Identification of Auditors' Propositions Related to Assessments of Management Estimates.

Abstract One of the most difficult areas of audit judgment is the evaluation of management estimates. The problem facing CPA firms is that individual auditors bring different experiences to the evaluation task. These differences can lead to disparate opinions and may ultimately result in errors in judgment regarding the estimates. To investigate this problem, practicing auditors provided judgments and recalled case materials to elicit their propositions (basic knowledge units) related to the collectibility of trade accounts receivable. Results based on the use of discourse analysis indicate that recalled propositions can be categorized into meaningful information sets that are related to auditors' levels of experience and judgments. In particular, while all auditors recalled some of the same propositions, specific differences were noted based both on their level of experience and judgment. In addition, experienced auditors were more likely to disagree with management's collectibility assertion than inexperienced auditors.