Improving Assessments of Another Auditor's Competence

Abstract

SUMMARY: Auditing standards require auditors to assess the competence of their colleagues. However, previous studies have shown that auditors' assessments of their colleagues' competence are inaccurate and overconfident, potentially leading to a reduction in audit effectiveness. In two related studies, we investigate both the process by which these assessments are made and a potential intervention aimed at improving these judgments. In study 1, we investigate the anchors used by senior auditors in assessing the competence of their subordinates and peers, and find that the anchors vary depending on the familiarity of the audit senior with their colleague. These findings inform study 2, which investigates the impact of different types of outcome feedback on auditors' assessments of another auditor's competence. We find that the effects of individual-specific feedback and average-group feedback will be contingent on the nature of the relationship between the assessor and assessee. Specifically, individual-specific outcome feedback is effective in reducing overconfidence when assessing the competence of a colleague with whom the assessor has previously worked, but not an unfamiliar colleague. When assessing the competence of an unfamiliar colleague, we find that average-group outcome feedback is effective in reducing overconfidence. Our results complement and extend earlier theory by showing that individuals, in assessing a colleague's competence, use anchors in addition to the competence of the assessor.