Journal of Behavioral Decision Making
J. Behav. Dec. Making, (in press)
DOI: 10.1002/bdm.412
Eliminating Recency with Self-Review: The
Case of Auditors’ ‘Going Concern’ Judgments
ROBERT H. ASHTON1* and JANE KENNEDY2
1
Fuqua School of Business, Duke University, USA
2
School of Business Administration, University of Washington, USA
ABSTRACT
This paper examines the use of self-review to debias recency. Recency is found in the
‘going concern’ judgments of staff auditors, but is successfully eliminated by the auditor’s use of a simple self-review technique that would be extremely easy to implement
in audit practice. Auditors who self-review are also less inclined to make audit report
choices that are inconsistent with their going concern judgments. These results are
important because the judgments of staff auditors often determine the type and extent
of documentation in audit workpapers and serve as preliminary inputs for senior auditors’ judgments and choices. If staff auditors’ judgments are affected by recency, the
impact of this bias may be impounded in the ultimate judgments and choices of senior
auditors. Since biased judgments can expose auditors to significant costs involving
extended audit procedures, legal liability and diminished reputation, simple debiasing
techniques that reduce this exposure are valuable. The paper also explores some future
research needs and other important issues concerning judgment debiasing in applied
professional settings. Copyright # 2002 John Wiley & Sons, Ltd.
key words
auditing; recency bias; debiasing; accountability
In this paper we demonstrate that a pervasive judgment bias, recency, can be eliminated by a simple selfreview by the judge before making a final judgment or choice. Recency entails that when people evaluate a
sequence of contradictory evidence items their judgments will be unduly influenced by evidence received later
(more recently) in the sequence. Recency has important implications for the interpretation of evidence and the
judgments and choices that follow. The basic premise is simply that judgments and choices should be based on
substantive evidence features (e.g. diagnosticity) and not on features such as where the evidence happens to
fall in a sequence of inputs. In auditing, responding to irrelevant evidence features like serial position can
subject the auditor to costs involving extended audit procedures, legal liability, and diminished reputation.
We study recency in the context of ‘going concern’ evaluation, a crucial judgment in auditing. Auditors
must evaluate a client’s ability to continue as a going concern on every audit engagement by investigating
conditions and events that might make the client’s continued existence questionable (American Institute of
Certified Public Accountants, 1988). The auditor must judge the probability that the client will not continue
* Correspondence to: Robert H. Ashton, Fuqua School of Business, Duke University, Durham, NC 27708, USA.
E-mail: rha2@mail.duke.edu
Copyright # 2002 John Wiley & Sons, Ltd.
Journal of Behavioral Decision Making
as a going concern and whether that probability exceeds a substantial doubt threshold, also established by the
auditor. If the threshold is not exceeded, a ‘standard’ audit report is issued; if the threshold is exceeded, however, a ‘modified’ report that provides additional disclosure about the reasons for such doubt is required.
Prior research finds that auditors’ judgments about the likelihood that a company has going concern problems are indeed influenced by the order in which evidence is received, and that these recency effects in
judgment carry through to the choice of the type of audit report to issue (e.g. Asare, 1992).
Going concern is chosen for study because auditors consider it a difficult and critical part of an audit
(Chow et al., 1987) and because it shares an important task feature with many other audit tasks. It is performed by hierarchical teams of auditors with different experience levels who work via a sequential process
with multiple layers of review (Solomon, 1987). ‘Certain team members [staff] perform the basic audit procedures and document in workpapers the evidence (the procedures and their results) and the conclusions
reached based on the evidence. When [staff] are satisfied that the evidence as documented and conclusions
are appropriate, they pass the workpapers to other members of the audit team [seniors] who traditionally are
at higher levels in the team hierarchy’ (Rich et al., 1997a, p. 87).
