The role of Emotional Status quo & Loss Aversion Biases, Behavioral Representative Bias, and Cognitive Dissonance Bias on Auditors’ Errors

Document Type : Original Article

Authors

1 Assistant Professor, Department of Accounting, Safadasht Branch, Islamic Azad University, Tehran, Iran

2 Assistant Professor Department of Finance, Esfarayen Branch, Islamic Azad University, Esfarayen, Iran

10.22034/iaar.2023.179303

Abstract

Knowledge of auditors' professions and choices is influenced by perception, judgment, and decision-making processes and can affect audit errors. The purpose of this study is to investigate the effect of status quo bias, loss aversion bias, representative bias, and cognitive dissonance bias on auditors’ errors, which is descriptive and analytical in terms of practical purpose and method. The statistical population of the present study includes the auditors of the Iranian Auditing Association. Researcher-made questionnaires with validity and reliability were distributed among 90 statistical samples during 2020 and the data analyzed using Smart PLS software. Findings indicate that status quo, loss aversion, representative and cognitive dissonance biases have a significant effect on auditors’ errors. Therefore, auditors do not tend to deviate from past decisions by acknowledging the status quo, and this increases auditors' errors by reducing flexibility. Also, imbalance in the orientation towards loss-avoidance bias reduces auditors' responsibilities and increases risk, and this is accompanied by an increase in auditors' errors. In addition, the classification of issues and considerations according to the auditor's relevant and comparable past experiences has led to representational bias, in which case auditors face an increase in auditors' errors. At the same time, cognitive dissonance cause auditors to continue to make wrong decisions, only with the aim of justifying their previous decision, and hence the auditors' errors increase. The results showed that the most effective biases affecting the auditors' errors include cognitive dissonance bias (39%), loss aversion bias (36%), representative bias (27%) and status quo bias (8%).  

Keywords

References

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Accounting and Auditing Research
Volume 15, Issue 58
June 2023
Pages 199-218

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