University of Illinois Urbana-Champaign

Applying systems-thinking to reduce check-the-box decisions in the audit of complex estimates

Bucaro, Anthony C

Content Files
BUCARO-DISSERTATION-2015.pdf

Permalink

https://hdl.handle.net/2142/78381

Description

Title
Applying systems-thinking to reduce check-the-box decisions in the audit of complex estimates
Author(s)
Bucaro, Anthony C
Issue Date
2015-04-15
Director of Research (if dissertation) or Advisor (if thesis)
Peecher, Mark E.
Doctoral Committee Chair(s)
Peecher, Mark E.
Committee Member(s)
  • Bauer, Timothy
  • Gajendran, Ravi S.
  • Hecht, Gary
Department of Study
Accountancy
Discipline
Accountancy
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Date of Ingest
2015-07-22T22:16:45Z
Keyword(s)
  • auditor judgment
  • thinking perspective
  • check-the-box
  • professional judgment
  • systems-thinking
  • system dynamics
Abstract
Even as audit regulators push for increased use of professional judgment in the audit of complex financial statement accounts, auditors seem to interpret audit standards as increasingly prescriptive. This leads to mechanical, or check-the-box audit decisions in just those situations in which it is most important to make decisions based on professional judgment. In response, regulators can, and do, issue new audit standards with a focus on providing auditors with guidelines instead of bright-lines, though those new standards often contain additional examples, definitions, and guidance which may be perceived as prescriptive. I conduct an experiment using practicing auditor participants to evaluate the joint effect of prescriptive versus judgment-based audit standards which allow auditors to use professional judgment without additional constraints, and systems- versus reductionist-thinking perspectives on auditor decisions related to complex estimates. My results indicate that introduction of a judgment-based standard is not sufficient, by itself, to decrease auditors’ check-the-box mentality. As expected, however, auditors who adopt a systems-thinking perspective are better able to apply both the prescriptive and judgment-based standards, resulting in less check-the-box decisions related to material misstatement decisions, but not to material weakness decisions. I find evidence that the systems-thinking perspective changes how auditors incorporate business process complexity into their audit planning process and changes how they perceive management’s role, relative to the role of process complexity itself, in potential accounting errors. These results suggest a potential limit to the ability to reduce auditors’ check-the-box mentality and increase their use of professional judgment by simply introducing more judgment-based standards. These results also suggest, however, that the goal of improving professional judgment may be achieved with an underlying change to the way auditors’ think, whether standards are prescriptive or more judgment-based.
Graduation Semester
2015-5
Type of Resource
text
Permalink
http://hdl.handle.net/2142/78381
Copyright and License Information
Copyright 2015 Anthony Bucaro

Owning Collections

Graduate Dissertations and Theses at Illinois PRIMARY
Graduate Theses and Dissertations at Illinois
Dissertations and Theses - Accountancy