Exploring the Relationship Between Auditor Judgment and Decision-Making Quality in Complex Financial Audits

Posted: Feb 14, 2023

• Dante Rivera
• Freya Walsh
• Emilia Dunn

Abstract

The landscape of financial auditing has undergone profound transformation in recent decades, characterized by increasing complexity in business transactions, sophisticated financial instruments, and global regulatory frameworks. This evolution has placed unprecedented demands on auditor judgment and decision-making processes, yet our understanding of the cognitive mechanisms underlying these critical functions remains limited. Traditional audit research has predominantly emphasized technical knowledge, regulatory compliance, and procedural adherence, while largely neglecting the fundamental neurocognitive processes that govern how auditors process complex information and arrive at professional judgments. This research addresses this significant gap by introducing an innovative neurocognitive framework that integrates principles from behavioral economics, cognitive neuroscience, and accounting expertise to examine the relationship between auditor judgment processes and decision-making quality in complex financial audits. The novelty of our approach lies in its departure from conventional survey-based or experimental economics methodologies, instead employing direct neural measurement techniques combined with sophisticated process-tracing to uncover the underlying cognitive dynamics of audit judgment.