Evidence of Auditor Intuition in Risk Assessment and the Inhibiting Effects of Justification

43 Pages Posted: 23 Jun 2020 Last revised: 21 Dec 2021

See all articles by Erin M Hawkins

Erin M Hawkins

Clemson University

Scott D. Vandervelde

University of South Carolina - Darla Moore School of Business

Aaron F. Zimbelman

University of South Carolina

Date Written: December 2021

Abstract

Intuition has the potential to improve the effectiveness and efficiency of auditor judgments. We expect auditors to develop helpful intuition in areas where they receive more frequent outcome feedback. However, we expect justification-oriented documentation requirements to reduce auditors’ reliance on their intuition. In an experiment with practicing auditors, we find evidence that more experienced auditors develop helpful intuition related to misstatements caused by errors but not fraud. Specifically, results indicate that with increasing experience, auditors’ error-related risk assessments are more accurate relative to expert panelists. In contrast, auditors’ fraud-related risk assessments are not more accurate with increasing experience. Further, more experienced auditors do not make more accurate error-related risk assessments when they are subject to justification-oriented documentation requirements. Collectively, our evidence suggests that auditor intuition in risk assessment can improve auditor judgment. However, documentation requirements for risk assessment tasks may include a hidden cost of limiting auditor reliance on helpful intuitive knowledge structures leading to judgments that are further away from expert judgments.

Keywords: Intuition, Justification, Knowledge Structures

Suggested Citation

Hawkins, Erin M and Vandervelde, Scott D. and Zimbelman, Aaron F., Evidence of Auditor Intuition in Risk Assessment and the Inhibiting Effects of Justification (December 2021). Available at SSRN: https://ssrn.com/abstract=3613871 or http://dx.doi.org/10.2139/ssrn.3613871

Erin M Hawkins (Contact Author)

Clemson University ( email )

Clemson, SC 29634
United States

Scott D. Vandervelde

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States

Aaron F. Zimbelman

University of South Carolina ( email )

Darla Moore School of Business
1014 Greene Street
Columbia, SC 29208
United States

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