Audit evidence quality: The role of accounting managers

• In Event: Continental Breakfast - RESEARCH INTERACTION FORUM
  In Roundtable Session: Research Interaction Forum

Abstract

I examine whether company managers who report less transparently obfuscate their behavior from external auditors by manipulating audit evidence quality and whether managers' manipulation strategies depend on how powerful they feel. I argue that managers manipulate audit evidence quality using two strategies: (1) filling the evidence set with less reliable (i.e., trustworthy) evidence and (2) omitting information about evidence that negates its reliability. Using an experiment, I find that managers use these strategies to manipulate evidence quality when they report less transparently. Further, I find that when managers report less transparently, more powerful feeling managers prefer to use the first strategy, whereas less powerful feeling managers prefer to use the second strategy. These findings suggest that managers who feel both more and less powerful are complicit in manipulating audit evidence quality when they report less transparently, decreasing audit quality and, ultimately, increasing the likelihood that less transparent reporting reaches investors.

Author

• Christy Sims Nielson, The University of Mississippi