Prompting More Relevant and Reliable Audit Evidence Ideation with a Counterfactual Mindset

• In Event: Improving Audit Quality

Abstract

Due to regulatory pressure to provide unpredictability in audits (AS No. 13, PCAOB 2010a; IFAC 2009) and the rapid pace of business change, audit firm leadership has increasingly called for greater creativity in their auditors (Arning 2013; Chipman 2013). As engagement team partners attempt to implement this directive, a challenge they are likely to encounter is design fixation (Jansson and Smith 1991). That is, knowledge of how an account or transaction was audited in the past will block new ideas from coming to mind. Relying on associative memory theory (Nijstad and Stroebe 2006), I predict and find that priming a counterfactual mindset improves the quantity, relevance, and reliability of audit evidence ideation when auditors plan familiar audit areas. I find the benefits of a counterfactual mindset on ideation are robust to the source of the design fixation (i.e., own knowledge vs. an inherited example). Supplemental analyses suggest that the improved list of audit evidence resulting from a counterfactual mindset subsequently allowed auditors to generate more efficient audit programs for familiar audit areas.

Author

• Elizabeth Altiero Poziemski, University of Central Florida