An Experimental Study of Internal Control Judgements

The work of independent auditors involves two basic activities evidence collection and evidence evaluation. Substantial agreement exists concerning the types of evidence that should be collected in particular situations and the appropriate collection techniques. The evidence-evaluation activity, however, is less susceptible to codification. As a result, the auditing profession relies heavily upon professional in evaluating audit evidence. For example, the AICPA has stated that of the independent auditor's work in formulating his opinion on financial statements consists of obtaining and examining evidential matter. The measure of the validity of such evidence for audit purposes lies in the judgment of the auditor. 1 The importance of judgment in auditing is accepted almost without question; yet auditors' judgments are seldom subjected to systematic research. A typical rationale for this situation is the AICPA's statement that 'judgment is the most important factor in the making of any audit, but in many situations it is practically impossible to write out in specific language how the auditor applies judgment. 2 The study reported in this paper was concerned with the evidence-evaluation function of independent auditing. One type of audit evidence was * Assistant Professor, University of Texas at Austin. This paper is based upon the author's doctoral dissertation; for the full report, see R. H. Ashton, Judgment Formation in the Evaluation of Internal Control: An Application of Brunswik's Lens Model (Minneapolis: University of Minnesota, 1973).