Increasing attention to disconfirming information in the audit environment when time pressure promotes confirmation of client assertions

Abstract

According to the Public Company Accounting Oversight Board (PCAOB), incentives and pressures found in the audit environment can cause unconscious biases to dominate decision making and lead auditors to underutilize evidence that disconfirms management's claims and assertions (PCAOB 2012; PCAOB 2019). This study investigates the activation of a counterfactual mindset to mitigate the adverse effects of time pressure on confirmation bias in the audit environment. Findings from an experiment with accounting students indicate that when incentive structures create significant time pressure, novice auditors are less likely to attend to evidence that disconfirms management's assertions. However, priming participants with a counterfactual mindset can overcome some of the adverse effects of time pressure by increasing attention to disconfirming evidence and perceptions that disconfirming evidence is important and useful for evaluating management's assertions. Activating a counterfactual mindset encourages the search for and use of disconfirming information when time pressures create biases against the consideration of disconfirming evidence. The results suggest the need to further investigate the potential benefits of counterfactual mindsets in the audit context.