This article deals with the expansion of the predictive ability criterion to consider the effects of information on decision-maker's (DM) behavior. The analysis involves two parts. In the first part, an information relevance criterion that simultaneously considers both the information and the DM's interpretation and use of it is developed. Under this relevance standard called prediction achievement, information alternatives are evaluated based upon the accuracy of the predictions made by the DM. Efficient implementation of this relevance measure requires that the effects of different information alternatives on the DM's behavior be predicted based upon descriptive mathematical models. The second part of this research consists of a field experiment designed to test three necessary conditions for the use of one particular model in the prediction of two-group classification decisions. E. Brunswik's Lens Model brings the relationship between predictive ability and information utilization into bold relief.

Research methodology, Laboratory studies, Incentives, Effort

Auditing, Financial statement errors, Auditor experience, Decision making

Auditing, Auditor judgement, Auditor expertise

Edward J. Joyce, Robert Libby, Some Accounting Implications of "Behavioral Decision Theory: Processes of Judgment and Choice", Journal of Accounting Research, Vol. 19, No. 2 (Autumn, 1981), pp. 544-550

Risk Taking, Probability distribution, Decision making

[Prior research indicates that auditors encounter difficulty in applying experienced error frequencies to judgments of the probability that an audit objective is violated given a particular transaction cycle. This difficulty may occur because of a mismatch between the organization of this particular judgment task and the organization of auditors' knowledge. We test the effectiveness of two decision aids at counteracting this difficulty: (1) a checklist aid which facilitates knowledge retrieval and (2) a decomposition-and-mechanical-aggregation aid which facilitates both knowledge retrieval and aggregation. The checklist aid slightly improved the degree to which auditors' judgments reflected experienced frequencies and the mechanical-aggregation aid greatly improved auditors' judgments, completely counteracting the effect of the task organization-knowledge organization mismatch.]

[Experienced auditors tend to structure their knowledge of financial statement errors with audit objective as the primary organizing dimension and transaction cycle as secondary. Yet, many audit tasks are structured in the opposite manner, requiring auditors to assess whether objectives are met for each transaction cycle. Our paper reports the results of an experiment which indicates that this mismatch between knowledge structure and task structure may hinder auditors' ability to draw on previous experiences when making conditional probability judgments and when allocating audit hours to various objectives within cycles. These results suggest one instance where knowledge structures that are often functional may have adverse effects when they do not match the task structure to which they are applied.]