Abstract The purpose of this paper is to investigate empirically the effects of decomposition on auditors' assessments of the allowable risk of incorrect acceptance for planned substantive tests of details (TD) within the framework of the audit risk model in SAS No. 39. It is hypothesized that (1) the assessments of TD made by auditors using a direct, holistic approach will be different than the assessments of TD made by auditors using a decomposition approach and (2) assessments of TD using a decomposition/intuitive combination approach will be different than assessments of TD using a decomposition/algorithmic combination approach. An experimental test supported the second hypothesis but not the first. Based on the experimental results, some questions are raised concerning the internal consistency of auditors' risk assessments and the appropriateness of the model in SAS No. 39 as a framework for decomposing and articulating audit risks.
Jiambalvo et al. (Thu,) studied this question.