Client Data Files and Auditor Skepticism: How Do “Dirty Files” Influence Auditors’ Skeptical Judgments and Actions?

• In Event: Professional Skepticism

Abstract

Auditors receive an abundance of data files from audit clients when performing audit work. These files may have differing characteristics (e.g., contain irrelevant information or errors) that may influence the ease of use and interpretation by an auditor. Depending on the perceptual fluency of client provided data files (i.e., how “dirty” the files are), auditors may resort to heuristic processing when assessing the files, resulting in skeptical judgments and actions that lead to over-auditing. This paper reports two experiments examining whether two characteristics of client provided data files, the presence of minor errors (absent or present) and information load (low or high), influence auditors’ perceptual fluency, skeptical judgments, and actions. We theorize and report that higher information load decreases perceptual fluency more when minor errors are present (Experiment 1), and this same combination increases auditors’ skeptical judgments and actions (Experiment 2). While minor errors should raise auditors’ concerns, greater information load should not. Together our study contributes to the literature on professional skepticism by presenting an alternative issue to those raised by regulators (i.e., too much skepticism rather than too little) that can occur when auditors struggle to interpret large amounts of data in client provided files. Our results provide several important practical implications for audit firms, audit clients, and regulators. Importantly, while access to increased amounts of client data may have many benefits, both audit firms and clients need to be wary of the potential suboptimal balance of effectiveness and efficiency that could affect audit quality.

Authors

• Lindsay Andiola, Virginia Commonwealth University

• Alisa Gabrielle Brink, Virginia Commonwealth University

• Edward Lynch, Cal State University - Fullerton

• Jodie Ferguson, Virginia Commonwealth University