Auditors' Evaluation of Evidence Obtained Through Management Inquiry: A Cascaded-Inference Approach

Abstract

This study uses the cascaded-inference paradigm to investigate how auditors evaluate evidence received during management inquiry. Contrary to predictions made by cascaded-inference theory, results indicate that auditors are relatively more sensitive to source-related uncertainties than evidence-related uncertainties when evaluating information provided by client management. In addition, management-provided evidence has less impact on auditors' beliefs than on nonauditors' beliefs. Finally, results also suggest that, under certain conditions, auditors may fail to recognize the value of information received during management inquiry.