Auditors' going‐concern judgments: rigid, adaptive, or both?

Auditors' going‐concern judgments: rigid, adaptive, or both? Purpose – The purpose of this paper is to examine when auditors' decision behavior is rigid and adaptive in the going‐concern judgment. Because rigid behavior has been found to produce inappropriate outcomes, understanding when decision behavior is rigid or adaptive can lead to improved decision making. Design/methodology/approach – An experiment is conducted using cases based on real companies to produce information search traces as dependent measures that are studied in the ill‐structured and structured parts of the going‐concern task. Findings – Auditors are adaptive in ill‐structured tasks and rigid in structured tasks as predicted by theory. Evidence of flawed decision making commonly found in studies of fixation and related concepts was not found. Research limitations/implications – The findings suggest the importance of explicitly accounting for task structure when studying decision behavior in situated contexts. Future research could assess whether task structure similarly impacts behavior in non‐auditing contexts. Practical implications – Researchers and practitioners have long been concerned about inappropriate rigid behavior. This paper helps practitioners better understand when rigid or adaptive behavior is likely to occur to improve decision making. Originality/value – Taking a novel approach to reconcile two well established but conflicting bodies of literature by focusing on “when” not “whether” people are rigid or adaptive, this paper resolves a long‐standing paradox. The implication for the literature is that reframing the question and directly measuring behavior demonstrates that individuals are neither rigid nor adaptive, but can be both as they follow behavior that is consistent with the demands of the task when the demands are defined in terms of task structure. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting and Finance Emerald Publishing

Auditors' going‐concern judgments: rigid, adaptive, or both?

Review of Accounting and Finance, Volume 10 (1): 16 – Feb 22, 2011

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1475-7702
DOI
10.1108/14757701111113802
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to examine when auditors' decision behavior is rigid and adaptive in the going‐concern judgment. Because rigid behavior has been found to produce inappropriate outcomes, understanding when decision behavior is rigid or adaptive can lead to improved decision making. Design/methodology/approach – An experiment is conducted using cases based on real companies to produce information search traces as dependent measures that are studied in the ill‐structured and structured parts of the going‐concern task. Findings – Auditors are adaptive in ill‐structured tasks and rigid in structured tasks as predicted by theory. Evidence of flawed decision making commonly found in studies of fixation and related concepts was not found. Research limitations/implications – The findings suggest the importance of explicitly accounting for task structure when studying decision behavior in situated contexts. Future research could assess whether task structure similarly impacts behavior in non‐auditing contexts. Practical implications – Researchers and practitioners have long been concerned about inappropriate rigid behavior. This paper helps practitioners better understand when rigid or adaptive behavior is likely to occur to improve decision making. Originality/value – Taking a novel approach to reconcile two well established but conflicting bodies of literature by focusing on “when” not “whether” people are rigid or adaptive, this paper resolves a long‐standing paradox. The implication for the literature is that reframing the question and directly measuring behavior demonstrates that individuals are neither rigid nor adaptive, but can be both as they follow behavior that is consistent with the demands of the task when the demands are defined in terms of task structure.

Journal

Review of Accounting and FinanceEmerald Publishing

Published: Feb 22, 2011

Keywords: Auditors; Decision making; Cognition; Individual behaviour; Going concern value

References

  • Categorization and representation of physics problems by experts and novices
    Chi, M.T.H.; Feltovich, P.; Glaser, R.
  • What do students remember? Episodic memory and the development of schematization
    Herbert, D.M.B.; Burt, J.S.

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