Effects of Prepopulating Workpapers with Prior Year Conclusions on Auditors’ Risk Assessments and the Backfiring Effect of Guidance

• In Event: Workpaper Reviews, Reviewers & Audit Quality

Abstract

We conduct an experiment in which we examine the impact of prepopulation of audit workpapers (the automatic copying over of prior year audit work into current year workpapers) on auditors’ accuracy at risk assessment. We meld psychology theory on default options with key features of the audit environment to develop predictions that prepopulation, compared to leaving current year workpapers blank, harms auditors’ accuracy at assessing risks that have increased or decreased since the prior year, but improves auditors’ accuracy at assessing risks that are unchanged from the prior year. Process testing reveals that these results occur because prepopulation prompts auditors to adopt decision strategies consistent with goals of inaction and efficiency. Finally, while providing skepticism-inducing guidance not to over-rely on the prior year attenuates prepopulation’s activation of the efficiency goal, the inaction goal is impervious to the guidance intervention, and guidance does not alter prepopulation’s negative effects on auditors’ accuracy.

Authors

• Sarah E Bonner, University of Southern California

• Tracie Majors, University of Southern California

• Stacey Ritter, University of Southern California