Effects of Exposure to Subsequently Invalidated Evidence on Judgments of Audit Workpaper Preparers and Reviewers

Tan, Seet‐Koh; Tan, Hun‐Tong

doi:10.2139/ssrn.1126243

Cited by 11 publications

(9 citation statements)

References 45 publications

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“…The participants' beliefs persisted despite viewing the opposite set of instructions, which invalidated the original basis. A more recent study shows that when auditors are required to make explicit judgments based on audit evidence that they believe is valid, they are unable to completely discount the evidence when they are subsequently told that the evidence is erroneous (Tan and Tan 2008). These findings are more counterintuitive than the other streams of research dealing with people's inability to ignore valid information in that explicit identification of the erroneous nature of the information does not seem to help expunge such evidence.…”

Section: Continued Influence Of Invalidated Informationmentioning

confidence: 98%

“…First, the rapid correction of erroneous disclosures indicates that investors likely see the erroneous disclosure and its correction simultaneously in news and corporate websites. In contrast, prior studies use a design where the erroneous and corrected information is sequentially presented item by item (e.g., Ross et al 1975;Johnson and Seifert 1994;Davies 1997;Tan and Tan 2008). In these studies, participants generally first make explicit judgments based on what they believe is valid evidence and then learn about its erroneous nature after some delay and/or intervening task.…”

Section: Continued Influence Of Invalidated Informationmentioning

confidence: 99%

See 1 more Smart Citation

Investors' Reactions to Management Disclosure Corrections: Does Presentation Format Matter?*

Tan

2009

Contemporary Accting Res

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Section: Continued Influence Of Invalidated Informationmentioning

confidence: 98%

Section: Continued Influence Of Invalidated Informationmentioning

confidence: 99%

Investors' Reactions to Management Disclosure Corrections: Does Presentation Format Matter?*

Tan

2009

Contemporary Accting Res

Self Cite

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“…Technical knowledge acquisition occurs on the job through the interaction of individual engagement team members (Westermann et al 2015). One important task of senior‐level auditors is to act as a supervisor, to guide and review the work of subordinates to improve their audit judgment and, ultimately, the judgment of the overall team (Gibbins and Trotman 2002; Tan and Tan 2008; Peecher et al 2010). Subordinates tend to attribute their best review experiences to reciprocal relationships and effective communication with their supervisors (Andiola et al 2019).…”

Section: Theory and Hypothesesmentioning

confidence: 99%

Do Audit Teams Affect Audit Production and Quality? Evidence from Audit Teams' Industry Knowledge*

Cahan

Che

Knechel

et al. 2022

Contemporary Accting Res

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We examine how the extent and distribution of industry knowledge within an audit team affect audit outcomes. While prior research examining the role of auditors' industry knowledge focuses mainly on audit firms, audit offices, and audit partners, audits are conducted by audit teams. Using an audit framework and proprietary data from a Big 4 firm that includes audit hours for each team member, we find that Big 4 audit teams with higher average industry knowledge are associated with more audit effort. In contrast, we find mixed evidence on the relation between the average hourly internal cost rate and team knowledge. Furthermore, we find that balanced teams, which have at least one team member who qualifies as an industry specialist at both the senior rank and junior rank, produce higher‐quality audits than teams that have no specialists. In contrast, the audit quality of unbalanced teams, which have a specialist at the senior rank but not the junior rank or vice versa, is not statistically different than teams with no specialists. Overall, our evidence suggests that both the extent and distribution of industry knowledge within a team matter for audit production and that industry knowledge is utilized more effectively when it is spread throughout the team. The findings have useful implications for audit firms and regulators regarding how team composition and industry knowledge affect audit outcomes.

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“…The distractor task includes one debriefing question that is unrelated to our hypotheses (i.e., perceived length of the presentation) and four demographic questions. Demographics have often been employed in behavioral research as a distractor task to clear short-term memory and simulate time intervals (Bonner, Libby, and Nelson 1997;Ricchiute 1999;Wilks 2002;Borthick, Curtis, and Sriram 2006;Tan and Tan 2008;Dong, Lui, and Wong-On-Wing 2017). We also created separate links in Qualtrics for Stages 1 and 2.…”

Section: Materials and Proceduresmentioning

confidence: 99%

Can Auditors Pursue Firm-Level Goals Nonconsciously on Audits of Complex Estimates? An Examination of the Joint Effects of Tone at the Top and Management's Specialist

Pyzoha

Taylor

2020

The Accounting Review

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We examine whether tone at the top emphasizing firm-level commercial, audit quality, or both goals (balanced) can nonconsciously affect auditors' engagement-level tendency to accept management's estimates, and whether the effects differ if management engages a specialist. This study is motivated by academics' and regulators' increasing attention on firm-level tone at the top and concerns about management bias in audited estimates, especially when the evidence is prepared by management's specialist. We find firm-level goals can be pursued nonconsciously by auditors when performing a complex task. When management's specialist is absent, a balanced approach reduces auditors' tendency to agree with management's estimate compared to a commercial approach; however, it is less effective when management's specialist is present. We find an audit quality approach reduces auditors' tendency to accept management's estimate compared to a commercial approach, regardless of the absence/presence of a specialist. Our results have important implications for regulators and audit firms.

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Effects of Exposure to Subsequently Invalidated Evidence on Judgments of Audit Workpaper Preparers and Reviewers

Cited by 11 publications

References 45 publications

Investors' Reactions to Management Disclosure Corrections: Does Presentation Format Matter?*

Investors' Reactions to Management Disclosure Corrections: Does Presentation Format Matter?*

Do Audit Teams Affect Audit Production and Quality? Evidence from Audit Teams' Industry Knowledge*

Can Auditors Pursue Firm-Level Goals Nonconsciously on Audits of Complex Estimates? An Examination of the Joint Effects of Tone at the Top and Management's Specialist

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