Business Commons^™

The Effect Of Auditors’ Informal Communication In The Audit Environment On Financial Reporting Outcomes, Emily K. Hornok

Electronic Theses and Dissertations

I examine the effect of auditors’ recurring, informal communication with managers and other auditors on financial reporting outcomes in a laboratory experiment in which participants in the roles of auditors and managers interact in a stylized audit setting. My 2×2 between-subjects design manipulates whether the auditors are able to informally communicate with either, neither, or both the manager and other auditors. I find that when the auditor and manager informally communicate, they each develop a social bond, which increases the manager’s feeling of accountability towards the auditor, causes the manager to make more honest representations to the auditor, and leads …