The Effects of Supervisor Preferences and Group Engagement Oversight on Component Auditor Skepticism in a Group Audit Engagement

In a group audit setting, component auditors receive instructions and communication from a group engagement team supervisor, while working under the immediate direction of a different, component audit supervisor. This study examines how the component audit supervisor's preferences and nature of the communication from the group engagement team affect component auditors' judgments in an accounting estimate evaluation task. We argue that the level of detail in documentation requested by the group auditor will impact the information processing of component auditors and alter the influence of motivated reasoning induced by component supervisors' preferences. In an experiment, component auditors who received communication from the group engagement team requesting less detailed documentation regarding their work, budgeted fewer audit hours and planned less substantive testing during audit planning judgments when they faced an optimistic rather than a skeptical component supervisor. However, when component auditors received communication from the group engagement team requesting more detailed documentation, there were no differences in planning judgments between the component supervisor preference conditions. The detailed documentation request led auditors to engage in a broader information processing strategy, diminishing confirmatory information search. These results provide insight into the hitherto unexplored area of group audit decision making processes and suggest ways to enhance auditor skepticism during group audit engagements