Auditors and base rates revisited

Abstract

In their 1981 study “Are Auditors' Judgments Sufficiently Regressive?” [ Journal of Accounting Research (Autumn 1981) pp. 323–349] Joyce & Biddle found that auditors underweighted base rates relative to a normative standard (Bayes' theorem), but appeared to be more sensitive to base rates than other subject groups. This study extends their results by addressing three questions raised by their findings: (1) Do auditors generally possess greater ability to recognize and utilize base rates than other decision makers? (2) Did the auditing context of the Joyce & Biddle experimental problems influence the results? and (3) Is it the framing of the experimental problems that influenced the apparent integration of base rates? Using students and auditors as subjects, the following five experiments replicate selected Joyce & Biddle experimental problems. The results suggest that it is the framing of the Joyce & Biddle experimental problem that drive their results rather than attributes of auditors or auditing context.