Auditors' cognitive processing habits

What is it about?

Audit seniors use simple processes for complex tasks despite interventions such as revised standards, judgment frameworks, and firm training. We propose that one reason for this is that some audit seniors developed strong habits to use simple processes in the audit room context when they were junior-level audit staff. Habits are mental associations between a behavior and a context; their strength depends on repeated use of the behavior in the context with concurrent rewards. Once a habit becomes strong, the context (audit room) automatically triggers the behavior (simple cognitive processing). Staff use simple cognitive processes and develop habits because simple processes are appropriate for their staff-level tasks. The habits become problematic when staff are promoted to the senior level, because their tasks become more complex but the context remains the same, and the context triggers the simple processes. We use an experiment in which we measure habit strength and manipulate context to test whether habit strength explains auditors' use of simple cognitive processes on a complex task. We find that it does--auditors with stronger simple process habits perform worse on the complex task than other auditors, but their performance is better in an alternative context that does not activate the habitual processes. We conduct additional analyses to validate our habit strength measure, including tests of its determinants.

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Photo by Helena Lopes on Unsplash

Photo by Helena Lopes on Unsplash

Why is it important?

Habits are hard-wired, so understanding that auditors' use of simple cognitive processes is habitual explains why traditional solutions and intervention haven't addressed audit deficiencies in this area. Changing habitual behavior requires new approaches that specifically target habit formation.