Does Identification with the Firm and Profession Mitigate Outcome Effect on Auditors’ Decisions?

Auditors’ Perception of Their Regulator Within Their Social Group

“…Anecdotal evidence in prior regulatory body literature indicates auditors' perception of their regulators may sway professional judgments (Daugherty & Tervo, 2010;Dowling et al, 2018;Houston & Stefaniak, 2013;Johnson-Snyder et al, 2022a, 2022bJohnson (Snyder), 2014). Further, auditing experts make many professional decisions while filling monitoring and evaluator roles.…”

“…Nonetheless, some research shows that is not always the case. For instance, audit experts' JDM processes are swayed by hindsight bias (Anderson, Jennings, Lowe, & Reckers, 1997;Anderson, Lowe, & Reckers 1993), social identity or professional role (Johnson-Snyder et al, 2022a;Johnson-Snyder & Killingsworth, 2020;, 2014); corporate citizenship performance and corporate social responsibility performance (Azizan & Shailer, 2021;Hickman, Cote, Sanders, & Weber, 2020), information structure (Holt & Loraas, 2021), changes in macro-economic conditions (Awadallah & Elsaid, 2020), audit committee strength and CEO narcissism (Zengin-Karaibrahimoglu, Emanuels, Gold, & Wallage, 2021), and the regulator's inspections and results (Daugherty & Tervo, 2010;Houston & Stefaniak, 2013;Johnson et al, 2019). However, only parts of prior literature specifically examine auditors' personal perception of their regulator, and none examines its impact on experts' evaluation of another expert's decision.…”

“…Staff auditors' consensus improves as tenure with a specific audit manager increases, while the consensus does not rise as tenure with the firm lengthens (Meixner & Welker, 1988). Audit experts, e.g., partners, directors, and senior managers, are more likely to agree with the decisions of in-group experts (Johnson-Snyder et al, 2022a, 2022bJohnson-Snyder & Killingsworth, 2020;Johnson (Snyder), 2014). These results suggest that, regardless of rank, a group member's judgment is influenced by the beliefs of the dominant social group.…”