International Journal of Finance & Managerial Accounting

International Journal of Finance & Managerial Accounting

Developing mediating measures of personal characteristic and code of conducts on influence of halo effect on audit judgment

Document Type : Original Article

Authors
Mehdi sharifi 1
Rasoul Abdi 2
saeed Jabbarzadeh 3
Nader rezaei 2
1 Ph.D. Student , Department of Accounting, Islamic Azad university Bonab Branch, Bonab, Iran.
2 Assistant Professor in Accounting, Islamic Azad university Bonab Branch, Bonab, Iran.
3 Associate Professor in Accounting, Islamic Azad university Urmia Branch, Urmia, Iran.
10.30495/ijfma.2023.20522
Abstract
Judgment is a process in which people think and comment on aspects of issues being decided. Wrong decisions are often made of wrong judgments. Auditing is one of professions that uses judgment in decision-making processes. However, halo effects affects the auditor's perception as a decision maker, which reduces power of reasoning and analysis in decision making. In this regard, purpose of present study is to investigate halo effects on judgment of auditors. The research period was 1398 and data needed to answer research question were collected by distributing a questionnaire among community of certified public accountants. Accordingly, data obtained from 186 supplementary questionnaires were analyzed using structural equations and also SmartPLS software as an effective tool used for this aim.
Research findings show that halo has an effect on audit judgment and also cods of professional conducts and personal characteristics play a mediating role in the relationship between halo effect and audit judgment
Keywords
Audit Judgment
Halo Effect
Professional code of conduct
and Individual Characteristics
  • Akbari Naftchali, Issa, Pourheidari, Omid, Khodamipour, Ahmad. (2020). The effect of experience on auditors' involuntary behaviors. Financial accounting and auditing research. 197-2228, 11 (41).
  • Arel, B., Kaplan, S.E. and O’Donnel, E. (2005), “Halo effects during internal control evaluation: the influence of management self-assessment on auditor judgment”, working papers,Arizona State University.
  • Broberg, P., Umans, T., Skog, P., Theodorsson, E. (2018). "Auditors’ professional and organizational identities and commercialization in audit firms", Accounting, Auditing & Accountability Journal, Vol. 31 Issue: 2, pp.374-399, https://doi.org/10.1108/AAAJ-02-2014-1607.
  • Flogard, Schmid CH, Lau J, Trikalinos TA. Meta-Analyst (2007). Software for meta-analysis of binary, continuous and diagnostic data. BMC Med Res Methodol.9:80.
  • Foroughi Abri, Meysam, Jafari, Alireza and Naderi Bani, Rahmatollah (2014), Factors Affecting Ethical Judgments among the Society of Certified Public Accountants of Iran, Financial Accounting Quarterly, Volume 6, Number 22.
  • Grammling, A., O'Donnel, E., and Vandervalde, S. (2010), “Audit partner evaluation of compensating controls: a focus on design effectiveness and extent of auditor testing”, Behavioral Research in Accounting,” Vol. 29 No.2, pp. 175-187.
  • Hajiha, Zohreh, Goodarzi, Ahmad, Fattahi, Zahra (2013), The relationship between the characteristics of auditors' professional skepticism and their judgment and decision, Management Accounting Quarterly, Volume 6, Number 4, pp. 59-43.
  • Hasas Yeganeh, Yahya (2005). Philosophy of auditing, scientific-cultural publications. First Edition.
  • Hasas Yeganeh, Y, (2011), "Challenges of Professional Judgment in Auditing", Journal of Certified Public Accountants, No. 10
  • Hirani, Forough, Vakilifard, Hamid Reza, Bani Mahd, Bahman, Rahnama Rudposhti, Fereydoun (2016), The effect of auditors' social characteristics on their judgment in resolving the conflict between the auditor and the management of selected features, Journal of Auditing Knowledge, Volume 17, Number 67 .
