My research primarily focuses on using lab experiments to study topics in auditing. I am interested in the evidence collection decisions of auditors, the willingness of auditors to impose adjustments on clients, and the willingness of client personnel to cooperate with audit requests. Recently, I have been studying elements of social rank, particularly status and power differentials, and how these influence auditor and client decisions in an interactive environment. I have also conducted research on audit report disclosures, and how changes in the audit report impact perceptions of auditor responsibility.
I specialize in designing abstract experiments with variable, performance-based compensation for participants, following the conventions long used in experimental economics research. However, I often draw on prior research and theory from psychology when forming and testing predictions. I believe that abstract games are a strong setting for testing psychology-based theory, as deviations from "wealth-optimizing" strategies can be more clearly attributed to the behavioral effects of interest.
Below are summaries of my current work, along with relevant links.
Title: Does Higher Status Make Client Personnel More Cooperative with Staff Auditors?
Abstract: Staff auditors sometimes collect evidence from high-status client personnel, and prior research explores how this can harm evidence collection by changing auditor behavior. In the current study, I focus on how higher status changes client behavior. Specifically, I investigate (1) the possibility that higher status makes clients more cooperative towards staff auditors, and (2) whether auditors’ actions moderate the effect. In an abstract, interactive laboratory experiment, auditors choose how much evidence to collect and clients choose how much to cooperate. Results indicate that high-status clients are more cooperative than low-status clients, but only for evidence requests that are relatively less costly for clients to comply with. Further analysis suggests that high-status clients are more sensitive to changes in request size than low-status clients. Overall, my findings demonstrate that collecting evidence from high-status client personnel may actually benefit auditors, but this effect depends on the auditor’s actions, carrying implications for practitioners that value client cooperation.
Dissertation Committee: Steven Kachelmeier (chair), David Harrison, Lisa Koonce, Jaime Schmidt, and Brian White.
Title: The Forewarning Effect of Critical Audit Matter Disclosures Involving Measurement Uncertainty
Coauthors: Steven Kachelmeier, Jaime Schmidt, and Kristen Valentine.
Abstract: We present experimental evidence suggesting that critical audit matter (CAM) disclosures in the auditor’s report involving areas of high measurement uncertainty forewarn users of misstatement risk. Specifically, in our first study with MBA students, financial analysts, and attorneys, we find that CAMs (1) lower pre-misstatement assessments of confidence in the financial statement area disclosed as a CAM, and (2) lower assessments of auditor responsibility for a subsequently revealed misstatement in a CAM-related area. In our second study with student participants proxying as mock jurors, we find that the responsibility-mitigating effect of CAM disclosure is driven by CAM disclosures involving measurement uncertainty, as opposed to CAM disclosures involving categorical determinations. Combined, our findings help reconcile mixed evidence from prior research, supporting the view that the forewarning effect of CAM disclosures involving measurement uncertainty could mitigate perceived auditor responsibility for CAM related material misstatements.
Status: Forthcoming at Contemporary Accounting Research.
Title: Does Audit Effort Impede the Willingness to Impose Audit Adjustments?
Coauthor: Steven Kachelmeier.
Abstract: In an abstract, incentivized experiment patterned after the investigation and adjustment decisions that characterize auditing, we find that participants who adjust for information obtained from their willful investigation specify lower adjustments than participants who get the same information without having to take investigative action. Our theory draws on mental accounting and information choice effects, which in combination predict that unfavorable outcomes from costly investigative actions can impede the willingness to incur additional costs in the adjustment process. Separating investigative and adjustment decisions in a paired variant of the task removes the effect of investigative effort on adjustments, but introduces a systematic negative effect on adjustments from sharing risk with paired participants. Our study provides potential insight into the puzzle of why auditors willingly exert costly effort to uncover material misstatements, only to subsequently waive the adjustments that would fully correct these misstatements.
Status: Revisions requested by The Accounting Review.
Title: How Engaging Are Well-Being Interventions and Are They Effective at Improving Auditor Performance?
Coauthors: Raj Raghunathan and Jaime Schmidt.
Abstract: This study will investigate (1) how frequently auditors engage in firm-sponsored well-being programs, and (2) whether a gratitude intervention improves auditor subjective well-being and audit task performance. Global national audit firms invest millions of dollars in well-being initiatives, but there is skepticism about whether such programs are utilized and effective at improving auditor well-being and performance. Using a field experiment, we plan to investigate how engaging and effective a gratitude intervention is for improving auditor performance. We have chosen a gratitude intervention over other well-being interventions because it is a low-cost intervention that has been well-documented in the psychology literature to improve well-being and job performance. In particular, we will ask practicing auditors to reflect on things they are grateful for on a weekly basis. We will then measure (1) how often auditors participate in the gratitude intervention and (2) their performance on an experimental audit task at the end of the intervention period. We will also have former interns undergo a similar lab experiment to pilot our materials. Our findings on whether or not auditors engage with and benefit from the gratitude intervention should provide insight into the advisability of firms’ well-being initiatives.
Status: Awarded a 2020 "Access to Audit Personnel" grant from the Center for Audit Quality. Data collection pending.