Risk assessment judgments of auditors and bank lenders: A comparative analysis of conformance to Bayes' theorem

Holt, Doris L.

doi:10.1016/0361-3682(92)90013-i

Cited by 8 publications

(2 citation statements)

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“…Relevant to the current study, prior research suggests that bankers view underconservative errors much more seriously while auditors tend to be more balanced in their concern for over-and underconservative errors (Holt and Morrow, 1992). Applied to the current setting, this finding suggests that bankers worry about interpreting``substantial doubt'' as indicating a company is less troubled than it actually is, whereas auditors worry about believing`s ubstantial doubt'' indicates a company is more or less troubled than it actually is.…”

Section: Context-free Interpretationsmentioning

confidence: 59%

“…Compared to errors associated with being overconservative, bankers are expected to view errors associated with being underconservative as having more serious consequences (e.g. Holt and Morrow, 1992). Specific loan losses associated with granting a loan to a company which is believed to be more healthy than it actually is, are more serious than losses associated with failing to grant a loan to a company because it was believed to be less healthy.…”

Section: Effect Of Context On Interpretationsmentioning

confidence: 99%

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An empirical investigation of context‐dependent communications between auditors and bankers

Almer

Brody

2002

Managerial Auditing Journal

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Despite attempts to close the expectation gap, researchers in the USA and other countries continue to demonstrate the existence of differences between auditors’ beliefs about their responsibilities and the public’s understanding of the audit function. This study considers how ambiguous language in auditor communications, and the context in which it occurs, contribute to the expectation gap. An experiment examined auditors’ and bankers’ understandings of the phrase “substantial doubt” used in a going concern audit report. It was predicted and found that auditors and bankers had different general understandings of the meaning of “substantial doubt” and their understandings were conditioned on ownership structure, a contextual variable. The results demonstrate the potentially crucial role of context in ambiguous communications with users. Implications of these results are discussed, as are suggested areas for future research.

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Section: Context-free Interpretationsmentioning

confidence: 59%

Section: Effect Of Context On Interpretationsmentioning

confidence: 99%