Improving Specialists’ Contributions to Audits
46 Pages Posted: 20 Jun 2016 Last revised: 13 Sep 2023
Date Written: September 12, 2023
Abstract
Auditors rely on specialists to audit highly specialized areas of financial statements. Yet, auditors and specialists do not always work together effectively, which can inhibit specialists’ contributions to audits. Informed by researchers’ and practitioners’ identification of “ownership” as potentially central to this problem, we conduct a survey and experiment with practicing valuation specialists to investigate it. In the survey, we seek insight into specialists’ psychological ownership – the feeling that something is your own – of their audit work. We find that specialists’ ownership and its contributing factors vary across specialists and engagements. In the experiment, we vary specialists’ psychological ownership of their audit work and whether auditor behavior infringes upon specialists’ audit work. We predict and find that specialists with higher psychological ownership engage in deeper processing of evidence in the absence of auditor infringement. Deeper processing leads specialists to make more evidence-informed judgments and to communicate their judgments more effectively to the audit team, in a setting where the pattern of evidence suggests potential client misstatement. Our study emphasizes that while psychological ownership is a potential mechanism for interventions aimed at improving specialists’ contributions to audits through specialists’ behavior, the effectiveness of such interventions will depend on auditors’ behavior as well.
Keywords: Accounting estimates, audit team interactions, infringement, psychological ownership, specialists
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