The Joint Effects of Rich Data Visualization and Analytical Procedure Categorization on Auditor Judgment

Abstract

We examine how the mere categorization of audit procedures as either risk assessment or substantive analytical procedures influences how auditors interpret and develop audit responses and how more versus less rich data visualization exacerbates this categorization effect. Results from an experiment using audit seniors show that richer data visualization exacerbates the effects of audit procedure categorization in auditors’ judgments and decisions. Auditors are more likely to identify client data outliers as high risk when data visualization is more rich, but only when prior audit procedures performed were categorized as risk assessment rather than substantive analytical procedures. Greater data visualization richness also increased (decreased) the specificity and comprehensiveness of auditors’ prescribed future tests when the evidence they viewed was categorized as risk assessment (substantive analytical) procedures. Follow-up responses support the notion that auditors view prior audit evidence gathered as more persuasive and sufficient when categorized as substantive analytical procedures and view evidence categorized as risk assessment procedures as more preliminary. We conclude that richer data visualizations in audit procedures can help auditors find data abnormalities and free up mental capacity to consider other information, but that the outcome of this effect on auditor decision processes is conditioned on procedure categorizations.