Business Commons^™

Increasing Auditor Sensitivity To The Risk Of Fraudulent Financial Reporting: Assessing Incentives And Pressures On Top Management, Donald Wengler

USF Tampa Graduate Theses and Dissertations

The ability of auditors to detect fraud, including intentional material misstatements in earnings, remains key to the credibility of audit firms and confidence in capital markets. The PCAOB concludes from its most recent inspections of public company audits that auditors often fail to assess and respond to risks of material misreporting by management. In a behavioral experiment, this study concludes that auditors can increase sensitivity to management motivation to misreport by actively seeking to transform identified risk factors focused on the organization, into factors focused on top managers, and to evaluate whether these manager-focused risk factors represent incentives for personal …

Do Changing Reference Levels Affect The Long-Term Effectiveness Of Incentive Contracts?, Lee Michael Kersting

USF Tampa Graduate Theses and Dissertations

This study examines whether reference levels change over time and the impact on individuals' risk-taking behavior. I apply expectations-based reference-dependent preferences theory to analyze whether individuals' reference levels change over time in an economic setting. The theory suggests that individuals develop reference levels based on expectations of future outcomes (Koszegi and Rabin 2006). Therefore, this study examines whether individuals' expectations affect the setting of their reference level and how possible changes in reference levels affect subsequent risk-taking behavior. This study also provides evidence on how budget-based contracts impact individual risk taking behavior in a single period setting. Prior research has …

Psychological Distance: The Relation Between Construals, Mindsets, And Professional Skepticism, Jason Rasso

USF Tampa Graduate Theses and Dissertations

In this study, I examine the influence of construals (interpretations) and mindsets on professional skepticism in auditors. Auditors have been criticized lately for not displaying enough professional skepticism, particularly in their audits of complex estimates (PCAOB 2008). Regulators speculate about and academic research shows a correlation between low professional skepticism and both audit failures and audit malpractice claims (Beasley et al. 2001; Anderson and Wolfe 2002). I hypothesize that prolonging the deliberative mindset in the audit judgment and decision-making process can increase professional skepticism in auditors.

Experienced auditors take part in a 1 x 3 between-participants experiment in which they …

An Empirical Investigation Of Decision Aids To Improve Auditor Effectiveness In Analytical Review, Robert N. Marley

USF Tampa Graduate Theses and Dissertations

There is considerable evidence in the audit literature that even though auditors usually identify the relevant information needed to propose and select the correct cause of an unexpected fluctuation, they frequently do not propose the correct cause, and even when they do propose the correct cause, they often fail to select it. I suggest that working memory limitations might be a factor contributing to this analytical review paradox. Consequently, this study investigates whether two new decision aids, designed from Cognitive Load Theory, reduce auditors' cognitive load during analytical review, freeing cognitive resources for problem solving, and ultimately leading to improved …

The Effects Of Directional Audit Guidance And Estimation Uncertainty On Auditor Confirmation Bias And Professional Skepticism When Evaluating Fair Value Estimates, Norma R. Montague

USF Tampa Graduate Theses and Dissertations

In this study, I examine the effects of audit guidance and estimation uncertainty on auditors’ confirmation bias and professional skepticism when evaluating fair value estimates. Fair value estimation is becoming more prevalent in financial reporting frameworks, and regulators warn that fair value estimation presents higher risk of material misstatement when greater judgment in estimation is involved. In addition recent evidence from the Public Company Accounting Oversight Board (PCAOB) indicates that some auditors may not be exercising sufficient professional skepticism when performing audit procedures in higher risk areas of the audit. Martin et al. (2006) suggest that it may be the …