Mitigating the Effects of Auditors’ First Impressions of Client Personnel: The Importance of Supervisors’ Preference for Effectiveness

Abstract

Fraud perpetrators realize the importance of conveying a positive first impression to others. We examine how auditors’ first impressions of client personnel interact with their supervisors’ preferences for audit effectiveness or efficiency to influence auditors’ risk judgments. We argue that auditors are typically focused on efficiency and, therefore, in an intuitive mindset that makes them susceptible to first impression biases. We therefore expect a positive (negative) first impression to decrease (increase) auditor objectivity and cause auditors to become less (more) sensitive to misstatement risk. We predict that supervisors’ preferences for effectiveness (over efficiency) will lead auditors to adopt an analytical mindset and mitigate the effects of first impressions. Our 2´2 experiment with 124 practicing auditors manipulates both first impression (positive vs. negative) and supervisor preference (effectiveness vs. efficiency) and supports our predictions. These findings build on first-impression research in psychology that suggests first impressions are subconscious and difficult to mitigate.