Auditors are expected to plan and adapt audit programs in response to changes in risk associated with each client. Results in the existing research have been mixed regarding whether auditors respond to changes in risk. Two possible explanations for the lack of responsiveness to changes in risk found in the existing research are that auditors succumb to profit pressure, and that researchers only analyze responses in the risky accounts without considering related accounts. This paper experimentally tests how auditors respond to changes in risk of material misstatement identified by means of interim audit testing results. The response to changes in risk of material misstatement is analyzed using planned audit hours across related financial statement accounts and at varying levels of profit pressure. Results indicate the following primary findings: (a) auditors respond to changes in risk of material misstatement by increasing planned audit hours in accounts related to the risky account, and (b) profit pressure does not affect the auditor's response to changes in risk. These results indicate that the relations between accounts must be considered in order to identify the auditors' response to changes in risk of material misstatement. In addition, the results are consistent with audit firms decreasing the emphasis on profit pressure due to the current importance that the market places on audit quality.

We examine the use of intuition versus analytical thinking in auditor risk assessment using a task that requires auditors to assess a group of impairment indicators. We expect that auditor intuition, rooted in the subconscious, more likely reacts to impairment indicator risk than does auditor analytical thinking. Results from two different experiments support this expectation for less‐experienced audit seniors. These seniors are more likely to assess step‐zero impairment indicators as signaling potential impairment when prompted to think intuitively versus analytically . In contrast, a third experiment finds that experienced seniors are more likely to assess step‐zero impairment indicators as signaling potential impairment when prompted to think analytically versus intuitively . This is consistent with the more experienced but still non‐expert seniors possessing developed analytical thinking, but struggling to effectively use their intuition. Our results inform theory by suggesting under what conditions auditor intuition and analytical thinking produce differential risk sensitivity. Furthermore, our results inform practice, given regulators' stated focus on auditor skepticism and impairment assessments.

Research documents significant management bias and opportunism around the discretionary inputs of audited complex estimates, including fair value measurements (FVMs), which raises questions about auditors' ability to test these estimates. We examine how the degree of quantification in client evidence and client control environment risk influence auditors' planned substantive testing of management's discretionary inputs to FVMs. We find that auditors allocate a lower proportion of effort to testing the subjective inputs to the fair value estimate when the degree of quantification in the client evidence and level of client risk are both high. Further, this tendency persists even after auditors receive a regulatory practice alert reminding them to focus more audit effort on testing fair value (FV) inputs that are susceptible to management bias, and despite the auditors increasing their overall audit effort. Qualitative analyses of the procedures auditors selected indicate that inapt attention to the degree of quantification in evidence is a potential root cause of the difficulty auditors encounter when testing complex estimates. Our results imply that in situations where both quantified and non-quantified data are important to the audit, there is the potential for management to manipulate the evidence they provide to auditors to distract auditors from testing the discretionary inputs to complex estimates that are susceptible to management opportunism. Data Availability: Contact authors for data availability.