Effects of expectation and prior involvement on memory for audit evidence and judgment: The moderating role of accountability

This dissertation investigates the effects of three important features of the audit environment on decision-making processes: reliance on prior year's working papers, repeated audit engagements, and the audit review process. It first analyzes the degree to which the first two variables affect the audit decision process. This issue has implications for the desirability of having repeated audit engagements as opposed to periodic rotation of audit personnel. It then examines whether awareness of a review can moderate the effects of prior involvements by causing the reviewee to process information more vigilantly, and make less extreme judgments.;Two laboratory experiments were conducted using auditors from two Big Six public accounting firms. In Experiment 1, the effects of expectations from using prior year's working papers and prior audit involvement were investigated, using a financial viability assessment task. Results demonstrated that auditors' judgments were aligned with the judgments documented in prior year's working papers. In addition, there was evidence that prior audit involvement moderated the effects of expectations. Auditors who inherited the current year's audit from another auditor paid more attention to the current period's evidence that was inconsistent with their prior period's judgments. With positive expectations about the firm's financial viability, auditors who were involved in the prior period's audit recalled relatively more consistent evidence than inconsistent evidence, compared to auditors who inherited the prior year's audit. The current period's judgments made by the two groups of auditors were not significantly different. However, there was some evidence that prior involvement may lead to a tendency to make current year's judgments that have smaller deviations from the prior year's judgments. Experiment 2 demonstrated that when the prospect of a review was made salient, the effects of prior involvement were ameliorated.