Influence of Trust, Time Pressure and Complexity Factors in Judgment and Decision-Making in Auditing

Santos, Cleston; Cunha, Paulo

doi:10.15728/bbr.2021.18.6.1

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ARTICLE • BBR, Braz. Bus. Rev. 18 (6) • Nov-Dec 2021 • https://doi.org/10.15728/bbr.2021.18.6.1 copy

Influence of Trust, Time Pressure and Complexity Factors in Judgment and Decision-Making in Auditing

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

This study aims to evaluate the interrelation of the influence of the factors trust (personal), time pressure (environmental) and complexity (task) in judgment and decision-making in theauditing field. As a research method, we undertook an experiment, with a 2x2x2 factorial composition. The final sample was composed of 126 independent auditors, distributed in eight random groups. The results indicated that a higher level of confidence increases the auditor’s propensity to perform the accounting adjustment and that time pressure and complexity decrease the auditor’s propensity to perform the proposed adjustment. These findings allow us to infer that the factors of trust, time pressure, and complexity, both individually and jointly influence judgment and decision-making. This study contributes to Behavioral Decision Theory, as in that the discussions are directed to assist auditing firms in their understanding of the joint and interactive effect of personal, environmental, and task factors in professional activities, and enable better planning and establishing criteria for audit working conditions.

KEYWORDS
Trust Personal Factor; Time Pressure Environmental Factor; Complexity Task Factor; Audit Judgment and Decision-Making

Dimensions	Variables	Subvariables	Metric	Authors
Personal Factor	Trust (TRU)	Capacity (CAP)	Statements 1 to 6 - model by Mayer et al. (1995Mayer, R. C., Davis, J. H., & Schoorman, F. D. (1995). An integrative model of organizational trust. Academy of Management Review, 20(3), 709-734.)	Mayer et al. (1995Mayer, R. C., Davis, J. H., & Schoorman, F. D. (1995). An integrative model of organizational trust. Academy of Management Review, 20(3), 709-734.); Kadous et al. (2013Kadous, K., Leiby, J., & Peecher, M. E. (2013). How do auditors weight informal contrary advice? The joint influence of advisor social bond and advice justifiability. The Accounting Review, 88(6), 2061-2087.); Lleó de Nalda et al. (2016Lleo de Nalda, A., Guillen, M., & Gil Pechuan, I. (2016). The influence of ability, benevolence, and integrity in trust between managers and subordinates: the role of ethical reasoning. Business Ethics: A European Review, 25(4), 556-576.)
		Integrity (INT)	Statements 7 to 11 - model by Mayer et al. (1995Mayer, R. C., Davis, J. H., & Schoorman, F. D. (1995). An integrative model of organizational trust. Academy of Management Review, 20(3), 709-734.)
		Benevolence (BEN)	Statements 12 to 17 - model by Mayer et al. (1995Mayer, R. C., Davis, J. H., & Schoorman, F. D. (1995). An integrative model of organizational trust. Academy of Management Review, 20(3), 709-734.)
Enviromental Factor	Time Pressure (TP)	-	No Time Pressure established; With Time Pressure established.	Bamber e Bylinski, (1987Bamber, E. M., & Bylinski, J. H. (1987). The effects of the planning memorandum, time pressure and individual auditor characteristics on audit managers’ review time judgments. Contemporary Accounting Research, 4(1), 127-143.); Svanström (2016Svanström, T. (2016). Time pressure, training activities and dysfunctional auditor behavior: evidence from small audit firms. International Journal of Auditing, 20(1), 42-51.)
Task Factor	Complexity (COM)	-	Low complexity (low amount of information and high clarity / accuracy of information);	Bonner (1994Bonner, S. E. (1994). A model of the effects of audit task complexity. Accounting, Organizations and Society, 19(3), 213-234.); Chung e Monroe (2001Chung, J., & Monroe, G. S. (2001). A research note on the effects of gender and task complexity on an audit judgment. Behavioral Research in Accounting, 13(1), 111-125.);
Judgment and Decision Making	Judgment and Decision Making (JDM)	-	High complexity (high amount of information and low clarity / precision of information).	DeZoort et al. (2003DeZoort, F. T., Hermanson, D. R., & Houston, R. W. (2003). Audit committee support for auditors: The effects of materiality justification and accounting precision. Journal of Accounting and Public Policy, 22(2), 175-199.); DeZoort et al. (2006DeZoort, T., Harrison, P., & Taylor, M. (2006). Accountability and auditors’ materiality judgments: The effects of differential pressure strength on conservatism, variability, and effort. Accounting, Organizations and Society, 31(4-5), 373-390.)

