The Influence of Professional Identity and Outcome Knowledge on Professional Judgment

• In Event: Continental Breakfast - Research and Education Forum
  In Roundtable Session: Table 12: Auditor Judgment

Abstract

In response to a Public Company Accounting Oversight Board (PCAOB or Board) 2007 inspection report, Deloitte notes that “[p]rofessional judgments of reasonable and highly competent people may differ as to the nature and extent of necessary auditing procedures, conclusions reached and required documentation” (PCAOB, 2011, p. 30). Other responses to PCAOB findings echo this sentiment. Understanding causes of differences between experts’ professional judgments may help stakeholders to effectively utilize PCAOB inspection findings and firms’ responses to those findings. This study uses Social Identity Theory to explore whether role identity as an audit partner, internal reviewer, or PCAOB inspector, influences an expert’s judgments in an ambiguous decision environment. We find that professional judgments do not differ based on professional identity. This study also examines whether the presence or absence of outcome knowledge explains judgment differences among auditing experts. Although outcome knowledge has been shown to influence judgment in previous research (e.g. Peecher & Piercey, 2008), we demonstrate that this bias extends to audit experts. We also find that experts’ level of organizational identification and membership esteem impacts professional judgment.

Authors

• Anna J. Johnson, Bradley University

• Julia L. Higgs, Florida Atlantic University - Boca

• Karen L. Hooks, Florida Atlantic University - Boca