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Auditors' perceptions of client firms: the stigma of decline and the stigma of growth

Article Abstract:

A study is conducted to examine the impact of auditors' perceptions of the growth/decline of their client companies on how they view the competence and integrity of the managers of these companies. It seeks to test the hypothesis that an inverted-U relationship exists between perceptions of growth/decline status and perceptions of management competence and integrity. Findings provide partial support for the hypothesis. It is found that rapid company growth and decline both have stigmatizing effects. However, the pattern of these effects is contrary to predictions. The study's results suggest that the client managers' competence is questioned when corporate performance declines but not when growth is experience. Conversely, the client managers' integrity is placed in doubt when rapid growth is observed, but not when performance declines.

Executive ability, Perception, Perception (Psychology), Corporate growth, Integrity

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Auditor belief revisions in a performance auditing setting: an application of the belief-adjustment model

Article Abstract:

The recency effects prediction of Hogart and Einhorn's 'belief-adjustment model' was examined in a 'performance editing' setting with state auditors as participants, and was found to influence the auditors' 'belief revisions.' The models's assumption that short evidence series do not produce serial evidence effects was also found correct. Examination of the participants' intermediate belief changes indicated that they exhibited a 'confirmatory attitude' towards evidence, contrary to the findings of earlier studies.

Accounting and auditing, Industrial efficiency, Economic efficiency, Belief and doubt, Hogart, R.M., Einhorn, H.J.

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The effect of outcome knowledge on auditors' judgmental evaluations

Article Abstract:

The judgments of auditors as they are influenced by outcome knowledge were examined. The outcome's degree of surprise was diversified to assess its impact on hindsight evaluations in an auditing task. Findings showed that a surprising outcome affects ex ante judgment, while an outcome that is not surprising has no significant effect on foresight and hindsight judgments. The effectivity of a simple decision aid to lessen the hindsight effect was also tested.

Influence, Evaluation, Judgments, Judgments (Law)

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