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    Auditors’ Levels of Dispositional Need for Closure and E...
    research summary posted November 12, 2014 by Jennifer M Mueller-Phillips, tagged 09.0 Auditor Judgment, 09.10 Prior Dispositions/Biases/Auditor state of mind 
    Auditors’ Levels of Dispositional Need for Closure and Effects on Hypothesis Generation and Confidence
    Practical Implications:

    This study provides evidence about DNFC, a stable personality characteristic that affects the judgment and decision making process and may also affect attrition of auditors. Evidence indicates that although higher-DNFC individuals are attracted to the profession, the lower-DNFC individuals may remain as auditors longer and be promoted to the level of partner. Therefore, early identification of a characteristic that may contribute to a rise to the rank of partner might be useful for accounting firms and allow for better training of future leaders.

    The evidence also indicates that auditors higher in DNFC tend to truncate the hypothesis-generation task sooner, producing fewer causal hypotheses and demonstrating lower hypothesis quality. Further, those same auditors express greater confidence that they have identified the true hypothesis—a combination that bodes poorly for the ultimate correct assessment of causality. However, assessment of an individual auditor’s DNFC could be helpful in tailoring audit programs to overcome limitations related to information-processing characteristics. This information may also be useful in forming audit teams (for example, pairing a low-DNFC individual with a high-DNFC individual) and in customizing auditor training (perhaps helping high/low-DNFC auditors learn compensating techniques).


    For more information on this study, please contact Dr. Charles Bailey at the University of Memphis,


    Bailey, C., C. Daily, and T. Phillips, Jr. 2011. Auditors’ Levels of Dispositional Need for Closure and Effects on Hypothesis Generation and Confidence. Behavioral Research in Accounting 23 (2): 27-50

    auditing judgment, need for closure, motivated cognition, judgment and decision making, hypothesis generation.
    Purpose of the Study:

    The extent to which auditors seek and process information before forming a judgment can have important consequences in the conduct of an audit. This research focuses on dispositional need for closure (DNFC), which is a personal trait that affects the propensity to seek and process information before reaching a judgment. Psychology researchers have demonstrated consistent effects on hypothesis generation and confidence in lay-judgment settings, and in a validation sample they identified accounting students as a group high in DNFC. The initial purpose of this study is to provide evidence of the DNFC level of a group of professional accountants, and auditors were chosen because of the implications of high DNFC for these individuals.

    Since findings concerning lay decision makers are not always applicable to accounting professionals, in the second part of the study we examine whether differences in DNFC can affect hypothesis generation by professional auditors. If DNFC affects the judgments of professional auditors in the ways demonstrated among laypersons, then it can have important implications for auditing judgment. That is, auditors high in DNFC may prematurely truncate the hypothesis-generation process, collect little evidence, seize on conclusions prematurely, be overconfident in their correctness, and be slow to recognize their mistakes as new information emerges.

    Design/Method/ Approach:

    Research evidence for Study I was collected in 2002 from members of the AICPA who specified a professional interest in auditing and worked for a Big 4 accounting firm. Participants completed the Need for Closure Scale (NFCS). Study II was conducted in 2007, using members of the AICPA specifying a professional interest in auditing and working for a Big 4 firm or another large firm. Participants completed the NFCS and an auditing related hypothesis-generation task.

    • The authors find professional auditors significantly lower in DNFC than reported in a sample of accounting students, and progressively lower in DNFC at higher professional ranks. Yet, substantial variance in this characteristic persists even at higher ranks, to potentially affect judgment and task performance. Possibly students high in DNFC are attracted to the accounting major because of its structure, but once experienced in the business environment, may find that the profession is not as structured as they had anticipated, and ultimately may leave the firm voluntarily or involuntarily.
    • The authors find that auditors lower in DNFC generate more hypotheses—and higher quality hypotheses—than auditors higher in DNFC when presented with an audit-related decision task.
    • The authors find that auditors lower in DNFC spend relatively more time on the deliberative, judgmental task of hypothesis generation, but not on simple non-deliberative response tasks.
    • The authors find that auditors higher in DNFC generate fewer hypotheses and lower-quality hypotheses, yet express greater (and unwarranted) confidence that they have included among their hypotheses the true cause of an irregularity regarding the case they have reviewed. 
    Auditor Judgment
    Prior Dispositions/Biases/Auditor state of mind