Threats	Threat characteristics	Threat control measures
Maturation	Changes undergone during the experiment (physical, psychological, fatigue, boredom).	Task with quick decisions and the duration was a maximum of 30 minutes.
History	Impact on people during environmental changes resulting from the passage of time (long).	Experiment was applied to the subjects in a short period, at most 4 months (from the first to the last subject).
Subject Mortality	Loss of research participants before the end of the experiment.	Each subject participated only once in the experiment, which had a short time of operation.
Instrumentation	In identical procedures, measurements may differ due to the application of different procedures.	Application of the instrument by the same person (standardized text). Consolidated instruments: Mayer et al. (1995Mayer, R. C., Davis, J. H., & Schoorman, F. D. (1995). An integrative model of organizational trust. Academy of Management Review, 20(3), 709-734.); DeZoort et al. (2003DeZoort, F. T., Hermanson, D. R., & Houston, R. W. (2003). Audit committee support for auditors: The effects of materiality justification and accounting precision. Journal of Accounting and Public Policy, 22(2), 175-199., 2006DeZoort, T., Harrison, P., & Taylor, M. (2006). Accountability and auditors’ materiality judgments: The effects of differential pressure strength on conservatism, variability, and effort. Accounting, Organizations and Society, 31(4-5), 373-390.) and Kadous et al. (2013Kadous, K., Leiby, J., & Peecher, M. E. (2013). How do auditors weight informal contrary advice? The joint influence of advisor social bond and advice justifiability. The Accounting Review, 88(6), 2061-2087.).
Selection	Problems in the selection and allocation of participants to treatment and control groups can generate groups with different characteristics. Participants need to be allocated to groups at random for comparability purposes.	The experimental treatment was applied to all individuals. Subjects were randomly distributed by group and in equal quantities.
Statistical Regression	Consequence of choosing individuals based on their extreme results. This threat is also present when there is no control group and random selection of participants.	Participants were randomly selected, following the experimental script. Professionals from all audit functions participated in the experiment, contemplating varied experiences, not just extremes.
Imitation Treatments	If there is communication between the participants during the operation of the experiment, the judgments and decision-making can have problems of independence.	Each subject analyzed the scenario and made the judgment and decision making individually, being submitted to only one experimental condition and without communication with the other participants.
Resentful Demoralization	In order to carry out the experiment, participants are submitted to different types of experimental treatments, which can generate different levels of motivation, with possible influence on the results.	The different experimental treatments (trust, time pressure, complexity) are factors inherent to the auditor’s activities.

Threats	Threat characteristics	Threat control measures
Population Validity	Sample results may not be generalizable to populations, such as people, companies, countries and / or cultures.	The generalization of the results was extended to the context of the present study. The survey was conducted with independent auditors.
Ecological Validity	It refers to the generalization of the study results to other experimental configurations. Application of the experiment closest to reality.	The task presented to participants for JDM was constructed based on data from real companies, similarly to DeZoort et al. (2003DeZoort, F. T., Hermanson, D. R., & Houston, R. W. (2003). Audit committee support for auditors: The effects of materiality justification and accounting precision. Journal of Accounting and Public Policy, 22(2), 175-199., 2006DeZoort, T., Harrison, P., & Taylor, M. (2006). Accountability and auditors’ materiality judgments: The effects of differential pressure strength on conservatism, variability, and effort. Accounting, Organizations and Society, 31(4-5), 373-390.) and Kadous et al. (2013Kadous, K., Leiby, J., & Peecher, M. E. (2013). How do auditors weight informal contrary advice? The joint influence of advisor social bond and advice justifiability. The Accounting Review, 88(6), 2061-2087.), adapted to the reality of Brazil.
Temporal Validity	The results of the experiment may not be generalized over the period / time.	The generalization of the results is limited to the period of analysis, that is, from July to November. The experiment captured the behavior of individuals at the time they were subjected to experimental treatments, without reaching any temporal changes, such as the closing period of the audit report.

Factors/Variables	Variables / Condition		Min.	Max.		Mean	Median
JDM Factors	JDM	Trust (TRU)	ANC	-3	5	3,641	4,000
		Trust (TRU)	BNC	-5	5	-1,065	-3,000
		Time Pressure (PT)	SPT	-5	5	2,230	4,000
		Time Pressure (PT)	CPT	-5	5	0,477	2,000
		Complexity (COMP)	BC	-5	5	2,127	4,000
		Complexity (COMP)	AC	-5	5	0,524	2,000
	JDM			-5	5	1,325	3,000

Independent variables		Model - multiple linear regression
Independent variables		Coefficient / Sig.		VIF
Constant		Coefficient	1,319	-
Constant		Sig.	0,000	-
TRU		Coefficient	2,322	1,003
TRU		Sig.	0,000	1,003
TP		Coefficient	-0,787	1,002
TP		Sig.	0,001	1,002
COMP		Coefficient	-0,823	1,003
COMP		Sig.	0,001	1,003
TRU^*TP		Coefficient	0,678	1,002
TRU^*TP		Sig.	0,005	1,002
TRU^*COMP		Coefficient	0,745	1,003
TRU^*COMP		Sig.	0,002	1,003
TP^*COMP		Coefficient	0,572	1,003
TP^*COMP		Sig.	0,022	1,003
TRU^TP^COMP		Coefficient	-0,495	1,003
TRU^TP^COMP		Sig.	0,037	1,003
R		0,750
R²		0,563
R² Adjusted		0,537
Durbin-Watson		2,096
Anova	F	21,701
Anova	Sig.	0,000
a. Predictors: (Constant), TRU^TP^COMP, TRU^TP, TP^COMP, TP, TRU^*COMP, TRU, COMP b. Dependent Variable: JDM.

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[1] cleston.alexandre@hotmail.com