Auditor Inquiry: The Influence of Client Message Framing on Auditors’ Judgment

Audit inquiry is the most predominate procedure used by financial statement auditors to gather audit evidence. Inquiry, relative to other audit procedures, is subject to manipulation from client personnel in that an explanation can be framed either positively or negatively. We utilize psychology theory on attribute framing and belief-adjustment to examine the influence of message framing by the client during audit inquiry on auditor judgment. In an experiment, we manipulate the valence of the message frame at the beginning (positive or negative) and ending (positive or negative) of a simulated audit inquiry, while holding the message content constant. We find that elements of both theories impact auditors’ inquiry judgments and decisions. Supportive of attribute theory, we find auditors are subject to a confirmation bias when judging reasonableness and persuasiveness of the client’s explanation. Alternatively, we find auditors are subject to a recency bias when judging the likelihood of material misstatement in the account, which affects their evidence gathering choices and is supportive of belief adjustment. Overall, auditors did not incorporate all framing equally.