Examining the Sleeper Effect in Auditors' Evaluations of Audit Evidence

• In Event: Auditor Biases

Abstract

Current auditing standards require auditors to consider qualifications of the source (e.g., credibility and competence of management) in assessing the quality (e.g., reliability and sufficiency) of audit evidence, especially in subjective audit areas. However, while auditing standards stress the importance of the evaluation of management, they do not prescribe how auditors should effectively identify and incorporate relevant information about the source into evidence evaluation. Psychology research highlights that credibility is multi-dimensional and, more importantly, competence is context-specific. That is, an expert in one area may lack the necessary knowledge and background in other areas. Recent research in psychology has identified a phenomenon called the “sleeper effect for the source”, which explains how a weak message’s persuasiveness can increase over time if it is delivered by a credible source. Using an experiment, I find that current auditing practices regarding management competence assessments result in auditors ignoring context-specific competence and relying on weak audit evidence when provided by a credible source (i.e., a sleeper effect). This effect results in reliance on overall source credibility assessments instead of consideration of a source’s context-specific competence during evidence evaluation. Further, an audit documentation intervention designed to assist auditors in identifying and incorporating context-specific competence into evidence evaluations moderates the sleeper effect.

Authors

• Jenny McCallen, University of Georgia

• Christopher P Agoglia, University of Massachusetts-Amherst

• Bradley Bennett, University of Massachusetts-Amherst