The Role of Ambiguity in Auditors' Determination of Budgeted Audit Hours.

Abstract This is a study which investigates the role of ambiguity on auditors' consideration of risk factors and subsequent determination of budgeted audit hours during the planning stages of audit examinations. Eighty-five practicing auditors responded to an experimental case that provided background information regarding factors affecting inherent risk and control risk for a hypothetical audit and ,also requested them to estimate the number of planned audit hours for the engagement. Consistent with previous research (e.g., Dusenbury et al. 1996), our results indicated that both ambiguity and risk play significant roles in the auditor's determination of the extent of substantive testing; however, the effect(s) of ambiguity are limited to engagements characterized by lower combined levels of risk. Some of our results are inconsistent with previous findings by Nelson and Kinney (1997), who reported a symmetric (moderating) effect of ambiguity on auditors' decisions, suggesting that the influence of ambiguity may be dependent upon the decision context examined.