The Impact of Benchmark Set Composition on Auditors' Level 3 Fair Value Judgments

• 成果类型: Article
• 署名作者: Bhattacharjee, Sudip; Moreno, Kimberly K.; Wright, Nicole S.
• 署名单位: Virginia Polytechnic Institute & State University; Northeastern University; James Madison University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52402
• 发表日期: 2019
• 页码: 91-108
• 关键词: novice auditors; context; ALTERNATIVES; performance; contrast; uncertainty; INFORMATION; experience; ratings

摘要

Auditors frequently use benchmarking analysis to evaluate the appropriateness of a client's estimates. Client management may strategically select benchmark data, making an auditor's evaluation task more difficult. Psychology research suggests that the composition of the benchmark set can lead to contrast effects, because evaluations of an option in a choice set can change based on the inclusion of other options in the set. In Experiment 1, we examine and find that auditors' judgments of the reasonableness of a client-preferred discount rate for a Level 3 investment are inappropriately influenced by the set of peer companies provided by the client as justification. In Experiment 2, audit managers performing the same task similarly exhibited contrast effects. However, as managers' investment experience increased, the influence of contrast effects from the benchmark set decreased. Given the widespread use of benchmark data, contrast effects from benchmark set composition have implications for accounting and auditing contexts.