Is Financial Decision-Making Affected by Prior Information? A Behavioral Approach

The role of financial experts is to provide their professional judgments with an opinion included in the financial reports after reviewing an entity’s financial information, following a specific audit process. We investigate whether self-inferred confirmation bias occurs among auditors during the audit process and decision-making (experiment 1) and whether experience mitigates this effect (experiment 2). To test self-inferred confirmation bias, we study whether negative, moderately negative, and positive previous financial opinions or the absence of them might influence the issuance of the subsequent decision-making. Results confirm the existence of self-inferred confirmation bias, showing that positive and negative prior opinions persuade auditors when suggesting the next one. Our evidence also suggests that professional experience mitigates this influence on auditors’ assessments