Accountability and Auditors' Materiality Judgments: The Effects of Differential Pressure Strength on Conservatism, Variability, and Effort

Posted: 6 Feb 2007

See all articles by Todd DeZoort

Todd DeZoort

University of Alabama - Culverhouse School of Accountancy

Paul D. Harrison

Wichita State University

Mark H. Taylor

University of South Florida, Muma College of Business, Lynn Pippenger School of Accountancy

Abstract

This study investigates the effects of differential accountability pressure strength on auditors' materiality judgments. We evaluate whether incremental levels of accountability (i.e., review, justification, feedback) increase judgment conservatism, decreases judgment variability, and increases effort. One hundred sixty auditors participated in a between-subjects experiment that included a planning materiality task and a proposed audit adjustment materiality task. As predicted, auditors under higher levels of accountability pressure (i.e., justification, feedback) provided more conservative materiality judgments and had less judgment variability than auditors under lower levels of pressure (i.e., review, anonymity). The results also indicate that accountability strength was positively related to the amount of time spent on the task, explanation length, and consideration of qualitative materiality factors. Finally, the results show that use of a planning materiality decision aid influenced the accountability effects for the planning materiality judgment. These judgments were more conservative and less variable when the planning materiality decision aid was available. We consider implications for research, practice, and policy in the context of the study's limitations.

Keywords: accountability, review, justification, feedback, decision aid, materiality, proposed audit adjustment

JEL Classification: m41

Suggested Citation

DeZoort, Todd and Harrison, Paul D. and Taylor, Mark H., Accountability and Auditors' Materiality Judgments: The Effects of Differential Pressure Strength on Conservatism, Variability, and Effort. Accounting, Organizations and Society, Available at SSRN: https://ssrn.com/abstract=958268

Todd DeZoort (Contact Author)

University of Alabama - Culverhouse School of Accountancy ( email )

Tuscaloosa, AL 35487
United States

Paul D. Harrison

Wichita State University ( email )

1845 N. Fairmount
Wichita, KS 67260
United States

Mark H. Taylor

University of South Florida, Muma College of Business, Lynn Pippenger School of Accountancy ( email )

4202 E. Fowler Avenue
Tampa, FL 33620
United States
(813) 974-6516 (Phone)

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