Using Audit Programs to Improve Audits of Complex Estimates

• In Event: Specialists, Audit Materiality & Complex Estimates

Abstract

Auditors experience difficultly when auditing complex estimates (Cannon and Bedard 2016; Griffith et al. 2015a) in part because the need to collect some evidence may not become apparent until testing is being performed (Griffith et al. 2015b). In this study, we experimentally examine whether changing the focus of audit programs from a step-by-step to a goal-oriented audit program improves auditors’ search for critical evidence that was not known to be necessary when the audit program was prepared. We expect that step-by-step audit programs may interfere with auditors’ ability to identify unplanned, but relevant procedures and evidence. Our theory suggests that having a general goal, which allows people to remain open to a broad set of ways to achieve the goal, is more effective than having a specific plan when the essential steps needed to achieve the goal are difficult to specify in advance (Parks-Stamm et al. 2007; Bayuk et al. 2010; Masicampo and Baumeister 2012). We find that auditors who use goal-oriented audit programs when auditing estimates are more effective than auditors who use step-by-step audit programs. Our study suggests that a goal-oriented approach to auditing estimates leads to improvements in audit quality on this important and difficult task.

Authors

• Jacqueline S Hammersley, University of Georgia

• Michael Ricci, University of Georgia