The effect of personalized audit communication and evidence inconsistency on auditor judgments and decision-making

Abstract

Purpose

The purpose of this study is to explore the effects of personalized task communication and examine auditor willingness to rely on and factor into their judgments and decisions historically accurate internal evidence suggesting a less conservative collectability judgment and audit adjustment decision than unfavorable external and less credible internal evidence.

Design/methodology/approach

This study uses a 2 × 2 between-subjects experimental design manipulating whether participants receive source credibility insights leading to an evidence set consisting of mixed internal evidence signals, where historically accurate internal evidence suggests either a less conservative or similar collectability signal as unfavorable external evidence; and receive personalized or non-personalized task communication.

Findings

Through experimental analysis of 103 Big Four audit senior associates, the author found auditors factor into their collectability judgments and audit adjustment decisions historically accurate internal evidence suggesting less conservative collectability judgments and audit adjustment decisions than unfavorable external and less credible internal evidence. The author also found evidence that communication personalization elicits affect and increases effort levels for purposes of improving pre-task information processing and subsequent collectability judgments. The results also indicate that the influence of perceived personalization may not incrementally influence reliance on internal evidence that is consistent with unfavorable external evidence.

Originality/value

To the best of the author’s knowledge, this is the first study to examine auditor reliance behaviors when internal evidence suggests a less conservative collectability judgment and audit adjustment decision than unfavorable external evidence and is the first to explore communication personalization as a tool for effective audit knowledge transfer.

Citation

Vagner, B. (2022), "The effect of personalized audit communication and evidence inconsistency on auditor judgments and decision-making", Managerial Auditing Journal, Vol. 37 No. 8, pp. 1038-1061. https://doi.org/10.1108/MAJ-09-2020-2857