My research primarily focuses on using lab experiments to study topics in auditing. I am interested in the evidence collection decisions of auditors and how clients respond to those requests, particularly in their willingness to cooperate. 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 also am interested in how both recent and proposed changes in the audit report impact the judgments and decisions of key participants and stakeholders in the audit process.
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.
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 in Contemporary Accounting Research, Winter 2020