In addition to collecting and documenting evidence, staff auditors make preliminary recommendations for
the judgments and choices of senior auditors. Ricchiute (1998, 1999), also in a going concern setting, finds
that the judgments of more experienced auditors are affected by whether the evidence received from less
experienced auditors is documented in causal or noncausal order. Analogously, to the extent that recency
impacts the judgments and documentation of staff auditors such as our participants, its impact may be
impounded in the ultimate judgments and choices of senior auditors. If sufficient detail about both the choice
variables and the sequential process used by staff auditors were provided to senior auditors, the latter might
be able to counter recency. Auditing research, however, finds a strong trend toward more limited documentation in hierarchical audit teams, often consisting simply of the staff auditors’ recommendation and a
reference to a specific audit program step (Rich et al., 1997). In such an environment, senior auditors will
not have enough information to overcome the bias. However, if simple interventions such as self-review—
implemented at the staff level—can eliminate recency, the potentially severe impacts of this bias may be
avoided. Because of this structural similarity between going concern and other audit tasks, we expect our
results to have implications beyond the particular setting that we investigate.
RECENCY IN AUDITING
Studies of recency in auditing typically are based on Hogarth and Einhorn (1992), who proposed a descriptive model of belief revision that takes recency into account. The model predicts recency when individuals
evaluate a short series of complex, mixed evidence. Short evidence series contain a maximum of about 12
items. Complexity relates to both task familiarity and the length of evidence items. Mixed evidence entails
both positive and negative items, i.e. evidence that both supports and contradicts a particular hypothesis.
Hogarth and Einhorn (1992) find support for the model in a series of experiments.
Several studies of recency in audit judgment have been published, including Ashton and Ashton (1988),
Butt and Campbell (1989), Tubbs et al. (1990), Asare (1992), Messier (1992), Pei et al. (1992), Kennedy
(1993), Krull et al. (1993), Reckers and Schultz (1993), Messier and Tubbs (1994), Cushing and Ahlawat
(1996), Trotman and Wright (1996), Bamber et al. (1997), and Ahlawat (1999), and some empirical regularities are apparent. Hogarth and Einhorn’s (1992) model is generally supported. Studies that require a judgment after each evidence item is presented—a step-by-step (SbS) response mode—tend to find significant
recency, while studies that require only one judgment at the end of the evidence series—an end-of-sequence
(EoS) response mode—tend to find no recency. EoS eliminates recency because the contrast effect that
characterizes sequential presentation is dampened by a netting of the effects of the positive and negative
evidence, thus reducing the impact of individual positive and negative items.
Copyright # 2002 John Wiley & Sons, Ltd.
Journal of Behavioral Decision Making, (in press)
R. H. Ashton and J. Kennedy
Eliminating Recency with Self-review
Two auditing studies explicitly attempt to debias recency. Kennedy (1993) finds that accountability
mitigates recency in judgments of the likelihood of business failure, and Cushing and Ahlawat (1996) find
that recency is eliminated when auditors are required to document their going concern judgments. Therefore,
while recency in auditing is a robust phenomenon, it can be debiased.
We believe it is important to find debiasing mechanisms beyond documentation and accountability
because not all elements of auditing tasks are documented in the workpapers or reviewed by superiors. Moreover, documentation frequently takes place after a decision has been made rather than before or during the
task. Such documentation serves to bolster conclusions reached rather than to map out the process used to
reach those conclusions. Rich et al. (1997b) characterize audit workpapers as persuasive messages that may
be ‘stylized’ to enhance the reputation of the preparer with the reviewer. The preparer can influence what and
how evidence is gathered, the interpretation of the evidence, whether or not the evidence is documented, and
how to frame and format the workpapers. These choices influence the conclusions drawn from the workpapers and how the reviewer is likely to perceive these conclusions. Although the reviewer may be aware of this
strategy and invoke some coping mechanisms to avoid being overly influenced, the reviewer may also be a
‘co-composer’ of the persuasive message due to the significant pressures imposed on the reviewer by his or
her superiors and clients (Rich et al., 1997b). Therefore, it is unlikely that documentation and accountability
will always be effective debiasing mechanisms for audit judgments and decisions made at the staff level.
