Thinking Fast versus Thinking Slow: The Effect on Auditor Skepticism

• In Event: Audit Quality 3

Abstract

Based on psychology theory and empirics about intuitive judgments, we propose that intuition can be a key element stimulating auditor skepticism and that analytical processing can crowd out intuition, making auditors less skeptical. We test our expectations with an experiment containing responses from 85 senior auditors. Our results support our theory. We find that auditors are more likely to judge an asset as potentially impaired if they use their intuition as opposed to analytical processing. When we categorize auditors on their innate use of intuition, our results become more pronounced. We find that auditors using analytical processing, who rarely use their intuition, almost never judge the asset as potentially impaired. Finally, we find that auditors using their intuition focus primarily on negative evidence items, whereas auditors who crowd out their intuition focus primarily on positive evidence items. Our research suggests that intuition can be of use to auditors, and when they crowd it out, judgment and professional skepticism can suffer.

Authors

• Christopher J. Wolfe, Texas A&M University

• Brant Erich Christensen, Texas A&M University

• Scott David Vandervelde, University of South Carolina