Effects of the preparer's justification on the reviewer's hypothesis generation and judgment in analytical procedures

Abstract

The process gains arising from the review process have been the subject of much research interest, but few studies have examined how features in the audit environment can influence the review process. In this paper, we investigate how one such feature — the preparer's justification for a conclusion made — affects the nature of hypotheses generated by reviewers and their likelihood assessments. Using the context of an analytical procedures task, our results showed that exposure to a preparer's justification for a non-error cause reduced the number of alternative error hypotheses generated by the reviewer, and increased the reviewer's belief in the likelihood of a non-error cause. We also showed that three mechanisms moderated the influence of the preparer's justification on the reviewer's judgment — generation of alternative hypotheses, explaining an alternative hypothesis, and making an initial independent assessment. Implications of the results are discussed.