Studies by Butler (1985), Heiman (1990) and Koonce (1992) on altering auditors’ probabilistic judgments
suggest that debiasing mechanisms beyond accountability and documentation can be effective. Butler (1985)
designed a decision aid to direct auditors’ attention to underlying distributional data that tend to be underweighted when assessing sampling risk. His simple decision aid improved auditors’ risk assessments and led
auditors to more correct decisions with regard to accepting or rejecting a reported account balance. Importantly, Butler’s decision aid was self-elicited much like the self-review technique we propose.
Heiman (1990) studied whether considering alternative explanations for an unusual financial statement
fluctuation would reduce auditors’ assessments of the likelihood of a hypothesized cause. She found that
when auditors were provided with alternative explanations or were able to generate at least two alternative
explanations themselves, they reduced their previous likelihood judgments. Heiman’s self-generating condition resembles our self-review condition in that auditors are asked to reconsider a previous likelihood judgment from a broader perspective, keeping constant the evidence set considered earlier. It resembles Butler’s
study in that the self-elicited intervention makes the distribution of errors more apparent.
In a similar vein, Koonce (1992) used counterfactual reasoning to debias auditors’ probability judgments
in an analytical review context. She found that auditors who developed a written explanation for a hypothesized cause of a significant account fluctuation were likely to persevere in their beliefs of the explanation’s
validity, unless they were explicitly asked to counterexplain (i.e., consider why the hypothesized cause might
not be correct). This result is important because it demonstrates that documentation in the workpapers may
actually induce or reinforce judgment bias unless some intervention in the process causes auditors to reflect
on or question their judgments. In the spirit of these papers, we propose our self-review technique.
Most studies of recency in auditing use the SbS response mode because it mimics the sequential nature of
many auditing tasks (Gibbins, 1984). However, the EoS results are also relevant because some important
auditing tasks are structured in an EoS fashion and because the EoS results suggest how tasks might be
restructured to eliminate recency. Task restructuring involves efforts to better align the task with the judge’s
capabilities. For example, if task framing impacts judgment, then reframing can be an effective debiaser
(Rutledge, 1995). Many reframing or restructuring techniques could be employed, including decomposing
the task into subtasks, reorganizing input data, and changing the response mode (Montgomery, 1983;
Coupey, 1994; Selart, 1996). For example, while the sequential integration of evidence in the SbS response
mode typically results in recency, a simple alternative is to reformat the task to encourage simultaneous
(EoS) evidence integration. If the judge (or an external party) is aware that SbS leads to recency, the response
mode can be changed by either the judge or the external party to an EoS mode.
Copyright # 2002 John Wiley & Sons, Ltd.
Journal of Behavioral Decision Making, (in press)
Journal of Behavioral Decision Making
We focus on a self-review by the judge (e.g. Tetlock, 1985) as a simple means of converting an SbS task to
an ‘as if’ EoS response mode, while not requiring the individual to change their method of processing when
gathering evidence. The self-review method recognizes that it may be futile, or even undesirable, to ask individuals to process in an EoS mode when the data are being gathered sequentially. For example, in a going
concern task, as auditors obtain and comprehend evidence they form impressions of the client’s ability to
continue as a going concern. Requests to suspend judgment are likely to be ineffective because forming a
judgment is a natural process when evidence is accumulated over time. Suspending judgment may also be
undesirable because, to do so, auditors would have to catalogue information without really processing it.
This approach could eliminate important opportunities for timely follow-up and elaboration of particular
evidence items. In contrast, a self-review method maintains the natural flow of the task yet allows the auditor
to step back at the end and reconsider, as if the evidence were being aggregated for the first time, and in a
manner that is not overly influenced by the order in which the evidence items were gathered.
We designed an experiment to test our expectations, which are stated formally as follows.
