Evaluating the sufficiency of causes in audit analytical procedures

When auditors perform analytical procedures, one concern is that they may render an incorrect conclusion about an observed fluctuation. In this paper, we argue that one way that auditors might make this kind of judgment mistake is to conclude that only one cause is responsible for an unexpected fluctuation when, in fact, multiple causes are responsible. We present a model of the evaluation of causes in analytical procedures that decomposes this task into two components - plausibility checking and sufficiency checking. We argue that auditors are more likely to make such judgment mistakes if they only perform the plausibility check. To address this prediction, we conducted an experiment in the context of analytical procedures using 72 experienced auditors as subjects. Our experimental results show that, as predicted, auditors who merely perform a plausibility check are more likely to erroneously conclude that one cause is responsible for a fluctuation when, in fact, other causes are operating. In contrast, auditors who perform both plausibility and sufficiency checks are much better at discerning when there is one vs. multiple causes responsible for a fluctuation.