Experimental Tests of a Descriptive Theory of Combined Auditee Risk Assessment

34 Pages Posted: 25 Jan 2007 Last revised: 14 Aug 2015

See all articles by Scott D. Vandervelde

Scott D. Vandervelde

University of South Carolina - Darla Moore School of Business

Richard M. Tubbs

University of Iowa - Department of Accounting

Albert Schepanski

University of Iowa - Department of Accounting

William F. Messier, Jr.

NHH Norwegian School of Economics

Date Written: December 19, 2006

Abstract

This research experimentally investigates how auditors make combined auditee risk judgments during the planning of the audit of an account balance in a client's financial statements. If auditors fail to assimilate risk factors according to normative criteria, inefficient or ineffective audits may result. First, we examine whether the predictions deduced from three normative models of auditee risk determination proposed in the auditing literature are descriptive of auditors' judgments. Second, a descriptive model of combined auditee risk assessment was induced from the data by the methods of psychological measurement. The results of the first analysis indicate that none of the normative models are descriptive of auditors' judgments. The results of the second analysis suggest that auditors' judgments of combined auditee risk are best explained by the range model, a configural-weight model, as compared to the alternative descriptive models tested. The results of the experiment suggest that auditors' judgments deviate significantly from normative criteria. Implications for the theory and practice of combined auditee risk assessment are discussed.

Keywords: Auditee risk assessment, Normative models, Descriptive models, Information integration, Psychological measurement

JEL Classification: M49, C90

Suggested Citation

Vandervelde, Scott D. and Tubbs, Richard M. and Schepanski, Albert and Messier Jr, William F., Experimental Tests of a Descriptive Theory of Combined Auditee Risk Assessment (December 19, 2006). Auditing: A Journal of Practice & Theory, Vol. 28, No. 2, 2009, Available at SSRN: https://ssrn.com/abstract=958791 or http://dx.doi.org/10.2139/ssrn.958791

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

Richard M. Tubbs (Contact Author)

University of Iowa - Department of Accounting ( email )

108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
(319) 335-0848 (Phone)
(319) 335-1956 (Fax)

Albert Schepanski

University of Iowa - Department of Accounting ( email )

108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States

William F. Messier Jr

NHH Norwegian School of Economics ( email )

Helleveien 30
N-5045 Bergen
Norway
678-386-8634 (Phone)

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