Auditors in the self-review debiaser and EoS conditions will exhibit significantly less recency than will
auditors in the SbS condition.
The following section describes the experimental task, participants and procedures. In the results section,
we focus on the effects of recency (and the self-review debiaser) on both audit judgment and audit report
choice. The final section discusses implications of the results for both practice and research, and it explores
some broader issues concerning biases and debiasing in applied professional settings.
METHOD
Task and procedures
The task involves a real publicly traded client in the telecommunications industry (which we call TeleWest
Company) that has been audited by a ‘Big Five’ international accounting firm. The client’s financial information was used in a previous study by Asare (1992).1 Participants are asked to assume it is early March and
they are reviewing the previous year’s financial statements and other information that has raised questions
about the ability of TeleWest to continue in existence. Participants are then reminded of the reporting
requirements of Statement on Auditing Standards No. 59 (American Institute of Certified Public Accountants, 1988) and are asked to consider the going concern issue in conjunction with their review. After reading
background information about the company and reviewing the firm’s financial statements for the year in
question and the prior three years, the participants assess the probability that TeleWest will not continue
as a going concern for the coming year. This initial assessment is made on a scale from 0 (certain to continue)
to 100 (certain not to continue).
Three participant groups receive 12 information items—six that are contrary to the assumption that TeleWest will continue in existence (negative evidence) and six that mitigate those concerns (positive evidence).2
Approximately half of the participants in each group receive the six contrary indicators followed by the six
1
We made two changes to Asare’s materials. First, we added Statements of Cash Flow to the Balance Sheets and Income Statements that
he used. Second, we included additional information items about the client’s possible going concern problems. While Asare used four
information items, he recognized that some of them contained multiple going concern indicators, and he decomposed them into seven
separate indicators for a manipulation check (Asare, 1992, p. 387). We used the seven decomposed indicators and added another five.
2
The six contrary indicators concern (1) operating losses, (2) negative cash flows, (3) non-renewal of a line of credit, (4) slow inventory
turnover, (5) product quality problems, and (6) the expiration of a patent on a key product. The six mitigating indicators concern (1) a
rapidly growing customer base, (2) improved cash inflows from large customers, (3) more liberal debt repayment terms, (4) lower
operating costs, (5) a likely infusion of equity capital, and (6) the willingness of shareholders to defer receipt of cash dividends.
Copyright # 2002 John Wiley & Sons, Ltd.
Journal of Behavioral Decision Making, (in press)
R. H. Ashton and J. Kennedy
Eliminating Recency with Self-review
Exhibit 1. Experimental sequence for each participant group
SbS group
EoS group
Debiaser group
Read background
information and financial
statements
Provide initial probability
assessment
Revise assessment 12
times: 6M-6C or 6C-6M
order
Choose audit report
Read background
information and financial
statements
Provide initial probability
assessment
Revise assessment 1 time:
6M-6C or 6C-6M order
Indicate M or C and rank
12 factors
Provide threshold for
standard versus modified
report
Indicate M or C and rank
12 factors
Provide threshold for
standard versus modified
report
Read background
information and financial
statements
Provide initial probability
assessment
Revise assessment 12
times: 6M-6C or 6C-6M
order
Indicate M or C and rank
12 factors; review; make
13th revision if participant
wishes
Choose audit report
Choose audit report
Provide threshold for
standard versus modified
report
mitigating indicators, while the remaining participants receive the mitigating followed by the contrary
indicators. The order of indicators within the mitigating and contrary categories is held constant. Participants
revise their initial assessments of the likelihood that TeleWest will not continue (either after each item or
after all items combined—as explained later) and recommend an audit report choice after all 12 indicators
have been reviewed. Because the upper end of the judgment scale refers to not continuing in existence, a
recency effect for probability judgments is demonstrated by a significantly higher mean probability for participants receiving the 12 indicators in the mitigating/contrary order than in the contrary/mitigating order.
