JURORS’ LIABILITY ASSIGNMENT UNDER GROUP AUDIT FAILURES

Liancheng Fu

doi:10.7273/000004421

In this dissertation, two experiments were conducted to examine whether the type of component auditor engaged and the remedial tactics implemented in court affect jurors’ hindsight bias and liability assignment. Study one examines the determinants and consequences of jurors’ hindsight bias. Two hypotheses were formulated: 1) jurors’ will exhibit hindsight bias when they have outcome knowledge compared to when they do not have outcome knowledge. The effect will be more significant when a within-network component auditor is engaged than when an outside-network component auditor is engaged; 2) the extent of jurors’ hindsight bias mediates the effect of their outcome knowledge on jurors’ liability assignment. The component audit type will moderate the mediation effect. Juror eligible participants were asked to read a litigated group audit failure case and make decisions. Results are consistent with the predictions. Study two examines whether auditors’ remedial tactics in court can reduce jurors’ hindsight bias and liability assignment by reducing jurors’ perception of the lead auditor’s control. Two hypotheses were formulated: 1) a first-person justification tactic will reduce jurors’ hindsight bias more when it includes arguments to reduce jurors' perception of the lead auditor’s control over the component auditor, than when it does not. The reduction in jurors' hindsight bias will be more significant when an outside-network component auditor is engaged than when a within-network component auditor is engaged; 2) the extent of jurors’ hindsight bias will mediate the effect of remedial tactics on jurors’ liability assignment. The component audit type will moderate the mediation effect. Juror eligible participants were asked to read a litigated group audit failure case and auditors’ remedial tactics before decision making. Results show that the first-person justification tactic, which includes arguments to reduce jurors' perception of the lead auditor’s control over the component auditor, effectively reduced jurors’ hindsight bias and liability assignment. However, this was observed when an outside-network component auditor was engaged but not when a within-network component auditor was engaged. Mediation analysis shows that component auditor type moderates the mediating effect of hindsight bias on the relationship between remedial tactics and liability assignment.

JURORS’ LIABILITY ASSIGNMENT UNDER GROUP AUDIT FAILURES

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