Prompting More Relevant and Reliable Audit Evidence Ideation With a Counterfactual Mindset

Abstract

Regulator concerns about the amount or type of audit evidence obtained by auditors are among some of the most pervasive and long-standing criticism of the profession. While prior literature has investigated many potential causes of suboptimal audit evidence selection, I examine whether the subconscious mechanism of design fixation is also contributing to auditors’ tendency to rely on similar audit evidence year-over-year. Design fixation is a phenomenon in which knowledge of how a problem was solved in the past blocks new ideas from coming to mind (Jansson and Smith 1991). Relying on associative memory theory (Nijstad and Stroebe 2006), I predict and find that priming a counterfactual mindset improves the quantity, relevance, and reliability of audit evidence ideation when auditors plan familiar audit areas, but not for unfamiliar audit areas. I also find the benefits of a counterfactual mindset on ideation are robust to the source of the design fixation (i.e., own knowledge vs. an inherited example). Supplemental analyses suggest that the improved list of audit evidence resulting from a counterfactual mindset subsequently allowed auditors to generate more efficient audit programs for familiar audit areas.