Debiasing halo effect: auditor reputation and the role of auditing learning on financial statements user trust

Radian Sri  Rama; Sutrisno T; Erwin   Saraswati; Aulia Fuad  Rahman

doi:10.21744/irjmis.v7n6.1006

Authors

Radian Sri Rama
radiansrirama19@gmail.com
Accounting Department, Brawijaya University, Indonesia
Sutrisno T Accounting Department, Brawijaya University, Indonesia
Erwin Saraswati Accounting Department, Brawijaya University, Indonesia
Aulia Fuad Rahman Accounting Department, Brawijaya University, Indonesia

Keywords:

auditing learning , auditor reputation, financial statements, halo effect, trust

Abstract

The purpose of this study was to examine the effect of auditor reputation (big four and non-big four) and auditing learning (with audit learning and without audit learning) on the trust of users of financial statements. Testing the influence of the auditor's reputation and learning will show a halo effect on users of financial statements. The research method used was an experiment. Participants were 102 students. Data analysis was performed with the two-way Anova test. The results showed a halo effect so that the auditor's reputation and audit learning affected the users of financial statements.

Downloads

Download data is not yet available.

References

Ackert, L. F., Church, B. K., & Schneider, A. (2007). Auditor Reputation and Individuals’ Investment Decisions.

Azwar, S. (1999). Penyusunan skala psikologi. Pustaka pelajar.

Baldvinsdottir, G., Hagberg, A., Johansson, I. L., Jonäll, K., & Marton, J. (2011). Accounting research and trust: a literature review. Qualitative Research in Accounting & Management.

Barton, J. (2005). Who cares about auditor reputation?. Contemporary accounting research, 22(3), 549-586.

Bigus, J. (2015). Auditor reputation under different negligence regimes. Abacus, 51(3), 356-378.

Billingsley, R. S., & Schneller, M. I. (2009). Information uncertainty and auditor reputation. Journal of Banking & Finance, 33(2), 183-192. https://doi.org/10.1016/j.jbankfin.2008.07.011

Brown, K. F., & Dang, L. (2011). Consequences of auditor reputation loss for client firms: deterioration of financial reporting quality after the Andersen collapse. International Journal of Business Innovation and Research, 5(3), 318-331.

Cano-Rodríguez, M., Sánchez-Alegría, S., & Arenas-Torres, P. (2016). The influence of auditor’s opinion and auditor’s reputation on the cost of debt: evidence from private Spanish firmsLa influencia de la opinión de auditorãa y la reputación del auditor en el coste de la deuda: evidencia en las empresas españolas no cotizadas. Spanish Journal of Finance and Accounting/Revista Española de Financiación y Contabilidad, 45(1), 32-62.

Cho, S., & Kim, Y. C. (2012). Corporate social responsibility (CSR) as a halo effect in issue management: public response to negative news about pro-social local private companies. Asian Journal of Communication, 22(4), 372-385.

Christensen, L. B. (2004). Experimental methodology. Allyn & Bacon.

Cohen, J., Ding, Y., Lesage, C., & Stolowy, H. (2017). Media bias and the persistence of the expectation gap: An analysis of press articles on corporate fraud. Journal of Business Ethics, 144(3), 637-659.

Coombs, W. T., & Holladay, S. J. (2006). Halo or reputational capital: Reputation and crisis management. Journal of Communication Management, 10(2), 123-137.

Craswell, A. T., Francis, J. R., & Taylor, S. L. (1995). Auditor brand name reputations and industry specializations. Journal of accounting and economics, 20(3), 297-322. https://doi.org/10.1016/0165-4101(95)00403-3

Doney, P. M., & Cannon, J. P. (1997). An examination of the nature of trust in buyer–seller relationships. Journal of marketing, 61(2), 35-51.

Ehavior, B., & Pavlou, P. A. (2002). Evidence of the effect of trust building technology in electronic markets: price premiums and buyer. MIS Quartely, 26(3), 243-268.

Field, A. (2009). Discovering statistics using SPSS:(and sex and drugs and rock'n'roll). Sage.

Frooman, J. (1999). Stakeholder influence strategies. Academy of management review, 24(2), 191-205.

Gagne, R. M. (1984). Learning outcomes and their effects: Useful categories of human performance. American psychologist, 39(4), 377.

Godbey, J. M., & Mahar, J. W. (2005). IMPLIED VOLATILITIES AND AUDITOR REPUTATION: THE ANDERSEN CASE', Research in Finance (Research in Finance, Volume 21).

Gramling, A. A., Schatzberg, J. W., & Wallace, W. A. (1996). The role of undergraduate auditing coursework in reducing the expectations gap. Issues in Accounting Education, 11(1), 131.

