Implications of Seemingly Irrelevant Evidence in Audit Judgment

TLDR

Audit research has traditionally examined the relevance of evidence, yet this study emphasizes that audit settings contain both diagnostic and nondiagnostic evidence, and that the attributes of the setting influence decision performance. The study investigates how a priori irrelevant nondiagnostic evidence can shape audit judgment. In a laboratory experiment, auditors who received both diagnostic and irrelevant nondiagnostic evidence made less extreme decisions, with the effect size tied to the attention‑grabbing capacity of the irrelevant evidence, demonstrating that judgments are influenced by evidence lacking predictive value.

Abstract

The purpose of this paper is to investigate the role that nondiagnostic evidence, which is a priori irrelevant, can have in audit judgment. In a laboratory experiment, auditor-subjects given a mix of diagnostic and nondiagnostic evidence made decisions that were less extreme (more regressive) than those made using only diagnostic evidence. The magnitude of the observed effect was in some cases directly related to the capacity of the nondiagnostic evidence to hold the auditor-subject's attention. This paper adds to the literature that explores how attributes of accounting settings affect decision performance (see Libby [1989]). Audit settings contain a mix of diagnostic and nondiagnostic evidence. But the focus in judgment research is typically on the relation between the importance (or relevance) of evidence in judgment and its predictive value. My results indicate that such a focus is too narrow, as judgments are influenced by evidence devoid of predictive value. The chosen research focus typically influences the types of evidence researchers include in experimental materials; that is, they typically include only the evidence they expect subjects to use.