This study conducts two experiments to examine how investors’ judgments differ when they read a press release using either a mobile device or a computer. Results show that when investors use a mobile device, information related to a specific headline (mentioning a specific part of the news like “net income” or “revenue”) influences their investment judgments more than when investors use a computer. This effect is robust to specific headlines that focus on either positive or negative information. In contrast, investors’ judgments do not differ when they use a mobile device compared to a computer and the headline is general (using the broad term “results”). We replicate our findings in a second experiment and provide evidence that the observed effect occurs because investors who use their mobile device are in a more distracted frame of mind, which in turn increases the influence of prominent information. Our results suggest that managers’ presentation choices may have a greater influence on investors as they increasingly rely on mobile devices to research and execute investment decisions.

Prior research shows that, under realistic conditions, jurors overly harshly evaluate audit firm culpability when financial statement fraud emerges after issuance of a clean audit opinion. In two experiments, we test theory-based predictions that three topical regulatory factors can reduce jurors’ assessments of audit firm culpability as well as predictions about two key mediators through which these factors effectively operate. The three factors are an auditor judgment rule (AJR) prohibiting juror second-guessing of auditor judgments made in good faith and with a reasonable basis, a critical audit matter (CAM) disclosure in the audit report that pertains to the disputed area, and a juror negligence training (JNT) in which jurors learn and apply legal concepts before the case evaluation. The two mediators are jurors’ perceptions that the audit firm missed a readily detectable fraud (detectability) and tacitly assented to management’s potentially fraudulent actions (acquiescence). Finally, we also test a “reactance-effects” prediction whereby, even while the AJR and JNT interventions decrease assessed auditor culpability on average, we expect the interventions will simultaneously increase assessed damages among the relatively small subset of jurors finding against the audit firm in their presence relative to jurors finding against the audit firm in their absence. Results support our predictions and also demonstrate that the mediators of perceived detectability and acquiescence can underlie these effects.

Recent reviews of the academic literature indicate that little is known regarding how users evaluate the materiality levels auditors use or respond to quantitative materiality disclosure. Regulators around the world have taken different stances on whether materiality should, or should not, be disclosed in the auditor’s report. In response to the dearth of research on these policy decisions, we examine the effect of audit materiality disclosures, or lack thereof, on professional investors’ decision making across different investment contexts (debt vs. equity, public vs. private). Our study is designed to test global audit public policy and as such our hypotheses are motivated by assertions made by regulators, auditing standards, and audit theory. Among a sample of 246 professional investors in our main experiment and 91 professional investors in two supplemental experiments, we find no consistent evidence that investors incorporate materiality disclosures into their investment decisions. Most importantly, we find evidence that investors’ understanding of materiality is not in line with regulator assertions. For example, investors fail to make consistent connections between the amount of disclosed audit materiality and the level of auditor effort. Our results hold across debt and equity investment settings for both public and private companies. In sum, our findings suggest that disclosures of audit materiality are not well understood by professional investors and are not viewed as decision relevant. This research informs practitioners, regulators, and academics regarding the effect of materiality disclosure on investor decision making as well as stakeholders’ views and expectations of overall materiality.