Debiasing the Outcome Effect: The Role of Instructions in an Audit Litigation Setting

Posted: 27 Apr 2002

See all articles by Peter Clarkson

Peter Clarkson

University of Queensland - Business School; Simon Fraser University (SFU) - Beedie School of Business; Financial Research Network (FIRN)

Craig Emby

Simon Fraser University (SFU) - Accounting Area

Vanessa W-S Watt

Simon Fraser University (SFU) - Beedie School of Business

Abstract

The outcome effect occurs where an evaluator, who has knowledge of the outcome of a judge?s decision, assesses the quality of the judgment of that decision maker. If the evaluator has knowledge of a negative outcome, that knowledge negatively influences his or her assessment of the ex ante judgment. For instance, jurors in a lawsuit brought against an auditor for alleged negligence are informed of an undetected fraud, even though an unqualified opinion was issued. This paper reports the results of an experiment in an applied audit judgment setting that examined methods of mitigating the outcome effect by means of instructions. The results showed that simply instructing or warning the evaluator about the potential biasing effects of outcome information was only weakly effective. However, instructions that stressed either (1) the cognitive non-normativeness of the outcome effect or (2) the seriousness and gravity of the evaluation ameliorated the effect significantly. From a theoretical perspective, the results suggest that there may both motivational and cognitive components to the outcome effect. In all, the findings suggest awareness of the outcome effect and use of relatively non-intrusive instructions to evaluators may effectively counteract the potential for the outcome bias.

Keywords: outcome bias, auditor negligence, debiasing

JEL Classification: M49

Suggested Citation

Clarkson, Peter and Emby, Craig and Watt, Vanessa W-S, Debiasing the Outcome Effect: The Role of Instructions in an Audit Litigation Setting. Available at SSRN: https://ssrn.com/abstract=299323

Peter Clarkson

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Craig Emby (Contact Author)

Simon Fraser University (SFU) - Accounting Area ( email )

Burnaby, British Columbia V5A 1S6
Canada
604-291-3140 (Phone)
604-291-4920 (Fax)

Vanessa W-S Watt

Simon Fraser University (SFU) - Beedie School of Business

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
1,830
PlumX Metrics