Does Seeking Audit Evidence Impede the Willingness to Impose Audit Adjustments?

Abstract

In two incentivized auditing experiments, participants who choose to acquire evidence adjust for the risk revealed by that evidence to a lesser extent than those who obtain the same evidence without investigative action, controlling for the diagnostic value of evidence. This finding follows from mental accounting and information choice theories, which in combination predict that choosing to undertake effortful investigation can magnify aversion to costly adjustments. In our first experiment, effort choice reduces adjustments only when the same participants make both decisions, not when different participants make these decisions in noninteractive pairs. We observe consistent findings in a second experiment that pairs all participants and allows interaction, with effort choice reducing adjustments only when participants responsible for evidence perceive high involvement in the adjustment decisions made by their paired counterparts. A potential implication of our study is that emerging audit technologies that facilitate evidence collection could also enhance auditor independence.

Audit evidence, technology, and judgement: A review of the literature in response to ED‐500

“…The balanced focus appears to change auditors' cognition and how they interpret the contradicting evidence. Kachelmeier and Rimkus (2022) conduct two experiments using the experimental economics methodology in an audit setting. Participants are 135 US student volunteers in Experiment 1 and 120 US student volunteers in Experiment 2.…”

Comments of the AFAANZ Auditing and Assurance Standards Committee on Proposed International Standard on Auditing 500 (Revised) Audit Evidence

“…Research (e.g., Kachelmeier & Rimkus, 2022; Smith et al, 2016) highlights that auditors who chose to acquire information rather than have it supplied to them weigh that evidence more heavily and are more confident in their judgements. The increased and explicit involvement in transforming information into evidence, therefore, may lead to a biased interpretation of that evidence.…”