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: Client Status and Cooperation with Audit Requests
Abstract: Prior research examines how low-status auditors change their behavior when collecting evidence from high-status client personnel. In the current study, I examine how these status differences change client behavior. Specifically, I investigate (1) whether high-status clients are more cooperative towards auditors, and (2) whether this effect dissipates when auditors make more costly requests. I conduct an abstract experiment in which auditors choose how much costly assistance they request from clients and clients choose how much to cooperate. Results indicate that high-status clients are more cooperative, but only for requests that are relatively less costly to comply with. Further analysis indicates that high-status clients are more sensitive to changes in the costliness of requests. Overall, my findings demonstrate that collecting evidence from high-status client personnel could benefit auditors, but only if they manage the costliness of their requests. This conclusion carries 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: Published at Contemporary Accounting Research.
Title: Does Seeking Audit Evidence Impede the Willingness to Impose Audit Adjustments?
Coauthor: Steven Kachelmeier.
Abstract: In two incentivized auditing experiments, participants specify lower adjustments when they choose to generate evidence than when the same evidence is provided without investigative action. This finding is consistent with theory from mental accounting and information choice, which in combination predict that choosing to undertake effortful investigation can magnify aversion to costly adjustments. Supporting this theory, we do not observe an effort choice effect if we separate investigative and adjustment decisions in noninteractive pairs in our first experiment. In our second experiment, we allow all participants to interact in pairs, observing a negative effect of effort choice only when participants responsible for evidence perceive high involvement in the adjustment decisions made by their paired counterparts. Our study provides insight into why auditors exert diligent effort only to waive the adjustments implied by that effort. A potential implication is that technological advances that facilitate evidence collection could enhance auditor independence.
Status: Revisions submitted to The Accounting Review.