Joint Impact of Materiality Guidance and Justification Requirement on Auditors' Planning Materiality

 ABSTRACT

In this study, we examine a setting in which overreliance on structured materiality guidance leads to less appropriate materiality assessments by auditors, and investigate whether a justification requirement in the absence of accountability mitigates this effect. Results from our experiment show that audit managers make less conservative and less appropriate planning materiality assessments in the presence of structured materiality guidance, but that this detrimental effect is mitigated by the need to justify their judgments. Our study on the joint effect of these two features extends current literature on materiality judgments and has implications for audit practice.

Keywords: planning materiality, structured guidance, justification

 Article Citation:
 Juthathip Audsabumrungrat, Sompong Pornupatham, and Hun-Tong Tan (2016) Joint Impact of Materiality Guidance and Justification Requirement on Auditors' Planning Materiality. Behavioral Research in Accounting: Fall, Vol. 28, No. 2, pp. 17-27.