The Influence of Inspection Findings Emphasis on Auditor Mindsets and Judgments in Audits of Complex Estimates

ABSTRACT I experimentally study how inspection findings emphasizing procedures performed versus judgment quality influence an auditor’s mindset and, in turn, how that mindset affects judgments. I find judgment (procedure) emphasis deficiencies elicit a (an) deliberative (implemental) mindset. I find deliberative auditors assess a biased estimate as less reasonable than implemental auditors and identify more contradictory information, replicating key findings from Griffith, Hammersley, Kadous, and Young (2015). I do not find evidence that deliberative auditors are overly conservative; they do not judge an unbiased estimate as less reasonable, nor are they less likely to reach a conclusion. Although I find a significant indirect effect of findings emphasis on judgment through mindset, I do not find an overall effect. By measuring mindset, I am able to identify certain auditors who default to a deliberative mindset when auditing an estimate, updating prior findings that suggest auditors generally default to an implemental mindset. JEL Classifications: M40; M41; M42.