Auditors' Evaluation of Evidence: The Effect of Communication Channel and Management Information

• In Event: Auditor - Client Communication

Abstract

This study investigates the effect of communication channel (e.g., face-to-face, written) and management information (i.e., background information on the reliability of client personnel) on auditors’ judgments of evidence persuasiveness in a management inquiry setting. I design a 2x2 between-participants experiment to test my theory and present results of an experiment with 122 practicing senior auditors. Auditor participants receive an explanation from a client’s assistant controller to explain an unexpected fluctuation in a financial ratio. I manipulate the means by which the assistant controller communicates with the auditor (communication channel) and the presence of background information about the assistant controller (management information). Results of my experiment indicate an interaction effect of the communication channel and management information. When management information is provided, auditors assess the evidence as more persuasive when communication is face-to-face versus written. Auditors not receiving management information do not assess the evidence differently, irrespective of the communication channel. The results suggest that when provided information on management, auditors are focused more on evaluating management which is made easier through face-to-face communication. Further, these assessments of management are consistent with the pattern of persuasiveness, indicating that they use this information more in their judgments when communicating face-to-face versus text and only when management information is provided. The results of this research suggest auditors may be assessing evidence as more persuasive than merited when management information is present and auditors are communicating with management face-to-face.

Author

• Melissa Carlisle, Case Western Reserve University