Auditing Practice and Cognitive Aging: Evidence from a Quasi-Experiment

Abstract

We show that auditing practice is more likely to prevent cognitive reflection abilities (CR-abilities) decline than financial reports elaboration practice. We rely on the institutionally unique setting of the Brazilian accounting profession together with previous research and interviews to reason that, while auditors and preparers follow indistinguishable educational paths, auditors usually engage in more cognitively taxing tasks than preparers. We collect data from a large number of Brazilian CPAs and use a quasi-experimental approach to estimate the moderation effect of career on the relationship between aging and CR-abilities. We find that CR-abilities do not differ at early career stages, but preparers’ CR-abilities decline across aging, whereas auditors’ CR-abilities are preserved. We cluster CPAs by age subgroups and compare auditors and preparers who are very similar across several personal and professional individual characteristics but career. This approach overcomes some of the pitfalls of previous studies, strengthening causal inferences.