Debiasing the halo effect in audit decision: evidence from experimental study

Abstract

Purpose The purpose of this paper is to test the existence of the halo effect caused by the presentation of information scope (holistic/specific), which can eventually lead to an inaccurate risk assessment of material misstatement. Empirical evidence is provided to demonstrate that methods of knowledge acquisition (explanatory feedback and self-explanation) are able to mitigate the halo effect. Design/methodology/approach This study used an experimental research, which focused on control and experimental groups in order to determine if the halo effect caused by the information scope (holistic/specific) can be mitigated via the explanatory feedback or self-explanation method. Findings It was found that auditors who received information from the holistic scope tend to experience the halo effect and eventually, their risk assessments of material misstatement also became less accurate when compared to auditors who received information from the specific scope. The explanatory feedback was found to be effective in mitigating the halo effect. However, the self-explanation knowledge acquisition method was not reliable in mitigating the halo effect. Research limitations/implications This research use self-explanation with a manual technique but, in practice, most auditors use audit tools based on computer. Experimental setting with computer to self-explanation cannot held because there is limitation of seminar setting. This research used individual decision; in practice most of audit decision with discussion in audit team. Practical implications CPA firms can use explanatory feedback, which comes in the form of managers’ review as a form of knowledge acquisition method as a mitigation strategy for the halo effect. Social implications The social implication of this research is the halo effect that can influence the decision in many aspects. Individuals must increase their professional values with many trainings that are useful to mitigating the halo effect. Originality/value The outcome of this paper was derived from the first accounting study that relied on learning methods as a mitigation strategy for the halo effect. In other words, this study used explanatory feedback and self-explanation as methods to test the halo effect. Previous literature on mitigating the halo effect had used audit experiences, implying that CPA firms’ intervention was unnecessary. Moreover, such study periods had been much longer, thereby, deteriorating the effectiveness of the research. Previous studies had only used the learning method to increase human capital quality and this was not related to any method as a mean to mitigate individual bias, for example, the halo effect, and an issue that was covered by this study.

Effects of organizational climate, role clarity, turnover intention, and workplace burnout on audit quality and performance

“…Others indicated a negative relationship between the burnout and the firm commitment and work environment conditions (Fogarty and Kalbers, 2006;L opez and Peters, 2012). Such studies did not provide concluding evidence on how to reduce fatigue and job burnout in organizations with a high level of pressure at work (Beck et al, 2013;Utami and Supriyadi, 2013;Tang et al, 2014). The current research adds to the behavioral accounting studies by JAOC 19,5 investigating the burnout phenomenon in an emerging market such as Egypt using few organizational theories to better understand this issue.…”

“…Burnout in the literature results from emotional exhaustion and physical tiredness (Beck et al, 2013;Utami and Supriyadi, 2013;Tang et al, 2014;Al Shbail and Al Shbail, 2020). Prior literature indicated that burnout (as shown in the emotional and physical exhaustion component in the workplace) is common among auditors who often experience high levels of stress, fatigue and may have cynical attitudes toward their clients and colleagues (Cropanzano et al, 2003;Daugherty and Dickins, 2009;Jones et al, 2010;Herda and Lavelle, 2012;Salehi et al, 2020).…”

Continuing Professional Development Strategies: A Model for the Iranian EFL Teachers’ Success

“…The most important method bias of this study could be the transient mood state of the respondents (students). Transient mood or halo effect are among biases that largely occur in quantitative educational research, where students answer the provided questions emotionally and sympathetically, which can ultimately lead to imprecise assessment of the materials (Utami, Kusuma, Gudono, & Supriyadi, 2017). In this study, the students filled the questionnaires in an area without the presence of their teachers, and they were told that their answers remain confidential and anonymous.…”

Towards an integrated debiasing framework for consumer financial decisions: A reflection on debiasing research

“…For instance, warnings positioned with sufficient prominence and written in emphatic language are effective in mitigating the hot-hands bias (Johnson et al, 2021). The specificity of information received could also influence the halo effect bias (Utami et al, 2017), such that specific information results in less of a halo effect.…”