Similarly, a recency effect for audit report choice is demonstrated by a significantly greater per cent of
modified reports for the mitigating/contrary participants.
Participants in each group—SbS, EoS and Debiaser—proceed through the six steps shown in Exhibit 1.
Participants in all three groups read background information, review financial statements, and provide initial
probability assessments. The next step for all groups is to revise the initial assessment in response to the 12
going concern indicators, which are presented in either mitigating/contrary or contrary/mitigating order.
Participants in the SbS and Debiaser groups make sequential revisions after reading each of the 12 items
(one per page), while those in the EoS group make only one revision after reading all 12 items (on a single
page). As explained earlier, the EoS response mode is expected to eliminate recency.
At this point, participants in the SbS and EoS groups (1) recommend the type of audit report to issue, (2)
review the 12 indicators (stating whether each is mitigating or contrary and ranking their importance to going
concern evaluation), and (3) provide their substantial doubt thresholds for distinguishing between standard
and modified reports—in that order. Participants choose between two principal report types that are relevant
in going concern settings—a standard report and a modified report involving additional disclosures that
explain the relevant going concern uncertainties. Participants indicate whether they believe each of the 12
indicators is contrary or mitigating by placing a C or M beside an abbreviated version of each item. The
importance ranking involves placing a number from 1 (most important) to 12 (least important) beside each
statement. Finally, the participants’ substantial doubt thresholds are elicited by having them state the probability of not continuing in existence above which they would have substantial doubt about the client’s ability
to continue as a going concern and thus would be expected to modify the audit report to reflect that doubt.
As Exhibit 1 shows, the Debiaser group performs these same three activities, but in a different order. After
reviewing an abbreviated version of each indicator, stating whether each is mitigating or contrary, and
Copyright # 2002 John Wiley & Sons, Ltd.
Journal of Behavioral Decision Making, (in press)
Journal of Behavioral Decision Making
ranking the indicators’ importance, the Debiaser group provides a final, post-review probability revision (i.e.
a 13th revision). Prior to this final revision, participants read the following statement:
Now, please review the contrary and mitigating factors above to determine whether or not you wish to
make any change in your final judgment about the likelihood that TeleWest Company will not continue to
be a going concern.
After this self-review, participants are allowed, but are not required, to make a final probability revision, after
a review of all the evidence and its relative importance, but before indicating a report choice. This is a
participant-driven analog to the EoS response mode. That is, a ‘restructuring’ of the task is achieved by
the participant’s own self-review, in contrast to the external restructuring provided by an external party.
Participants
The participants are 135 staff auditors with a single ‘Big Five’ accounting firm who are attending a training
session at the firm’s national educational facility. While going concern judgments and related audit report
choices ultimately are made by senior auditors, as described earlier, staff auditors typically collect and document evidence on which final judgments and choices are based, and such documentation often includes
preliminary recommendations with respect to going concern issues.
RESULTS
We examine first whether recency exists in the SbS and EoS groups’ final probability judgments, and then
whether it is eliminated by the self-review debiaser. As indicated earlier, we expect to find recency in the SbS
group but not in the EoS group, and we expect it to be eliminated by the self-review. We also analyze some
features of the participants’ audit report choices.3
Probability judgments
Participants’ mean judgments of the probability that TeleWest will not continue as a going concern, both
before and after receiving the 12 going concern indicators, are shown in Exhibit 2. As expected, the initial
probability judgments do not differ by order condition for any of the three groups ( p 0.41). Also as
expected, the final probability judgments in the SbS group reveal significant recency ( p ¼ 0.01). The mean
assessed probability of not continuing as a going concern is significantly higher when contrary evidence is
received last (49.1) than when mitigating evidence is received last (39.8). Moreover, there is no recency in
the EoS group, as final judgments do not differ significantly by order condition ( p ¼ 0.59), consistent with
prior research. Finally, and most importantly, Exhibit 2 shows that the self-review debiaser successfully
eliminates recency ( p ¼ 0.65), as hypothesized. In each of these tests for recency, the initial probability judgment is used as a covariate since the initial probability judgments are positively correlated with the final
probability judgments.
