The Influence of Inspection Focus on Auditor Judgments in Audits of Complex Estimates

I conduct an experiment with professional auditors on how an inspection's focus on procedures performed versus judgment quality influences an auditor's mindset, and in turn, how that mindset affects auditor judgments and decisions. I study mindset effects on an auditor's evaluation of a complex estimate when the estimate is aggressively biased versus unbiased. I predict and find a conditional indirect effect of inspection focus on auditor judgment through mindset. I find judgment- (procedure-) focused deficiencies lead to a (an) deliberative (implemental) mindset, concerned with making a decision (planning how to achieve a goal). I find deliberative auditors assess a biased estimate as less reasonable than implemental auditors. I do not find evidence that deliberative auditors are conservative in their judgments over an unbiased estimate, nor overly cautious in their decision-making. This study contributes to literature examining how regulators can influence auditor judgments through the inspection process and the effects of mindset on auditor judgments and decisions