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Analysis of Auditors Perceptions and Overreliance on Negative Information

Analysis of Auditors Perceptions and Overreliance on Negative Information Research in both psychology and accounting indicates that humans,in making decisions, resort to using decision strategies known asheuristics. One heuristic of particular interest in the field ofaccounting is that of anchoring and adjustment. Empirical research hasshown that subjects will sometimes bias judgements towards the anchoreven in situations where the anchor is of little value or is irrelevant.Explains that the presence of a primary or recency effect in the contextof the anchoring and adjustment heuristic may be the existence of aninternal anchor. Combining these theories, hypothesizesthat auditors would use their initial mindset as an anchor. A laboratoryexperiment indicated that auditors did employ the anchoring andadjustment heuristic they did have a negative internal anchor and theinertia effect could be used to predict whether a primary or recencyeffect would be present in a particular likelihood estimation. Theresults gave strong support for the idea that auditors placeoverreliance on negative information. However, the results indicatedthat students did not have an internal anchor, did not employ theanchoring and adjustment heuristic and that the inertia effect was notuseful in predicting whether a primary or recency effect would bepresent in a particular likelihood estimation. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Auditing Journal Emerald Publishing

Analysis of Auditors Perceptions and Overreliance on Negative Information

Morris, David E.
Managerial Auditing Journal , Volume 8 (6) – Jun 1, 1993
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References (4)

Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0268-6902
DOI
10.1108/02686909310042767
Publisher site
See Article on Publisher Site

Abstract

Research in both psychology and accounting indicates that humans,in making decisions, resort to using decision strategies known asheuristics. One heuristic of particular interest in the field ofaccounting is that of anchoring and adjustment. Empirical research hasshown that subjects will sometimes bias judgements towards the anchoreven in situations where the anchor is of little value or is irrelevant.Explains that the presence of a primary or recency effect in the contextof the anchoring and adjustment heuristic may be the existence of aninternal anchor. Combining these theories, hypothesizesthat auditors would use their initial mindset as an anchor. A laboratoryexperiment indicated that auditors did employ the anchoring andadjustment heuristic they did have a negative internal anchor and theinertia effect could be used to predict whether a primary or recencyeffect would be present in a particular likelihood estimation. Theresults gave strong support for the idea that auditors placeoverreliance on negative information. However, the results indicatedthat students did not have an internal anchor, did not employ theanchoring and adjustment heuristic and that the inertia effect was notuseful in predicting whether a primary or recency effect would bepresent in a particular likelihood estimation.

Journal

Managerial Auditing Journal – Emerald Publishing

Published: Jun 1, 1993

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