To further examine the effectiveness of the self-review debiaser, we compare the difference in final probability judgments between the two evidence orders in the SbS group to that same difference in the EoS and
Debiaser groups. As shown in Exhibit 3, these planned contrasts follow from an ANCOVA that includes
3
Note that different judgments do not necessarily result in different report choices because many factors other than judgment can
influence choice, e.g. the consequences associated with a particular choice. Moreover, choices often are expressed on a coarser scale than
judgments. In our setting, for example, judgments are expressed on a continuous (probability) scale, while choices are binary (standard
or modified report). Therefore, we examine whether differences in participants’ probability judgments carry through to their reporting
choices and whether the self-review debiaser impacts choice.
Copyright # 2002 John Wiley & Sons, Ltd.
Journal of Behavioral Decision Making, (in press)
R. H. Ashton and J. Kennedy
Eliminating Recency with Self-review
Exhibit 2. Initial and final probability judgments that TeleWest Company will not continue as a going concerna
Groups
Order
Mitigating/contrary
Mean
Std dev.
N
Contrary/mitigating
Mean
Std. dev.
N
Tests for recency effectsb
t
p
SbS
EoS
Debiaser
(51.3) 49.1
(21.3) 20.8
23
(46.9) 42.1
(23.8) 23.3
23
(47.2) 42.5
(21.9) 25.1
26
(56.9) 39.8
(21.5) 25.3
21
(52.3) 47.0
(24.4) 23.0
22
(50.2) 46.7
(22.1) 25.0
20
(0.81) 0.22
(0.42) 0.59
(0.44) 0.40
(0.63) 0.65
(0.83)
(0.41)
2.30
0.01
a
Initial probability judgments are shown in parentheses.
The p-values that refer to initial judgments are two-tailed, while those that refer to final judgments are one-tailed. All t-tests for
differences in final probability judgments are adjusted for the covariate (initial probability judgments).
b
initial probability assessment as a covariate. As expected, the order-effect difference is significantly greater
for the SbS group than for either the EoS group ( p ¼ 0.04) or the Debiaser group ( p ¼ 0.03).
It is important to confirm that debiasing actually occurs at the point of the self-review. Recall that the
Debiaser group has the opportunity to provide a 13th probability revision after stating whether each indicator
is mitigating or contrary and ranking their relative importance. This 13th judgment is used in the analyses in
Exhibits 2 and 3. Prior to the self-review, the Debiaser group follows identical experimental procedures to
those of the SbS group (see Exhibit 1). Therefore, the Debiaser group’s 12th judgments should (1) not differ
from the SbS group’s 12th judgments and (2) show greater recency than their own 13th judgments.
To test our expectation that the 12th judgments do not differ between the SbS and Debiaser groups, we use
a 2 2 ANCOVA that includes both groups for the two evidence orders, with the 12th judgments of each
group as the dependent variable. As expected, order is significant ( p ¼ 0.04, one-tailed) and group is not
( p ¼ 0.42, one-tailed). Thus, the difference in the probability judgments for the two orders does not differ
between the SbS and Debiaser groups before the self-review. To test directly whether debiasing occurs after
the 12th judgment, i.e. with the self-review, we perform a repeated-measures ANOVA on the 12th and 13th
Exhibit 3. ANCOVA and planned contrasts of final probability judgments
Panel A: ANCOVA
Source of variance
Order
Group
Order X group
Anchor
Error
R2 ¼ 0.40
Panel B: Planned contrasts
Tests of SbS group
Versus EoS and debiaser groups
p (one-tailed)
SbS versus EoS
SbS versus Debiaser
Copyright # 2002 John Wiley & Sons, Ltd.
