Tell Me More? Explanation Detail and Auditor Reliance on Human and Non-Human Specialists

• In Event: Auditor Reliance on Advanced Technologies, Specialists, or Both

Abstract

PCAOB inspection reports document persistent deficiencies in auditors’ use of specialists when evaluating complex estimates. In this study, we examine whether the explanation detail surrounding a specialists’ methods and assumptions influences auditors’ elaboration, and ultimately, reliance on specialist-provided evidence. In addition, we examine whether the type of engaged specialist (i.e., human versus system) impacts the extent of auditors’ reliance on that specialist. We find that a less-detailed explanation constrains auditors’ elaboration, resulting in judgments indicative of algorithm aversion. Interestingly, when given a greater opportunity to elaborate (via a more-detailed explanation), auditors increase their reliance on system-provided evidence and reduce their reliance on evidence from human specialists. Our findings demonstrate that when auditors’ elaboration is relatively low, their decisions are heavily influenced by heuristic cues (e.g., human versus non-human source). Yet, when elaboration is relatively high, auditors’ decisions are based on the underlying evidence rather than superficial factors.

Authors

• Blake Holman, University of Kentucky

• Benjamin P. Commerford, University of Kentucky