Counteracting the Directional Influence of Incentives on Auditor Judgment Public

Abstract

Auditing standards require auditors to be objective in their judgment. However, incentives in the audit environment motivate auditors to prefer a particular audit conclusion over others, undermining auditor objectivity. In this study, I examine the effects of two interventions on the directional influence of incentives on auditors’ judgment. I predict and find that increasing the salience of auditors’ intrinsic motivation for their job counteracts the directional influence of incentives on auditor judgment. I further show that the counteracting effects are achieved through auditors’ information processing: auditors with salient intrinsic motivation search for relatively more information that contradicts their incentive-preferred audit conclusion and evaluate the information as relatively less supportive of their incentive-preferred audit conclusion than do auditors in the control conditions. On the other hand, I do not find evidence that holding auditors accountable according to auditing standards reduces the directional influence of incentives on auditors’ information evaluation (consistent with my prediction) or information search (contrary to my prediction). The results of this study indicate that salient intrinsic motivation that focuses auditors on intrinsic aspects of audit tasks is a promising means of mitigating the negative impact of directional incentives on audit quality, a challenging issue that has consistently concerned regulators, practitioners, and academics.

Table of Contents

CONTENTS

DISSERTATION

I. Introduction 1

II. Background and Hypothesis Development 7

III. Research Method 15

IV. Results 22

V. Discussion and Conclusions 31

VI. References 35

FIGURES

Figure 1: Overview of the Experiment 39

Figure 2: Counteracting Effects of Salient Intrinsic Motivation on Audit Judgment 40

TABLES

Table 1: The Impact of Auditor Incentive and Interventions on Audit Judgment 41

Table 2: The Impact of Auditor Incentives and Interventions on Information Search 43

Table 3: The Impact of Auditor Incentives and Interventions on Information Evaluation 45

Table 4: The Impact of Auditor Incentive and Interventions on Audit Judgment Change 47

APPENDICES

Appendix A: Additional Evidence Items 48

Appendix B: Intrinsic Motivation Intervention 49

Appendix C: Experimental Instrument 50

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, Cognitive
Mot-clé	information evaluation directional incentives intrinsic motivation accountability information search motivated reasoning
Committee Chair / Thesis Advisor	Kathryn Kadous, Emory University
Committee Members	Jacqueline S. Hammersley, University of Georgia Melissa Williams, Emory University Kristy Towry, Emory University

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