Knowledge that Transforms

Prior research reports that the memories of working paper preparers may be biased toward evidence consistent with their prior decisions, but that reviewers exposed to the same set of evidence can mitigate the bias by evaluating inconsistent evidence. This study tests whether audit seniors’ decisions bias their ability to recognize evidence to document in working papers, and whether biased documentation affects the decisions of audit partners who are exposed only to the subset of evidence that seniors recognize and document. Experiment 1 confirms that audit seniors’ prior decisions bias their memories for evidence to document in working papers, and also creates materials for experiment 2. Experiment 2 offers a new insight: when exposed only to the evidence that seniors recognize and document, partners make decisions biased in the direction of the seniors’ decisions, since not all of the inconsistent evidence is documented. Experimental procedures controlled for four alternative interpretations: justification, evidence order, recency, and primacy.