The Impact of Hierarchical Teams, Method of Communication, and Auditor Priming on Key Audit Decisions

Abstract

This experimental study explores the impact of hierarchal team decision processing in face-to-face (F2F) and computer mediated communication (CM) settings on auditors’ risk assessment and financial statement adjustment decisions. Results indicate that while hierarchal team processing of issues does not significantly impact auditor risk assessments, team processing does significantly impact auditors’ proposed adjustment decisions. Findings reveal that auditors exhibit significantly riskier decision making after hierarchical team discussions when discussions are conducted F2F versus CM, as audit experience increases, and when auditors have some versus no prior experience working on audit engagements with team members (ETM). Higher levels of task experience, however, moderate the impact of ETM on auditors’ adjustment decisions. Findings also reveal strong within-team agreement with the most experienced team member following hierarchical team processing of issues. Lastly, results show that priming of team members prior to team discussions does not significantly impact audit judgments.