I conduct an interactive experiment with participants in manager- and investor-like roles to examine whether and how mandating range disclosures for uncertain estimates will influence managers' reporting decisions. I find that managers report less aggressively when ranges are disclosed, such that investors have little aggressive reporting to identify using range disclosures. However, consistent with psychology theory, range disclosures have the greatest effect on managers with stronger levels of psychopathy, narcissism, or Machiavellianism (“the Dark Triad” of personality in psychology). Range disclosures discipline these managers' aggressive reporting, while managers with lower levels of all of these personalities have less aggressiveness to discipline and are insensitive to range disclosure. Consequently, mandating range disclosures should have the greatest effect on managers most in need of reining in—and is unlikely to reveal aggressive reporting to investors (as might be expected) because these managers reduce aggressiveness in anticipation of investor actions.

We experimentally examine whether audit seniors' use of simple cognitive processes for a complex task is affected by the strength of habits that they developed as staff. A habit is a mental association between a behavior and a specific context. We propose that, for seniors with stronger habits to use simple processes, the typical audit room context automatically activates those processes, making it harder to select the processes that are more effective for a complex task. As predicted, we find that seniors with stronger habits identify fewer issues with a complex estimate than seniors with weaker habits when in the typical context. Seniors with stronger habits perform better in an alternative context that does not activate the simple processes, while those with weaker habits do not. Additional analyses validate that habit strength underlies our results and explore how the audit setting influences the development and enactment of habitual behaviors.

Prior research shows that, under realistic conditions, jurors overly harshly evaluate audit firm culpability when financial statement fraud emerges after issuance of a clean audit opinion. In two experiments, we test theory-based predictions that three topical regulatory factors can reduce jurors’ assessments of audit firm culpability as well as predictions about two key mediators through which these factors effectively operate. The three factors are an auditor judgment rule (AJR) prohibiting juror second-guessing of auditor judgments made in good faith and with a reasonable basis, a critical audit matter (CAM) disclosure in the audit report that pertains to the disputed area, and a juror negligence training (JNT) in which jurors learn and apply legal concepts before the case evaluation. The two mediators are jurors’ perceptions that the audit firm missed a readily detectable fraud (detectability) and tacitly assented to management’s potentially fraudulent actions (acquiescence). Finally, we also test a “reactance-effects” prediction whereby, even while the AJR and JNT interventions decrease assessed auditor culpability on average, we expect the interventions will simultaneously increase assessed damages among the relatively small subset of jurors finding against the audit firm in their presence relative to jurors finding against the audit firm in their absence. Results support our predictions and also demonstrate that the mediators of perceived detectability and acquiescence can underlie these effects.

We use multiple methods to examine how depletion and auditors' skeptical dispositions interact to affect auditors' challenging of managers in negotiations over financial statement amounts. We expect auditors are likely depleted from effortfully exercising self‐regulation during the busy times when these negotiations occur. Individuals in a depleted state tilt toward natural, less effortful behaviors. Thus, we posit that the effects of depletion will diverge depending on the auditor's skeptical disposition—a determinant of how natural or effortful they will find the skeptical behaviors (e.g., challenging) versus client service behaviors (e.g., maintaining the client relationship and audit efficiency) required for negotiations. We predict that client service auditors (i.e., low skeptics) will challenge managers less in negotiations when depleted versus non‐depleted, while high skeptic auditors will challenge more when depleted. We test this interactive prediction in an abstract experiment where we manipulate depletion and measure auditors' skeptical dispositions using trait skepticism. Findings support our predictions. We also develop a new measure of auditors' client service–skeptic disposition based on the skepticism literature that adds nuance to the traditional lower versus higher skeptic labels. In a second study, interviews with audit partners validate the realism of our depletion and client service–skeptic constructs and corroborate our experimental findings. Our study sheds light on depletion effects in auditors' negotiations with their clients and how the effects differ based on auditor personalities.