Compliance Checklists and Bias in Audit Judgments

• In Event: Auditor Judgment

Abstract

We investigate whether using a compliance checklist affects auditors’ judgments of the acceptability of aggressive reporting methods. The use of decision aids such as checklists in audit settings is increasing and existing research generally suggests that checklist use can improve decision-making quality. We argue that the use of a compliance checklist can also have detrimental effects as it increases auditors’ acceptance of aggressive reporting methods by inducing cognitive biases. Our data, collected using an experiment with experienced auditors of a Big Four company as participants, supports this prediction. Specifically, we find that auditors using a compliance checklist are more lenient in their evaluation of aggressive reporting and that this effect is stronger if they have been hired by a company’s management board than if they have been hired by an independent audit committee. We discuss the implications of this finding for research and practice.

Authors

• Marcel Van Rinsum, Erasmus University

• Victor Maas, Erasmus Universiteit Rotterdam

• David Stolker, Erasmus University