Herbig, P., Milewicz, J., & Golden, J. (1994). A model of reputation building and destruction. Journal of Business Research, 31(1), 23-31. https://doi.org/10.1016/0148-2963(94)90042-6

Hillison, W., & Pacini, C. (2004). Auditor reputation and the insurance hypothesis: The information content of disclosures of financial distress of a major accounting firm. Journal of Managerial Issues, 65-86.

Hogarth, R. M., & Einhorn, H. J. (1992). Order effects in belief updating: The belief-adjustment model. Cognitive psychology, 24(1), 1-55. https://doi.org/10.1016/0010-0285(92)90002-J

Kanagaretnam, K., Krishnan, G. V., & Lobo, G. J. (2009). Is the market valuation of banks’ loan loss provision conditional on auditor reputation?. Journal of Banking & Finance, 33(6), 1039-1047. https://doi.org/10.1016/j.jbankfin.2008.10.013

Krishnamurthy, S., Zhou, J., & Zhou, N. (2006). Auditor reputation, auditor independence, and the stock?market impact of Andersen's indictment on its client firms. Contemporary Accounting Research, 23(2), 465-490.

Lennox, C. S. (1999). Audit quality and auditor size: An evaluation of reputation and deep pockets hypotheses. Journal of Business Finance & Accounting, 26(7?8), 779-805.

Leuthesser, L., Kohli, C. S., & Harich, K. R. (1995). Brand equity: the halo effect measure. European journal of marketing.

Magnis, C., & Iatridis, G. E. (2017). The relation between auditor reputation, earnings and capital management in the banking sector: An international investigation. Research in International Business and Finance, 39, 338-357. https://doi.org/10.1016/j.ribaf.2016.09.006

Mayhew, B. W. (2001). Auditor reputation building. Journal of Accounting Research, 39(3), 599-617.

McGeoch, J. A. (1933). The psychology of human learning: a bibliography. Psychological Bulletin, 30(1), 1.

McKnight, D. H., Choudhury, V., & Kacmar, C. (2002). The impact of initial consumer trust on intentions to transact with a web site: a trust building model. The journal of strategic information systems, 11(3-4), 297-323. https://doi.org/10.1016/S0963-8687(02)00020-3

Monroe, G. S., & Woodliff, D. R. (1993). The effect of education on the audit expectation gap. Accounting & Finance, 33(1), 61-78.

Morgan, R., & Hunt, S. (1994). The commitment-trust theory of marketing relationships. Journal of Marketing, 58(3), 20-38.

Nahartyo, E., & Utami, I. (2014). Altering Rationality: The Impact of Group Support Systems and Style of Leadership. Journal of Applied Management Accounting Research, 12(2).

Nisbett, R. E., & Wilson, T. D. (1977). The halo effect: evidence for unconscious alteration of judgments. Journal of personality and social psychology, 35(4), 250.

Park, C. K., Xu, Z. Z., Liu, T., Lü, N., Serhan, C. N., & Ji, R. R. (2011). Resolvin D2 is a potent endogenous inhibitor for transient receptor potential subtype V1/A1, inflammatory pain, and spinal cord synaptic plasticity in mice: distinct roles of resolvin D1, D2, and E1. Journal of Neuroscience, 31(50), 18433-18438.

Pierce, B. P., & Kilcommins, M. (1997). The impact of undergraduate auditing modules on the audit expectations gap. Irish Accounting Review, 4(2), 89-118.

Putra, G. S. A., & Dwirandra, A. A. N. B. (2019). The effect of auditor experience, type of personality and fraud auditing training on auditors ability in fraud detecting with professional skepticism as a mediation variable. International research journal of management, IT and social sciences, 6(2), 31-43.

Rifa’i, A., & Anni, C. T. (2012). Psikologi Pendidikan Smarang: Pusat Pengembangan MKU. MKDK-LP3 UniversitasNegeri Semarang.

Rodgers, W., Guiral, A., & Gonzalo, J. A. (2019). Trusting/Distrusting Auditors’ Opinions. Sustainability, 11(6), 1666.

Shadish, W. R., Cook, T. D., & Campbell, D. T. (2002). Experimental and quasi-experimental designs for generalized causal inference/William R. Shedish, Thomas D. Cook, Donald T. Campbell. Boston: Houghton Mifflin,.

Skinner, B. F. (1958). Teaching machines. Science, 128(3330), 969-977.

Tedeschi, J. T. (Ed.). (2013). Impression management theory and social psychological research. Academic Press.

Thorndike, E. L. (1920). A constant error in psychological ratings. Journal of applied psychology, 4(1), 25-29.

Weber, J., Willenborg, M., & Zhang, J. (2008). Does auditor reputation matter? The case of KPMG Germany and ComROAD AG. Journal of Accounting Research, 46(4), 941-972.