MSc IFM

Anchoring and Adjustment Effects on Audit Judgements

Anchoring and Adjustment Effects on Audit Judgements

Prof. Dr. Stefan Hunziker
by
Prof. Dr. Stefan Hunziker, Head of MSc International Financial Management, and Prof. Dr. Imke Keimer, Lecturer at the Institute of Financial Services Zug IFZ

Dario Himmelsbach, an IFM graduate in June 2016, works presently as an audit assistant by a leading audit firm. For his master thesis he decided to examine the «Anchoring and Adjustment Effects on Audit Judgements».

In the 1970s, Nobel laureates Kahneman and Tversky studied human behaviour and found evidence on the persistence of irrationality in decision-making processes. In his thesis Dario Himmelsbach focused on the most studied heuristic in auditing for the Swiss market. Using an experimental research design, with a control and an experimental condition, his thesis analysed audit judgments of 85 auditors from more than ten leading audit firms in Switzerland.

In order to reflect the prevailing audit environment, the sample size accounts for all linguistic regions, comprises multinational and local firms and consists of an equal share of assistants and managing auditors. Based on the results of the experiment, his contribution found evidence on the existence of the anchoring and adjustment heuristic in Swiss audit judgments. However, the weakest statistical power has been found for the going concern assumption, which is deemed to have the greatest impact on the auditor’s report. This is insofar relevant as it seems that Swiss auditors are less prone to the anchoring and adjustment heuristic regarding essential audit estimates. Since only 30% of the participants indicated to have knowledge about behaviourism, his experiment also revealed a remarkable lack of awareness.

The findings of his thesis are relevant to Swiss auditors and accounting professionals since they provide experimental evidence on the high degree of unconscious employment of the anchoring and adjustment heuristic.

Dario Himmelsbach has revealed the current significance of the anchoring and adjustment effect not least for young professionals in the financial environment. Therefore, the MSc in International Financial Management prepares their student for their upcoming challenges in a global economy with regard to behavioural management in an optimal manner.

You may also be interested in the following:

MSc International Financial Management Managing performance in a global economy
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