  • Hosseini, Seyed Hossein, Niko Maram, Hashem and Ali Akbar Rezaei, Explaining the components affecting the professional skepticism of auditors based on individual dimensions, Journal of Management Accounting, Volume 8, and Number 25.
  • Luippold, B. L., and Kida, T.E. (2012), “The impact of initial information ambiguity on the accuracy of analytical review judgment”, Auditing: A Journal of Practice & Theory, Vol. 31 No. 2, pp.113-129.
  • Lee, H. Y., Mande, V. & Son, M, (2009), “Do Lengthy Auditor Tenure and the Provision of Non-Audit Services by the External Auditor Reduce Audit Report Lags?”, International Journal of Auditing, Vol. 13, No. 2, PP. 87–104.
  • McDaniel, L., Marint, R. & Maines, L. A, (2019), “Evaluating Financial Report Quality: The Effects of Financial Expertise vs. Financial Literacy”, The Accounting Review, Vol. 77, Supplement, PP. 139–67.
  • Murphy, K.R. and Anhalt, R.L. (2003), ”Is halo error a property of the rater, the ratees, or the specific behavior observed?”, Journal of Applied Psychology, Vol. 77 No.4, pp.494-500.
  • Nugerah, Rita, Nelly Sari, Ria, ostiana, Rina Mona F,(2011), the relationship between ethics, expertise, audit experience, fraud risk assessment and audit situational factors on auditor professional scepticism, Department of Accounting, Faculty of Economics, Universitas Riau, Indonesia.
  • O’Donnell, E., and J.J. Schultz, Jr. (2019). The halo effect in business risk audits: Can strategic risk assessment bias auditor judgment about accounting details?, The Accounting Review 80(3): 921- 939.
  • Rahimian, Nizamuddin and Hedayati, Ali (2013). Factors Affecting the Professional Opinion of Auditors, Certified Public Accountant, Winter 2013, New Volume, No. 36, pp. 77-96.
  • Rajabalizadeh, Javad (2015), The Impact of Auditors' Emotions and Moods on Professional Auditing Judgment: A Study of Studies and a Review of Proposed Concepts and Approaches, M.Sc. Thesis, Faculty of Administrative and Economic Sciences, Ferdowsi University of Mashhad.
  • Royaei, Ramazan Ali, Yaghoubnejad, Ahmad, Azinfar, Kaveh. (2014). The relationship between professional skepticism and the professional judgment of independent auditors. Financial Accounting and Auditing Research, 67-95, 6 (22). B
  • Saeedi Graghani, Muslim, Naseri, Ahmad. (2017). Individual differences and the auditor's professional judgment. Financial accounting and auditing research. Winter, pp. 111-129, 9 (36).
  • Salman Panah, Najmeh, Talebnia, Ghodratollah (2013), Selection of Factors Affecting the Ethical Judgment of Certified Public Accountants in Iran, Quarterly Journal of Management Accounting, Year 6, Issue 18, Fall 2013.
  • Schultz, D. and Schultz, S.E. (2012), Pyschology and Work Today. Tenth Edition. USA: Pearson Education.
  • Tabesh, Zohreh, Abdoli, Mohammad Reza, Houshang, Yavarpour (2021) Investigation of the effect of halo on the career path of the auditor, accounting and auditing research, No. 45, from pages 89 to 112.
  • Tan, H, T. and Jamal, K. (2001), “Do auditors objectively evaluate their subordinates’ work?”, The Accounting Review, Vol. 76 No.1, pp. 99-110.
  • Utami, Intiyas, Tri Ika Ayuananda,(2017). Belief revision towards long-series information Journal of Economics, Business, and Accountancy Ventura Vol. 20, No. 2, August – November, pages 213 – 226.
  • Utami,Intiyas Indra Wijaya Kusuma Gudono Supriyadi, (2017)," Debiasing the Halo Effect in Audit Decision: Evidence from Experimental Study ", Asian Review of Accounting, Vol. 25 Iss 2 pp.1-55.
  • Utami, I. and E. Nahartyo (2013). “The Effect of Type A Personality on Auditor Burnout: Evdidence from Indonesia”, Accounting & Taxation, Vol. 5, No. 2. pp. 89-102.
  • Wilks, T. (2002), “Predecisional distortion of evidence as a consequence of real-time audit review”, The Accounting Review, Vol. 77 No. 1, pp. 51-71.