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The effects of audit experience and probability knowledge on auditors' use of heuristics in judgments under uncertainty
Abstract
Decision making in an uncertain environment is a formidable task. Input cues are weighted according to a decision rule and applied to an event to produce a judgment. Research into the quality of such decisions has provided mixed evidence. Psychology research suggests that decision makers employ heuristics (simplifying strategies) in arriving at judgments, and that their use may result in biased judgments. Such biases include underweighting of disconfirming information, insufficient adjustment from an initial anchor, overestimation of conjunctive probabilities, and neglect of base rates. However, these psychology studies typically examined the judgments of student subjects performing relatively unfamiliar, generic tasks. Some researchers question whether these observed biases may have resulted from an experimental mismatch between tasks and subjects. In particular, Edwards (1983) argued that different patterns of heuristic use might be evident when experienced decision makers perform familiar tasks. Also, Klayman and Ha (1987) suggest that decision makers may make use of specialized, "task-specific" heuristics in familiar contexts. Smith and Kida (1991)'s review of audit research on heuristics and biases indicates that the presence and extent of the aforementioned biases are often mitigated or modified when auditors perform familiar, job-related tasks. The central hypothesis of this study was that experience differences would affect auditors' heuristic use in audit tasks, but not in relatively unfamiliar, generic tasks. Results of the confirmatory decision strategy and anchoring and adjustment experiments supported this hypothesis. Although both experienced and inexperienced auditors' audit task judgments indicated the use of conservatism (preferential attention to negative information), inexperienced auditors' judgments were more negative than those of experienced auditors. There were no significant experience-related differences in either of these settings' generic tasks. The conjunctive probability judgment experiment also provided evidence of task-specific heuristic use, as experienced auditors produced significantly greater conjunction effects in the audit task than in the corresponding generic task. Overall, results provided some evidence suggesting that decision makers' heuristic use is affected by both individual and task differences. Additional research examining the effects of these differences on heuristic use should provide further insight into the strategies decision makers use in making judgments under uncertainty.
Subject Area
Accounting|Behaviorial sciences|Psychology|Experiments
Recommended Citation
Coulter, John Michael, "The effects of audit experience and probability knowledge on auditors' use of heuristics in judgments under uncertainty" (1994). Doctoral Dissertations Available from Proquest. AAI9420614.
https://scholarworks.umass.edu/dissertations/AAI9420614