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https://hdl.handle.net/2142/19578
Description
Title
Belief perseverance in audit analytical review
Author(s)
Koonce, Lisa Lynn
Issue Date
1990
Doctoral Committee Chair(s)
Solomon, Ira
Department of Study
Accountancy
Discipline
Accountancy
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, Accounting
Language
eng
Abstract
Auditors often perform analytical procedures to identify potential financial-statement errors, irregularities and other unusual events. While recent descriptive research suggests that analytical procedures can be very effective and efficient for identifying causes of unusual financial-statement relationships, little experimental evidence on these issues has been reported. The primary purpose of this dissertation, therefore, is to provide experimental evidence on the conditions under which auditors performing analytical procedures may be prone to compromising audit effectiveness by accepting a plausible, but incorrect, non-error explanation for an unusual financial-statement relationship.
Two experiments utilizing the framework of belief-perseverance theory were conducted to investigate these conditions. Consistent with the theory, auditors were noted to revise their beliefs about an hypothesized non-error cause of an unusual fluctuation in the auditee's gross margin in an upward (downward) fashion when asked to document a written explanation (counterexplanation) for that cause. This result suggests that once auditors develop written explanations for non-error causes, they are more likely to compromise audit effectiveness by accepting an incorrect explanation than are auditors who have not written such explanations. It also suggests that once auditors construct written counterexplanations, their propensity to compromise audit effectiveness will be reduced.
When auditors were asked to document written explanations and counterexplanations in the two possible task-performance orders, the predicted primacy order effect did not obtain. Rather, the experimental data were suggestive of a recency order effect. This finding, if replicated in other studies, may suggest that auditors who initially document counterexplanations and then document explanations are more likely to compromise audit effectiveness by accepting a plausible, but incorrect, non-error explanation than are auditors who perform the same two tasks in the opposite order (i.e., explain and then counterexplain). Based on additional experimental evidence that initially engaging in counterexplanation was significantly more difficult, it is possible that explanation followed by counterexplanation is the natural order of comprehension and that any other task-performance order will yield judgments less impacted by the available counterexplanation evidence.
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