The impact of selected environmental cues on audit disclosure judgments

Abstract

This paper presents the results of an experiment on the impact of environmental cues on audit decisions. Environmental cues are characteristics of the client (the setting of the audit) that may affect the objectivity and judgments of auditors. Practicing auditors were asked to determine the appropriate disclosure for a proposed audit adjustment in two actual, disguised cases. The environmental cues manipulated were: client size, prior association and client growth pattern. The results indicated that environmental cues did not significantly alter audit disclosure judgments but may affect reliance on other potentially vital cues. Enhanced auditor training or decision aids may be needed to increase auditor sensitivity to potentially important cues.