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    How Audit Reviewers Respond to an Audit Preparer's...
    research summary posted July 23, 2015 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.11 Auditor judgment in the workpaper review process 
    How Audit Reviewers Respond to an Audit Preparer's Affective Bias: The Ironic Rebound Effect.
    Practical Implications:

    These findings extend the audit review process literature by highlighting that reviewers might not always mitigate biases in preparers’ judgments, particularly in cases where they cannot readily determine how much the bias influenced the preparer’s judgment. Reviewers may be inappropriately influenced by the preparer’s judgment. Audit firms should be interested in these findings because they view the review process as a key quality control mechanism. If reviewers rely too heavily on a preparer’s biased judgment, then they inadvertently increase the firm’s audit risk. Identifying this potential limitation of the review process is a necessary first step in helping reviewers respond more appropriately when they believe it is likely that a preparer’s judgment is biased.


    Frank, M. L., & Hoffman, V. B. 2015. How Audit Reviewers Respond to an Audit Preparer's Affective Bias: The Ironic Rebound Effect. Accounting Review 90 (2): 559-577.

    affect, audit review process, bias, ironic rebound effect, auditor judgment
    Purpose of the Study:

    Significant amount of research suggests that audit seniors’ (i.e., preparers’) judgments may be biased by factors such as their affect toward client personnel. However, research has not examined whether the audit review process corrects for this type of bias in preparer judgments. To address this issue, this study examines how experienced audit managers (i.e., reviewers) respond when reviewing an audit preparer’s judgment that they suspect could be biased by affect. Specifically, the authors investigate whether reviewers are able to rely less on a potentially biased preparer judgment. If reviewers rely too heavily on preparers’ judgments that are overly influenced by affect, then audit quality could be reduced.

    For example, assume that a preparer’s feelings of personally liking client personnel (i.e., positive affect) result in the preparer reaching a judgment that is overly favorable to the client. If reviewers are inappropriately influenced by the preparer’s judgment, then they may overlook a serious problem in the client’s financial statements. Similarly, if a preparer’s feeling of disliking client personnel (i.e., negative affect) causes the preparer to reach a judgment that is overly critical, and if reviewers are inappropriately influenced by the preparer’s biased judgment, then reviewers may require unnecessary costly audit procedures. Thus, over-relying on a preparer’s judgment that has been biased by affect could undermine the efficiency and effectiveness of the audit review process, resulting in significant costs to the audit firm.

    Design/Method/ Approach:

    Participants were 119 audit managers and senior managers with an average of 9.37 years of audit experience recruited from two Big 4 accounting firms. The study was conducted online. Using a 2x2 between-subjects design, participants were told to assume the role of an audit manager assigned the task of reviewing certain inventory judgments made by a hypothetical audit senior. The evidence was collected prior to February 2012.


    Reviewers who are not informed about the preparer’s affect are not significantly influenced by the preparer’s judgment and arrive at judgments more consistent with the audit evidence. In contrast, reviewers who not only receive the same preparer judgment and workpaper evidence, but who are also informed of the preparer’s affect, are significantly influenced by the preparer’s judgment. The results suggest that reviewers can better adjust for a preparer’s judgment that is simply inconsistent with the audit evidence than one that appears biased by the preparer’s affect.

    In a follow-up study the authors found that reviewers indeed believe that a preparer’s positive (negative) affect toward the controller will cause the preparer’s judgment to be more favorable (unfavorable) to the client than is warranted. Thus, despite their belief that affect biases the preparer’s judgment, reviewers fail to mitigate this bias when reaching their own judgments.

    Auditor Judgment
    Auditor judgment in the workpaper review process