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    Accountability and auditors’ materiality judgments: The e...
    research summary posted May 3, 2012 by The Auditing Section, last edited May 25, 2012, tagged 09.0 Auditor Judgment, 09.01 Audit Scope and Materiality Judgments, 09.02 Documentation Specificity, 09.11 Auditor judgment in the workpaper review process, 10.0 Engagement Management, 10.02 Materiality and Scope Decisions, 10.03 Interaction among Team Members 
    Accountability and auditors’ materiality judgments: The effects of differential pressure strength on conservatism, variability, and effort.
    Practical Implications:

    Firms should consider the levels of accountability pressure and situations where they use them and consider how different levels of pressure may impact performance.  Higher levels of accountability pressure may increase effectiveness and increase the likelihood of finding material misstatements. 

    On the other hand, increased effectiveness and time spent due to higher levels of accountability pressure may cause inefficiencies and result in unnecessary effort.  Firms should evaluate the costs and benefits for their situations. 

    The authors note that this study only looks at the effect of accountability pressure from an unknown partner.  In the real world, auditors have accountability pressures from many levels such as other superiors, clients, regulators, and audit committees. 
    Further, the auditor may have assessed things differently if they knew the partner that was performing their review.


    DeZoort, T., P. Harrison, and M. Taylor. 2006.  Accountability and auditors’ materiality judgments: The effects of differential pressure strength on conservatism, variability, and effort.  Accounting, Organizations, and Society 31 (4-5):  373-390. 

    Audit Judgment; Audit Materiality; accountability pressure; materiality judgment
    Purpose of the Study:

    The purpose of this study is to look at how four different levels of accountability pressure (i.e. how their decisions would be reviewed) affect auditor conservatism, variability, and effort in tasks related to materiality.

    Design/Method/ Approach:

     The authors performed a computerized experiment using a final sample of auditors from five public accounting firms.  Participants were managers, staff and senior associates.   Participants were asked to review client background information, financial information, and a proposed audit adjustment for the Allowance for Doubtful Accounts balance.  Participants were asked to provide a planning materiality amount for the engagement and a materiality judgment regarding the proposed audit adjustment.  The auditors were put into one of four levels of accountability pressure:

    • Anonymity –judgment decision and responses were anonymous
    • Review –audit partner review but no feedback provided
    • Justification – participants provide written justification, which was reviewed but no comments provided
    • Feedback –formal feedback from partner about performance provided  

    In addition, about half of the participants received a “planning materiality decision aid,” which provided a range of planning materiality values.

    • For higher levels of accountability pressure strength (i.e. justification and feedback) judgments regarding planning materiality and proposed audit adjustments were more conservative and less variable.  In addition, higher level participants spent more time on the tasks, provided longer explanations and included more qualitative factors than those in lower levels, which suggest a higher level of effort.
    • Planning materiality decision aids reduced planning materiality variation across the various pressure levels, particularly for those in the lower accountability pressure groups.  
    Auditor Judgment, Engagement Management
    Audit Scope & Materiality Judgements, Documentation Specificity, Auditor judgment in the workpaper review process, Materiality & Scope Decisions, Interaction among Team Members
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