Expert Judgments in an Audit’s Analytical Review

Abstract

This study used expert subjects in a multi-period experiment to investigate how different information conditions affected auditors’ judgments regarding an account misstatement in an audit’s analytical review process. The study found that the saliency level of prior probability of the misstatement negatively affected the probability judgment errors. The results also showed that in the situation where the prior probability was less salient, a longitudinal learning effect occurred. Despite errors in probability judgments, the subjects’ accuracy rates on specific state judgments were high. It was found that the saliency of prior probability positively affected the accuracy of the state judgments.