df
1
2
2
1
128
F
0.96
0.48
2.31
78.93
p
0.33
0.62
0.10
0.00
t
1.80
1.92
0.04
0.03
Journal of Behavioral Decision Making, (in press)
Journal of Behavioral Decision Making
probability judgments of the Debiaser group. Order interacts with the timing of the judgment (F ¼ 5.37,
p ¼ 0.03), confirming that the self-review is responsible for the elimination of recency. Overall, 34 of 46
participants in the Debiaser group change their probability judgments after the self-review. Eleven of 19 participants in the mitigating/contrary order decrease their probability judgments, while 11 of 15 participants in
the contrary/mitigating order increase their probability judgments (2 ¼ 3.32; p ¼ 0.07).
Audit report choices
The preceding analyses reveal recency in the SbS group’s—but not in the EoS or Debiaser groups’—final
probability judgments. A further issue is whether recency also characterizes the audit report choices of the
SbS group and, if so, whether the self-review is effective in eliminating it. Consistent with recency, a greater
per cent of the SbS group in the mitigating/contrary condition choose modified reports (87%) compared to
the contrary/mitigating condition (71%). In both the EoS and Debiaser groups, however, the per cent choosing modified reports is greater in the contrary/mitigating condition (68% versus 65% in EoS; 68% versus
58% in Debiaser). The intergroup differences are not significant in a SbS-EoS comparison (2 ¼ 1.87;
p ¼ 0.17), but, more importantly for our study, are at least marginally significant in a SbS-Debiaser comparison (2 ¼ 3.23; p ¼ 0.07). Thus, the choice results are similar to the judgment results, but are weaker—perhaps due to the coarser choice scale.
Another issue is the extent of consistency between participants’ audit report choices and the choices
implied by their own final probability judgments and substantial doubt thresholds.4 Exhibit 4 reveals that
29% of participants (39 of 134) make choices that are inconsistent with their thresholds and probability judgments. Of these inconsistencies, 87% (34 of 39) reflect the choice of a modified report when the participant’s
probability judgment and substantial doubt threshold imply a standard report. These participants would provide more disclosure in the audit report than their thresholds imply. The other 13% reflect participants’
choice of a standard report when their judgments and thresholds imply modified reports. These participants
would provide less disclosure relative to that provided by a modified report. The overwhelming incidence of
the former type of inconsistency agrees with much prior research that reveals cautious decisions by auditors
in a great variety of tasks (see Davis and Ashton, 2001 and Smith and Kida, 1991 for reviews of this literature). A final question is whether the self-review debiaser (or the EoS response mode) reduces the extent of
inconsistencies. Tests of both SbS versus EoS and SbS versus Debiaser suggest the answer is yes. The 45%
inconsistency rate in the SbS group drops to 24% in the EoS group (2 ¼ 4.33; p ¼ 0.04) and to 18% in the
Debiaser group (2 ¼ 7.90; p ¼ 0.01).
Exhibit 4. Inconsistencies between participants’ report choices and reports implied by their probability judgments and
substantial doubt thresholds
Inconsistencies
Group
SbS
EoS
Debiaser
All groups
N
44
45
45a
134
Total
20
11
8
39
(45%)
(24%)
(18%)
(29%)
More disclosure
Less disclosure
17
11
6
34
3
0
2
5
a
One participant in the Debiaser group did not provide a report choice.
4
Recall that Statement on Auditing Standards No. 59 requires the choice of a modified (standard) report if the auditor’s probability
judgment exceeds (is less than) his or her substantial doubt threshold. We have participants provide all three variables (judgments,
choices and thresholds) so the consistency among them can be examined.
Copyright # 2002 John Wiley & Sons, Ltd.
