Realigning Auditors' Accountability: Experimental Evidence

• 成果类型: Article
• 署名作者: Hurley, Patrick J.; Mayhew, Brian W.; Obermire, Kara M.
• 署名单位: Northeastern University; University of Wisconsin System; University of Wisconsin Madison; Oregon State University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52224
• 发表日期: 2019
• 页码: 233-250
• 关键词: quality; rotation; IMPACT; incentives; reputation; decisions; Justification; complexity; retention; selection

摘要

We use experimental economic markets to examine the impact of changing institutional design features on audit quality. Specifically, we manipulate auditors' economic accountability to managers by altering who hires the auditor-a manager or an independent third party-and auditors' psychological accountability to investors by explicitly stating that the auditor is hired on the investors' behalf. Our design shifts auditors' accountability from managers, who have directional goal preferences, to investors, who prefer judgment accuracy. We find that removing auditors' economic accountability to managers and replacing it with psychological accountability to investors significantly increases audit quality. This increase in audit quality occurs despite the independent third party randomly hiring auditors. In an additional treatment, we incorporate auditor accuracy into the third-party hiring algorithm and find even higher audit quality. Our results suggest that altering auditors' accountability relationships can significantly enhance audit quality.