The Impact of Data Analytic Sophistication and Supervisor Preference on the Evaluation of Complex Estimates

• In Event: Technology in Auditing

Abstract

The rise of technology-enabled data analysis tools creates opportunities for firms to improve audit quality related to complex estimates. In an effort to combat auditor’s resistance to using technology-enabled tools, firms may promote the sophistication of such tools to their audit staff. However, there is a paucity of research examining how auditors consider the sophistication of an analytic tool when making judgments about audit evidence. We conduct an experiment and find that, holding all other information constant, the perceived sophistication of an analytic tool interacts with the preferences of an audit supervisor to jointly impact auditor’s anticipated evaluation from a supervisor and, in turn, their evidence evaluation decisions when auditing a complex estimate. As such, the promotion of tool sophistication by audit firms can significantly affect the audit of complex estimates to a greater degree than what would normatively be expected. Implications for audit theory and practice are discussed.

Authors

• Steve Perreault, Providence College

• Jared Koreff, Trinity University