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    The Influence of Auditor Experience on the Persuasiveness of...
    research summary posted April 16, 2012 by The Auditing Section, last edited May 25, 2012, tagged 07.0 Internal Control, 07.01 Scope of Testing, 09.0 Auditor Judgment, 09.03 Adequacy of Evidence, 09.10 Prior Dispositions/Biases/Auditor state of mind 
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    Title:
    The Influence of Auditor Experience on the Persuasiveness of Information Provided by Management
    Practical Implications:

    The extent to which auditors’ judgments are persuaded by information from management represents asignificant issue for audit practice, especially when information from more objective sources is also available.  The evidence indicates that less experienced senior auditors rely on information from management that is aligned with management’s self-interest to a greater extent than more experienced audit seniors.  This reliance raises a concern that some senior auditors assess audit evidence more favorably than may be warranted because they inappropriately rely on information provided by management. A lack of appropriate skepticism has the potential to make audits ineffective and expose the firm to audit failures.  The study suggests the importance of carefully assigning audit tasks to auditors with an appropriate level of experience.

    Citation:

    Kaplan, S. E., E. F. O’Donnell, and B. M. Arel. 2008. The Influence of Auditor Experience on the Persuasiveness of Information Provided by Management. Auditing: A Journal of Practice & Theory 27 (1): 67-83.

    Keywords:
    Auditing, Auditor experience, Persuasiveness, Management’s assessments
    Purpose of the Study:

    Information provided by management is among the most pervasive sources of information that auditors receive during an audit engagement; however, evaluating information from management presents a dilemma for auditors.  On one hand, management should generally be knowledgeable and competent, which suggests they are a good source of information.  On the other hand, because management has self-interested incentives, they are not an objective source of information.  Thus, auditors should be particularly skeptical when evaluating information obtained from management.  Prior research finds that auditors may place too much reliance on information provided by management when that information is favorable to management (i.e., when the information may not be objective).  Understanding the factors that influence auditors’ consideration and skepticism of information provided by management is important. 

    The purpose of this paper is to examine whether auditor experience reduces auditors’ reliance on information provided by  management when that information is favorable to management.  The authors motivate their expectations based on the psychology literature of persuasion knowledge.  The authors expect that as auditors gain experience they develop more persuasion knowledge.  The authors also expect that with more persuasion knowledge, auditors will be more skeptical (or less persuaded) of management-provided information that is aligned with management’s self-interests.

    Design/Method/ Approach:

    The research evidence was collected in the mid-2000s time period.  The authors used a group of audit seniors with a wide range of experience from one Big 4 firm to complete a simulated task.  Auditors were provided with information about the reliability of internal controls.  They received assessment information from two sources: information from management and information gathered from other members of the engagement team.  The audit seniors were asked to assess the overall reliability of internal controls based on both management’s reliability assessment and the tests performed by the other members of the audit team.

    Findings:
    • The authors find that when management’s assessment information was aligned with management’s self-interests (when the information from management was more favorable than the information gathered from the other members of the engagement team), auditor experience at the senior level did have an effect on the audit seniors’ internal control reliability assessments.  Specifically, less experienced audit seniors were influenced more by management’s information than were more experienced audit seniors.  The authors claim that more experienced audit seniors had more persuasion knowledge than less experienced audit seniors; thus they were more skeptical of management’s information because it was aligned with management’s self-interests.  
    • The authors find that when management’s assessment information was not aligned with management’s self-interests (when the information from management was less favorable than the information gathered from the other members of the engagement team), auditor experience at the senior level did not have an effect on the audit seniors’ internal control reliability assessments.  Specifically, all audit seniors made similar internal control reliability assessments.
    Category:
    Internal Control, Auditor Judgment
    Sub-category:
    Scope of Testing, Adequacy of Evidence, Prior Dispositions/Biases/Auditor state of mind
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