AN EMPIRICAL STUDY OF RISK PREFERENCE ELICITATION WITH PRACTICING AUDITORS USING EXPERIMENTAL AND BUSINESS CONTEXTS

This study investigated the risk behaviors of practicing auditors using standard elicitation techniques adapted from cognitive psychology and decision sciences. Four basic research issues were studied: (1) whether risk preference elicitation form affects consistency of responses; (2) whether different management, experience, or attitudinal levels affect risk preferences; (3) whether dollar magnitude affects the outcomes of elicitation procedures; and (4) whether subjects exhibit consistent behavior in two different elicitation environments. This study has implications for the development of decision support systems to assist auditors in evaluating risky decision situations.; Results indicate that auditor risk preferences were consistent and similar to risk preferences elicited from different subject groups in prior research. The form for risk preference elicitation in the study did not affect consistency of responses. Risk preferences did not differ according to different management, experience, or attitudinal factors. Dollar magnitude did not affect the outcomes of the elicitation procedures. Subjects exhibited different behaviors between anchored and nonanchored situations, and also consistently violated expected utility theory. Subjects also demonstrated the risk-preference reversal phenomenon described by prior researchers.