The Influence of Professional Identity and Outcome Knowledge on Auditor Judgment.

• In Event: Factors affecting auditor judgment II

Abstract

In response to a Public Company Accounting Oversight Board (PCAOB) 2007 inspection report, Deloitte notes, “[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” (30). The PCAOB (2012) argues that inspection deficiencies should not be characterized as differences in professional judgments. Using social identity theory, we examine whether role identity influences experts’ judgments. We provide a hypothetical judgment made by a lead engagement partner (LEP) and measure the degree in which participants assigned to other review roles (engagement quality review partner (EQRP), internal quality reviewer (IQR), or a PCAOB inspector (Inspector)) agree with the LEP. We predict EQRPs (Inspectors) will agree (disagree) more than the other identities and in-group reviewers will agree more with LEP judgment than out-group reviewers. Interesting, controlling for theory-based covariates, we find the IQRs disagree more than those in both the EQRP or inspector roles. Also, as predicted, we find outcome knowledge impacts expert judgment.

Authors

• Anna J Johnson, Bradley university

• Julia L Higgs, Florida Atlantic University - Boca

• Karen L Hooks, Florida Atlantic University - Boca

• Veena Looknanan Brown, University of Wisconsin-Milwaukee