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Audit firms claim that they are used as the whipping boy when something goes wrong, either because of the public's poor knowledge of the auditing function or because financial incentives exist to blame the audit firm. An alternative explanation is that audit firms' active communication of their assurance provider role causes blaming behavior. We investigate these different explanations based on a 2 × 2 between‐subjects experiment in which we manipulate financial incentives to blame the audit firm and the audit firm's communication strategy. Three weeks in advance of the experiment we administered an auditing knowledge questionnaire to the participants to include their auditing knowledge levels into our study. We find that audit firms with “deep pockets” and an active assurance provider communication strategy receive significantly higher blame, and that poor knowledge of auditing is associated with higher blame. Furthermore, when a firm uses an assurance provider communication strategy, then it receives higher blame from participants with high (relative to low) auditing knowledge.
International Journal of Auditing – Wiley
Published: Nov 1, 2018
Keywords: ; ; ;
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