We examine how managers assess performance and promotion prospects—that is, the ex ante likelihood of promotion—and the conditions under which these assessments diverge. We argue that managers apply different cognitive schemas when they make different assessments. To the extent that a signal provides different information about future versus current contributions, assessed performance and promotion prospects are likely to diverge. In two experiments, we manipulate professionals' promotion eligibility and level of consultative decision making. We find that experienced managers assess performance and promotion prospects differently, but only when professionals are promotion eligible. Specifically, more (as opposed to less) consultative decision making decreases promotion prospects while not affecting assessed performance (Experiment 1) or even improving it (Experiment 2). By contrast, more consultative decision making improves both assessments when professionals are not eligible for promotion. We shed light on the relations between subjective assessments, including that promotion is not necessarily the consequence of superior assessed performance.

Effective consultation is critical for improving the audit of estimates. In an experiment where audit managers acted as consultants to other auditors, we examine conditions in which consultants either recommend estimates that differ substantially from advice-seekers’ assessments (contrariness) or recommend narrower reasonable ranges of estimates (precision). Psychology theory argues that both of these attributes can improve estimates. We examine whether these attributes depend on consultants' status motives, that is, the desire to gain respect from or power over others. We find that active status motives lead consultants with higher specialized knowledge to provide recommendations that are less contrary, but more precise. However, consultants increase precision by tightening range bounds in a manner that is not counter to management's preference and thus unlikely to prompt the audit team to challenge the estimate. We also find that higher consultant decision authority constrains precision. Our findings suggest limits to consultation's potential effectiveness in improving estimates. For instance, our findings suggest that firms and standard setters direct consultants to focus scrutiny on the range bound that is most likely to constrain management opportunism.

Audit theory and regulation assumes that auditors’ commercial motivation threatens audit quality. In this registered report, we use data from two Big Four firms in the Netherlands and provide empirical evidence on the relation between auditors’ commercial motivation and (1) compensation, (2) total audit effort, and (3) audit quality. We proxy commercial motivation as the time that individual auditors report allocating to commercial activities. We hypothesize that auditors’ commercial effort is positively related to compensation and we find mixed support. Next, we hypothesize that auditors’ commercial effort is negatively related to the audit effort but we find no support. Turning to audit quality, we hypothesize a negative direct relation between auditors’ commercial effort and audit quality but we find no support. We also predict a positive indirect relation in which auditors’ commercial effort increases quality control reliance leading to higher audit quality. We find some support for this hypothesis but only when we use technical consultations to proxy for quality control. Auditors with greater commercial effort maintain quality because they rely more on technical consultations. In sum, our study challenges the assumption that auditors’ commercial effort threatens audit quality and questions the need for additional regulation to constrain commercial motivation.

Auditing standards require that auditors’ reliance on a specialist is commensurate with the specialist’s competence. In assessing competence, auditors encounter cues diagnostic of the specialist’s social status but less so of competence. In an experiment, we manipulate specialist status and find that auditors mistake status for competence unless they are prompted to separate the constructs. This raises the possibility that auditors could over-rely on high-status specialists. However, auditors also assess high-status specialists as more influential, and when the specialist disagrees with the client, they rely more on high-status specialists because of this perceived influence. Thus, high-status specialists can increase auditors’ willingness to challenge the client by providing a strong ally. Additional analyses suggest that auditors are aware that they rely on the specialist’s influence rather than competence, indicating that auditors do not use the process that auditing standards envision to evaluate and rely on specialists. Data Availability: Data are available upon request.

Auditors frequently seek informal advice from peers to improve judgment quality, but the conditions under which advice improves auditor judgment are poorly understood. We predict and find evidence of a trust heuristic among auditors receiving advice from advisors with whom they share a social bond. This heuristic is evident among non-specialists, who weight advice according to its justifiability when it is received from a weaker social bond advisor, but fail to objectively assess the quality of advice received and weight it heavily when it comes from a stronger social bond advisor, regardless of its justifiability. Specialists, while less prone to the trust heuristic in advice weighting, show inconsistencies in advice weighting and their assessments of advice quality. In particular, specialists discount better justified advice from stronger social bond advisors, despite rating this advice as being of relatively high quality. This defensiveness likely arises from an aversive social comparison process attributable to the high ego-relevance of a task within one's specialization. Future research is warranted to corroborate or refute this possibility.

As the use of audit data analytic tests (ADA) becomes increasingly established in practice, auditors will often confront situations in which they inherit ADA developed by others, as opposed to developing the ADA themselves. Despite the potential benefits of ADA, inheriting ADA could decrease auditors’ skeptical actions by diminishing their psychological ownership of the ADA. In an experiment where an ADA identifies a fraud red flag, we find that auditors who inherited the ADA are less likely to exercise skeptical actions than those who were personally involved in its development. We then provide evidence that informing auditors who inherit an ADA about the test development activities (e.g., a brief memorandum documenting the ADA's development) mitigates the negative effect of inheriting the ADA. Evidence from mediation analyses suggests that these effects are driven by decreased psychological ownership when auditors inherit the ADA.

In three experiments, we find that rewarding professional skepticism can backfire and decrease skepticism on future audit tasks where red flags are present. We focus on rewards for costly skepticism: skepticism that is ex ante appropriate, but generates incremental ex post costs and does not identify a misstatement. Auditors interpret a reward for costly skepticism as a better-than-expected outcome and view subsequent tasks from a risk-averse gain frame. As a result, auditors seek to avoid the downside risk of skeptical action, which decreases auditors' sensitivity to red flags and their willingness to communicate severe red flags to their managers, compromising audit quality. However, we also find that a supervisor consistently rewarding costly skepticism decreases auditors' risk aversion and increases their skepticism. In sum, auditors believe skeptical action has downside risk. A cultural shift toward credible, consistent rewards for appropriate skepticism likely helps ensure that rewards have their intended effect. Data Availability: Contact the authors.