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Auditors' usage of unaudited book values when making presampling audit value estimates

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  • MICHAEL D. SHIELDS
  • IRA SOLOMON
  • WILLIAM S. WALLER

Abstract

. An important issue in audit judgment research concerns auditors' use of unaudited book values when making judgments in the presampling phase of the audit. This paper presents a rudimentary model of the auditor's belief revision process with respect to unaudited book values from an audit value estimation perspective. An experiment testing some implications of the model is also presented. The model proposes that the auditor should judge the validity of unaudited book values in the circumstances and use them accordingly when making presampling audit value estimates. The experimental results indicated that the subjects (auditors) used available unaudited book values and that the extent of usage varied over accounts. However, the results also indicated some inaccurate presampling validity judgments which led to overweighting of unaudited book values. Résumé. Une question importante qui préoccupe les chercheurs dans le domaine de la formulation de jugements en vérification a trait à l'utilisation par les vérificateurs de valeurs comptables non vérifiées dans la formulation de jugements au cours de la phase de la vérification précédant l'échantillonnage. Les auteurs présentent un modèle rudimentaire du processus de révision des convictions du vérificateur en ce qui a trait aux valeurs comptables non vérifiées dans une perspective d'estimation de la valeur de vérification. Ils font également état d'une expérience destinée à vérifier certaines des conséquences du modèle. Selon le modèle, le vérificateur devrait juger de la validité des valeurs comptables non vérifiées dans les circonstances et les utiliser en conséquence dans la formation d'estimations de la valeur de vérification avant échantillonnage. Les résultats de l'expérience révèlent que les sujets (vérificateurs) utilisent les valeurs comptables non vérifiées disponibles et que l'étendue de cette utilisation varie avec les comptes. Toutefois, les résultats révèlent aussi l'inexactitude de certains jugements relatifs à la validité antérieure à l'échantillonnage, à la suite desquels une importance trop grande a été accordée aux valeurs comptables non vérifiées.

Suggested Citation

  • Michael D. Shields & Ira Solomon & William S. Waller, 1988. "Auditors' usage of unaudited book values when making presampling audit value estimates," Contemporary Accounting Research, John Wiley & Sons, vol. 5(1), pages 1-18, September.
    • Handle: RePEc:wly:coacre:v:5:y:1988:i:1:p:1-18
    DOI: 10.1111/j.1911-3846.1988.tb00692.x
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    References listed on IDEAS

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    1. Scott, Wr, 1979. "Scoring Rules For Probabilistic Reporting," Journal of Accounting Research, Wiley Blackwell, vol. 17(1), pages 156-178.
    2. Felix, Wl & Grimlund, Ra, 1977. "Sampling Model For Audit Tests Of Composite Accounts," Journal of Accounting Research, Wiley Blackwell, vol. 15(1), pages 23-41.
    3. Scott, Wr, 1975. "Auditors Loss Functions Implicit In Consumption-Investment Models," Journal of Accounting Research, Wiley Blackwell, vol. 13, pages 98-117.
    4. Gibbins, M, 1984. "Propositions About The Psychology Of Professional Judgment In Public Accounting," Journal of Accounting Research, Wiley Blackwell, vol. 22(1), pages 103-125.
    5. Beck, Pj & Solomon, I & Tomassini, La, 1985. "Subjective Prior Probability-Distributions And Audit Risk," Journal of Accounting Research, Wiley Blackwell, vol. 23(1), pages 37-56.
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