Knowledge Structure and the Estimation of Conditional Probabilities in Audit Planning

Experienced auditors tend to structure their knowledge of financial statement errors with audit objective as the primary organizing dimension and transaction cycle as secondary. Yet, many audit tasks are structured in the opposite manner, requiring auditors to assess whether objectives are met for e...

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Bibliographic Details
Published in:The Accounting review 1995-01, Vol.70 (1), p.27-47
Main Authors: Nelson, Mark W., Libby, Robert, Bonner, Sarah E.
Format: Article
Language:English
Subjects:
Accounting
Audio frequencies
Audit cycles
Audit objectives
Auditing
Conditional probabilities
Errors
Estimating techniques
Financial audits
Financial statements
Financial transactions
Judgment
Judgmental probability
Knowledge
Memory
Probability
Studies
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Summary:Experienced auditors tend to structure their knowledge of financial statement errors with audit objective as the primary organizing dimension and transaction cycle as secondary. Yet, many audit tasks are structured in the opposite manner, requiring auditors to assess whether objectives are met for each transaction cycle. Our paper reports the results of an experiment which indicates that this mismatch between knowledge structure and task structure may hinder auditors' ability to draw on previous experiences when making conditional probability judgments and when allocating audit hours to various objectives within cycles. These results suggest one instance where knowledge structures that are often functional may have adverse effects when they do not match the task structure to which they are applied.
ISSN:0001-4826
1558-7967