@article{5c1583a215c74958859eedf59794e86f,
title = "Prompting the Benefit of the Doubt: The Joint Effect of Auditor-Client Social Bonds and Measurement Uncertainty on Audit Adjustments",
abstract = "We design an incentivized experiment to test whether measurement uncertainty elevates the risk that social bonds between auditors and reporters compromise audit adjustments. Results indicate that, when audit evidence is characterized by some residual uncertainty, the adjustments our auditor-participants require are sensitive to whether auditors have an opportunity to form a modest but friendly social bond with reporters. In contrast, although auditors do not adjust fully even when misstatements are known with certainty, social bonding has no effect in this scenario. Accordingly, our experiment contributes beyond the main effects of social bonding and measurement uncertainty demonstrated in prior research by showing that these forces interact. A practical implication is that regulators and practitioners should consider both the technical and the social challenges facing audits of complex estimates.",
keywords = "C92, D81, M41, M42, accounting estimates, auditor independence, experimental economics, leniency, measurement uncertainty, social bonds, social identity",
author = "Kachelmeier, {Steven J.} and {Van Landuyt}, {Ben W.}",
note = "Funding Information: We appreciate helpful suggestions on previous versions from an anonymous reviewer, participants at the 2016 AAA Auditing Section Midyear Meeting, the 2016 AAA Annual Meeting, the 2016 University of Illinois Auditing Doctoral Consortium and Symposium, and workshop participants at the University of Bern, University of California at Irvine, Erasmus University, Iowa State University, Rutgers University (Newark), the University of Texas at Austin, and the University of Waterloo. We also appreciate individual comments from Markus Arnold, Bradley Bennett, Efrim Boritz, Jim Cannon, Paul Demere, Jeremy Douthit, Christine Earley, Prasart Jongjaroenkamol, Bill Kinney, Zach Kowaleski, Stephan Kramer, Christine Nolder, Sue Ravenscroft, Marcel van Rinsum, Aruhn Venkat, Michael Williamson, and Emre Y{\"u}cel. We gratefully acknowledge funding from the Eugene and Dora Bonham Endowment Fund and from the Department of Accounting, McCombs School of Business. The first author also gratefully acknowledges support from the Randal B. McDonald Chair in Accounting. We are grateful to Paula Kachelmeier and Xinyu Zhang for research assistance Publisher Copyright: {\textcopyright}, University of Chicago on behalf of the Accounting Research Center, 2017",
year = "2017",
month = sep,
doi = "10.1111/1475-679X.12171",
language = "English (US)",
volume = "55",
pages = "963--994",
journal = "Journal of Accounting Research",
issn = "0021-8456",
publisher = "Wiley-Blackwell",
number = "4",
}