Are Auditors' Judgments Sufficiently Regressive?

Journal of Accounting Research, Vol. 19, No. 2, Autumn 1981

28 Pages Posted: 16 Sep 2010

See all articles by Edward J. Joyce

Edward J. Joyce

University of Minnesota

Gary C. Biddle

University of Melbourne - Faculty of Business and Economics; Columbia Business School; HKU Business School; London Business School

Date Written: August 15, 1981

Abstract

The primary purpose of this paper is to test for the use of the representativeness heuristic by auditors in situations in which its use will lead to judgments that systematically depart from the Bayesian optimal responses. No explicit representation of payoffs was made, nor were subjects typically asked to choose a course of action. Thus it cannot be concluded that use of the representativeness heuristic in the experimental situations tested is not cost effective. To the extent, however, that one is willing to assume that action choices are sensitive to judgments of outcome probabilities, and these action choices have differential expected payoffs, a finding of extensive heuristic use by auditors would suggest further research to assess the economic consequences of such use.

Suggested Citation

Joyce, Edward J. and Biddle, Gary C., Are Auditors' Judgments Sufficiently Regressive? (August 15, 1981). Journal of Accounting Research, Vol. 19, No. 2, Autumn 1981, Available at SSRN: https://ssrn.com/abstract=1677330

Edward J. Joyce

University of Minnesota ( email )

Gary C. Biddle (Contact Author)

University of Melbourne - Faculty of Business and Economics ( email )

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