Author)

Nanyang Technological University (NTU) - Division of Accounting ( email )

Nanyang Business School
Singapore, 639798
Singapore

Hun-Tong Tan

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore
+65 6790 4819 (Phone)
+65 6793 7956 (Fax)

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