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.

Framed in the decision to restate financial statements, this study addresses whether behavior predicted by competing theories depends on the complexity of evidence. Two experiments observe the information‐search behavior of auditors responsible for investigating their firm's prior opinion. Experiment 1 shows that auditors confronted with few (many) summarized statements that replicate in form the materials used in prior research prefer to first search statements that are inconsistent (consistent) with the prior‐period accounting. This result generally corroborates research in accounting and confirms the predictions of information‐quantity theory in psychology. In contrast, experiment 1 also shows that, when materials mimic the detailed documents common in practice, the results are different: Auditors confronted either with few or with many detailed documents prefer to search inconsistent documents first. This result confirms the predictions of evidence‐complexity theory in psychology and shows that, compared to the materials on which prior research relies, detailed documents, such as memos, emails, letters, and analyses, drive information search toward inconsistent evidence. Experiment 2 probes further and finds that auditors evaluate documents bearing notes inscribed after the documents were prepared to be more inconsistent with the prior‐period accounting, and that the dispersion in search behavior may be reliably conditional on the presence of notes.

David N. Ricchiute, An Empirical Assessment of the Impact of Alternative Task Presentation Modes on Decision-Making Research in Auditing, Journal of Accounting Research, Vol. 22, No. 1 (Spring, 1984), pp. 341-350

I test whether hints at an attorney's line of argument influence accountants' expert witness testimony. In experiment 1, litigation services accountants review evidence adopted from a recent auditor-liability case and decide whether a defendant auditor complied with generally accepted auditing standards. I find that hints posed before the review of evidence result in decisions that are more consistent with the attorney's verdict preference. Motivated by a lack of research on the role of accountants' expert testimony in judges' decisions and by evidence that most auditor-liability cases settle, I find in experiment 2 that the certainty of decisions in an expert's report affects the settlement decisions of experienced lawyers, a proxy for trial judges. These findings show that hints at an attorney's line of argument can influence accountants' decisions about evidence documenting auditing issues, and that the certainty of decisions in an expert's report can affect the decisions of mock trial judges. The study has implications for drafting attorney-expert retention letters, and for training accounting experts and the judiciary about the role of hints in the attorney-expert setting.

Presents evidence that the presentation order of audit working-paper documentation affects the outcome of audit partners' going-concern decisions. Interaction of memory organization and the organization of working-paper evidence to affect audit decisions; Effects of order manipulation on the subjects' going-concern decisions; Implications of the research for audit working-paper design.

[This article reports evidence that the presentation order of audit working-paper documentation affects the outcome of audit partners' going-concern decisions. Although Frederick (1991) has found that memory organization and the organization of evidence interact to affect the retrieval of audit evidence from memory, this study establishes that memory organization and the organization of working-paper evidence interact to affect audit decisions. Order effects are hypothesized because the going-concern decision task is driven by voluminous working-paper evidence that is typically documented in an order convenient for compiling audited financial statements, not in an order optimal for minimizing the cognitive effort required to reconstruct the causal order of relevant events. The experiment reported in this article tests the proposition that evidence documented in a contextually meaningful causal order (rather than in the traditional working-paper order of the public accounting firm participating in the study) will diminish the cognitive effort required of highly experienced audit partners by facilitating their ability to evoke pre-existing going-concern schemata from long term memory. One hundred audit partners from a public accounting firm participated in the study. The experiment manipulated the presentation order of 60 sentences to compare the going-concern decisions of partners who read the audit evidence in variations of two distinctly different orders: causal order versus the participating firm's working-paper order. Evidence sentences were compiled from one of the firm's audit engagements by the researcher and by the engagement partner, manager, and reviewing partner assigned to the audit. Fifteen of the sentences referred to events consistent with a decision of substantial doubt about the entity's ability to continue as a going concern, 15 were consistent with a decision of no substantial doubt, 15 supported both decisions, and 15 supported neither decision. The sentences were arrayed in causal order by the researcher, engagement partner, and manager, using procedures outlined in Pennington and Hastie (1986, 1988). The working-paper order of presentation was prepared by the engagement partner, manager, and reviewing partner and represents the way an audit partner in the participating firm would likely encounter the evidence in a set of working papers assembled by the firm. The experiment was constructed as a 2 X 2 design: 25 subjects read the "yes" sentences (evidence for substantial doubt) in causal order and the "no" sentences in working-paper order, 25 read the "no" sentences in causal order and the "yes" sentences in working-paper order, 25 read both the "yes" and "no" sentences in causal order, and 25 read both the "yes" and "no" sentences in working-paper order. To control for within-cell order effects, randomly assigned subjects in each of the four treatment groups read the "yes" cues first, and the others read the "no" cues first. All subjects completed two tasks: a decision regarding substantial doubt based on the 60 evidence sentences and an assessment of their confidence in the decision. The results establish that the order manipulation affected the subjects' going-concern decisions but not their confidence in those decisions. Subjects decided there was substantial doubt about the client more often when the strongest evidence supporting this decision was read in causal order and, correspondingly, least often when the strongest evidence was read in the firm's working-paper order. The order effects documented in this study have important implications for audit working-paper design, particularly in complex unstructured decision tasks like the going-concern decision.]

Examines whether the provision of audit clients with nonaudit services result in knowledge spillovers and audit production efficiencies that could produce economic rents for the auditor. Demonstration of the comparability of the research sample with prior studies; Data set compiled from the participating firm's internal billing records.

Reviews the book, "Auditing Symposium VI: Proceedings of the 1982 Touche Ross/ University of Kansas Symposium on Auditing Problems," edited by Donald R. Nichols and Howard F. Stettler.