How Does “Fit” Versus “Non-fit” Affect Audits of Estimates? The Compatibility Between Focus and Mindset Público

Abstract

Auditors frequently fail to critically evaluate management’s accounting estimates, jeopardizing

financial reporting quality (PCAOB 2017). I propose that one way to potentially improve audits

of estimates is to align an auditor’s focus (prevention/promotion) and mindset (concrete/abstract)

in a compatible way. I predict that judgment quality will be higher when the focus and mindset fit

versus do not fit each other, but I find the opposite. To reconcile my results with the typical findings

in non-judgment tasks that performance is higher under fit versus non-fit, I develop a new

prediction. I propose that whether judgment quality is higher under fit versus non-fit depends on a

third factor: auditors’ willingness to engage in the judgment task before receiving any

manipulations. I find that for auditors who are initially less engaged, judgment quality is higher

under fit versus non-fit, consistent with the typical findings in non-judgment tasks. However, for

auditors who are initially more engaged, judgment quality is higher under non-fit versus fit,

consistent with my main results. My study suggests that how “fit” versus “non-fit” affects

performance is more complex than previously thought. My study implies that firms should

consider auditors’ initial willingness to engage in the judgment task when using fit and non-fit to

improve audits of estimates.

Table of Contents

Introduction .....................................................................................................................................1

Theory and Hypothesis ...................................................................................................................7

Method ..........................................................................................................................................11

Results ...........................................................................................................................................14

Discussion .....................................................................................................................................24

Conclusions ...................................................................................................................................27

Appendix 1.....................................................................................................................................30

Appendix 2.....................................................................................................................................31

Appendix 3.....................................................................................................................................35

About this Dissertation

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School	Laney Graduate School
Department	Business
Subfield / Discipline	Accounting
Degree	Ph.D.
Submission	Dissertation
Language	English
Research Field	Business Administration, Accounting Psychology, Behavioral
Palavra-chave	judgment quality construal level audits of estimates regulatory fit regulatory focus
Committee Chair / Thesis Advisor	Kadous, Kathryn, Emory University
Committee Members	Estep, Cassandra, Emory University Williams, Melissa, Emory University Towry, Kristy, Emory University

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