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    The effects of feedback type on auditor judgment performance...
    research summary posted May 3, 2012 by The Auditing Section, last edited May 25, 2012, tagged 09.0 Auditor Judgment, 09.11 Auditor judgment in the workpaper review process, 10.0 Engagement Management, 10.03 Interaction among Team Members 
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    Title:
    The effects of feedback type on auditor judgment performance for configural and non-configural tasks
    Practical Implications:

    The results of this study indicate management should consider the level of task complexity before determining the best form of feedback to provide a staff member.  For simple tasks, it may be effective to merely provide staff with the correct answer.  However, for more complex tasks, it would be beneficial to provide staff with an explanation of the decision-making process in addition to the correct answer for that task.  The study also suggests that it could be beneficial to provide staff with insight into their own decision making process for complex tasks, particularly when they have low-levels of self-insight.  Thus, the results can directly inform the protocol of a firm’s workpaper review process.  This feedback could ultimately improve auditors’ subsequent decisions in audit tasks, which would improve audit quality.

    Citation:

    Leung, P. W. and K. T. Trotman. 2005. The effects of feedback type on auditor judgment performance for configural and non-configural tasks. Accounting, Organizations and Society 30 (6): 537-553.

    Keywords:
    Feedback, auditor judgment, configural processing, risk assessment, risk and risk management, task complexity, self-insight, intertask learning
    Purpose of the Study:

    One of the fundamental aims of auditing research is to improve auditor judgment.  Many audit decisions require configural processing (which means that the auditor must recognize an underlying pattern in the information rather an assessing a situation as the sum of all of the individual pieces of information).    Prior research has shown that auditors have difficulty arriving at the optimal decision when configural processing is required, which provides an opportunity for significant improvements in judgment. 

    Psychology literature has shown the effect of different forms of feedback on performance of simple tasks, but only speculated on how these effects may be impacted by task complexity.  This study considers how different forms of feedback improve auditor judgments on both simple and complex (i.e., configural processing) tasks.  Specifically, it examines four types of feedback: 

    • Outcome feedback which provides information on the correctness (i.e. was it right or wrong) of each decision. 
    • Task properties feedback which provides information on how well the individuals understood the nature of the task at hand.
    • Cognitive feedback which provides information about an individuals’ own decision making processes they used to reach their final answer. 
    • Combined task properties and cognitive feedback, which would include both the above mentioned feedbacks.
    Design/Method/ Approach:

    The authors test these forms of feedback experimentally pre-2005 by asking auditors from a Big 5 firm in Hong Kong to review checklists from simulated audits and determine the likelihood of misstatement in accounts receivable. In some cases, the audit program contained substitutable procedures (i.e., the presence of one procedure compensated for the absence of another) which required the auditors to configurally process the information (i.e., to recognize the relationship between the two compensating procedures).  In other cases, each step in the audit program addressed a unique audit objective and the task required only simple judgment.  

    The study was conducted in 3 stages.  In the first stage, the auditors assessed the likelihood of misstatement for a series of accounts receivable balances and then provided the criteria they used for making their decisions (i.e., how much weight they placed on each procedure listed in the audit program).  In stage 2, they were provided with a specific form of feedback and then were asked to complete assessments of an additional series of accounts receivable balances.  In the final stage, they were asked to assess the likelihood of misstatement for a series of cash disbursement cycles.  

    Each auditor was provided with one of the following forms of feedback: 

    • Outcome feedback –am assessment of misstatement determined by the partner on the job. 
    • Task properties feedback –the weight each audit procedure was given in the partner’s decision process and its combined importance with other procedures. 

    Cognitive feedback – provided the participants with information on their own decision-making process.  Since each participant completed a series of decisions, it was possible to calculate the weight they placed on each of the audit steps as they made their decisions. 

    • Combined task properties and cognitive feedback – provided with the importance of each audit procedure in both the partner’s decisions and their own decisions.
    Findings:
    • Outcome feedback is useful for simple tasks. 
    • Task properties feedback (i.e., information about how the partner made his/her decision) is useful for both simple and complex tasks. 
    • Cognitive feedback is useful for complex tasks, particularly when auditors have a low level of self-insight (i.e., they have an incorrect belief about the weight they place on each audit procedure in their decision-making process). 
    • Combined task properties and cognitive feedback is useful for both simple and complex tasks.  However, there is no additional benefit from adding cognitive feedback to task properties feedback. 
    Category:
    Auditor Judgment, Engagement Management
    Sub-category:
    Auditor judgment in the workpaper review process, Interaction among Team Members
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