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ItemAuditors' evaluation of evidence: The effect of communication medium and management information(Georgia Institute of Technology, 2015-07-17) Carlisle, MelissaThis study investigates the effect of communication channel (e.g., face-to-face, written) and management information (i.e., background information on the reliability of client personnel) on auditors’ judgments of evidence persuasiveness in a management inquiry setting. Management information directs auditors to focus on the source of the evidence, creating a goal of assessing management during evidence collection. Auditors are distracted away from the evidence when the communication channel presents management characteristic cues (i.e., face-to-face), unrelated to the message and related to their new unconscious goal of assessing management. By comparison, when evidence is communicated by a channel that does not provide additional management characteristic cues (i.e. written), auditors are better able to evaluate the evidence without distraction. I predict an interaction effect, where communication channel effects auditor judgments when management information is provided, but not otherwise. I design a 2x2 between-participants experiment to test my theory and present results of an experiment with 122 practicing senior auditors. Auditor participants receive an explanation from a client’s assistant controller to explain an unexpected fluctuation in a financial ratio. I manipulate the means by which the assistant controller communicates with the auditor (communication channel) and the presence of background information about the assistant controller (management information). Results of my experiment indicate an interaction effect of the communication channel and management information. When management information is provided, auditors assess the evidence as more persuasive when communication is face-to-face versus text. Auditors not receiving management information do not assess the evidence any differently, irrespective of communication channel. I also find evidence that auditors assess management differently when management information is provided. The results suggest that auditors are focused more on evaluating management when communicating through face-to-face versus written channels. Further, these assessments of management are consistent with the pattern of persuasiveness, indicating that they use this information more in their judgments when communicating face-to-face versus text and only when management information is provided. The results of this research suggest auditors may be assessing evidence as more persuasive than merited when management information is present and auditors are communicating with management face-to-face. Auditors as well as regulators should be aware of this effect so that adjustments can be made. Future researchers should consider these results in future research on management inquiry.
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ItemThe unintended effect of group identity: an experimental investigation of benefit asymmetry and employees' cooperation(Georgia Institute of Technology, 2014-07-01) Xu, HuiThe primary purpose of this study is to investigate whether the effect of group identity on individuals' willingness to cooperate is moderated by benefit asymmetry (i.e., mutual cooperation may benefit some group members more than others). I conduct an experiment in which participants act as group members for a hypothetical company. Consistent with expectations, I find that a strong group identity promotes employees' cooperation rates, but only in situations in which benefits resulting from mutual cooperation are symmetric. When the benefits are asymmetric, employees' willingness to cooperate depends on whether they are disadvantaged or advantaged as well as the level of group identity. Specifically, the disadvantaged employees are less likely to cooperate when group identity is high. In contrast, the advantaged ones' willingness to cooperate is unaffected by the level of group identity. Results of my study suggest that, in situations of benefit asymmetry, inducing a high level of group identity may have unintended negative consequences on group performance as well as organizational productivity.
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ItemEffects of risk-based inspections on auditor behavior(Georgia Institute of Technology, 2014-06-30) Shefchik, Lori B.I examine how risk-based inspections influence auditor behavior in a multi-client setting. I conduct an experiment using an abstract setting that captures the theoretical constructs present in the audit ecology. I manipulate the presence of risk-based inspections between-participants and the level of client risk (higher vs. lower) within-participants. Consistent with the theoretical predictions, under conditions of high resource pressure, I find that auditor effort is higher under a regime with risk-based inspections as compared to a regime without inspections, and the auditor effort increases more for higher-risk clients than for lower-risk clients. More notably, following attentional control theory, I predict and find that risk-based inspections diminish the quality of auditor decision performance for lower-risk clients. Specifically, auditors' decision performance is worse (i.e., more suboptimal) for lower-risk clients than for higher-risk clients (ceteris paribus), but only under a risk-based inspections regime. Likewise, auditors' decision performance for lower-risk clients is worse in a regime with risk-based inspections than in a regime without inspections. I theorize that accountability pressures from PCAOB inspections combined with pressures from high resource constraints (that naturally occur in the audit environment) induce task-related anxiety on auditors. Following attentional control theory in a multi-task setting, I predict anxiety interrupts auditors' decision-making processing shifting attention toward higher-risk clients contributing to the anxiety, and away from lower-risk (untargeted) clients, thereby decreasing the quality of decision performance for lower-risk clients. I perform several supplemental analyses to test the underlying theory. First, I conduct a second experiment where auditors operate under relatively lower resource pressure and find that auditors’ decision performance is no longer worse for lower-risk clients in an inspections regime. The results support the theory that it is the combined pressures of inspections and high resource constraints causing the negative effects. Second, I conduct a supplemental experiment and measure participants' levels of anxiety. In support of the underlying theory, participants' reported anxiety levels are higher under a regime with versus without inspections. Third, I perform several robustness checks to rule out alternative explanations of the findings. The findings of this study contribute to the auditing literature, and they have practical and regulatory implications. First, by identifying higher auditor effort in a regime with inspections, I join others in documenting potential benefits of inspections on auditor behavior, and thus audit quality. Second, by examining the effect of risk-based inspections on auditor effort in a multi-task setting, I extend prior research by providing evidence that inspections increase auditor effort more for higher-risk clients than for lower-risk clients. Third, and most notably, by identifying diminished auditor decision performance for lower-risk clients under a risk-based inspections regime, this is the first study to provide theory and evidence on how risk-based inspections can lead to potential negative consequences on audit behavior, and thus audit quality.
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ItemThe effects of ego and external stress on group cooperation(Georgia Institute of Technology, 2014-05-16) Liu, YuebingI conduct two experiments to examine the effects of different types of stress on individuals' willingness to cooperate. The experience of stress is characterized by the primary cognitive appraisal of threat. It activates the emotion of anxiety and induces stress coping behaviors. I posit that because different types of stress differ in terms of the secondary dimension of cognitive appraisal, the responsibility of possible failure, they lead to different stress coping behaviors in collaborative contexts. Based on the attribution of threat, I classify stress into two types, ego and external stress. Under ego stress, the possible failure is attributed to one's capabilities. Ego stressors, such as lack of skill, cause individuals to worry about their capabilities, posing a threat to goal achievement. I argue that ego stress motivates an individual to seek affiliations for joint protection. I provide experimental evidence that ego stress increases cooperation. Under external stress, on the other hand, the possible failure is attributed to factors in the environment. External stressors, such as environmental uncertainty, cause individuals to worry about threat related factors in the environment, which also may hinder goal achievement. I argue that external stress motivates people to avoid risks, including the risk of being exploited by a partner. I provide evidence that external stress reduces cooperation.