Anchor and adjustment heuristic effect on audit judgement

Describes research which investigated the operation of the anchor and adjustment heuristic in the context of the continuing audit engagement. Specifically, the impact of information concerning the previous year′s compliance test results was measured over several reported error rates from the current year′s compliance test results. The experimental instrument was applied to two classes of participants, audit practitioners from public accounting and from a government audit service. Each participant was required to supply an estimate of the total population error rate using the information given and the risk assessment methodology. The results of this empirical investigation determined that the addition of the previous year′s information appears to moderate the impact of the anchor and adjustment heuristic by reducing the decision makers′ confidence that the sample error rate represents an acceptable population error rate.