Journal of Behavioral Decision Making, (in press)
R. H. Ashton and J. Kennedy
Eliminating Recency with Self-review
DISCUSSION
This study finds that a simple self-review debiaser is effective in eliminating recency in auditors’ going concern judgments. The results have implications for both practice and research. With respect to practice, they
support the use of a simple, low-cost, easily-implementable debiasing intervention. In auditing, for example,
before final judgments are made, sequential tasks could be restructured either ‘externally’ by audit program
designers to enable simultaneous evidence integration (EoS processing) or ‘internally’ by the auditor performing the task to effect a self-review that simulates EoS processing. Because of their key role in collecting
and documenting audit evidence and making preliminary recommendations for senior auditors’ decisions,
staff auditors could especially benefit from such an intervention.
Our experiment does not allow us to specifically identify which feature of the self-review method accomplishes the debiasing. Participants reviewed all of the evidence items and ranked each item in order of importance. A review of the evidence may be sufficient to accomplish debiasing. However, importance ranking
should stimulate deeper processing and thus may contribute to the debiasing. Future research could investigate the relative contributions of these steps in our self-review method.
In professional settings such as auditing it is essential to recognize that many ‘debiasers’ already exist in
the natural environment and therefore need not be created in the ways envisioned here. Examples are
accountability and documentation requirements, reputation effects, and group processes in professional
organizations. Such forces could be effective in maintaining a high level of judgment quality if they motivate
the judge to recall knowledge or use cognitive processes that might otherwise be unattended to under day-today pressures. However, accountability and documentation requirements frequently take place after a decision has been made rather than before or during the task. Such documentation serves to bolster conclusions
reached rather than to map out the process used to reach those conclusions. Although self-review is less
likely to have this effect because it occurs before the final judgment or decision has been made, it is conceivable that if any time passed between the original judgment and self-review, the same bolstering behavior
could occur.
Other examples of debiasers in the natural environment involve markets, which provide financial incentives and feedback to market participants and their advisors. While markets are not created for the purpose of
debiasing judgments, this often may be an important outcome of markets. In many cases, however, markets
do not mitigate biases (Camerer, 1992). In fact, the Tuttle et al. (1997) finding of significant recency effects
in market prices suggests that markets cannot be counted on to eliminate the particular bias that we study.
Camerer et al. (1989) and Ganguly et al. (1994) provide other examples of biases that persist in market settings (e.g. the ‘curse of knowledge’ and the base rate fallacy).
Moreover, it is important to recognize that debiasing interventions could ‘backfire’ by exacerbating the
dysfunctional behaviors they are intended to correct (Curley et al., 1989; Tetlock and Boettger, 1989, 1994;
Ashton, 1990), or could lead to new dysfunctional behaviors. And moving to the organizational and market
settings in which professionals work may cause biases that do not exist in individual settings to appear (Berg
et al., 1995). Examples are biases associated with estimating others’ knowledge and behaviors (Kennedy and
Peecher, 1997). Finally, judgment biases can be functional. Hogarth (1981) discusses the altered nature of
biases in a ‘continuous’ decision environment as opposed to a ‘discrete’ one, and Kahneman and Lovallo
(1993) suggest that biases can be partially counteracted by other biases. While broad issues like these have
been carefully considered in stylized settings, they probably have not received the attention they deserve in
applied professional contexts.
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Authors’ biographies:
Robert H. Ashton is the Martin L. Black, Jr. professor and KPMG Research Scholar at the Fuqua School of Business at
Duke University, and is the Dean of the Fuqua School of Business Europe. His research interests involve behavioral
decision theory and its applications to management accounting, external auditing and taxation issues.
Jane Kennedy is the William R. Gregory Fellow of Accounting at the University of Washington’s School of Business in
Seattle, WA. Her research interests involve behavioral decision theory and how individuals use financial information to
make important decisions.
Authors’ addresses:
Robert H. Ashton, Fuqua School of Business, Duke University, Durham, NC 27708, USA.
Jane Kennedy, School of Business Administration, University of Washington, Seattle, WA 98195, USA.
Copyright # 2002 John Wiley & Sons, Ltd.
Journal of Behavioral Decision Making, (in press)