Influence of Hierarchical Level and Construal Instructions

1 www.congressousp.fipecafi.org

Influence of Hierarchical Level and Construal Instructions on Auditor’s Materiality

Judgment

CAMILA ADAM

Fundação Universidade Regional de Blumenau (FURB)

PAULO ROBERTO DA CUNHA

Fundação Universidade Regional de Blumenau (FURB)

Abstract

Materiality judgments are essential to the entire audit process to ensure the reliability of the

financial statements. To ensure the audit’s quality is important to understand possible factors

that influence the auditor’s materiality decisions or judgments, as the hierarchical level and

construal instructions. Thus, the study aim’s to examine the influence of hierarchical level and

construal instructions on auditors’ materiality judgment. The sample consists of 208 external

auditors with profiles on the professional social network Linkedin®. The experiment design is

3x2 full factorial analysis. For the analysis and interpretation of data, we used descriptive

statistics and Analysis of Variance (ANOVA) in the STATA® software. The results show that

the auditors with a high hierarchical level, recognize the detected misstatements as more

material than auditors with a low hierarchical level. Auditors who receive abstract construal

instructions tend to recognize the misstatements identified as more material than auditors who

receive concrete construal instructions. We also find that auditors with a low hierarchical level,

when receiving abstract construal instructions, recognize the detected misstatements as more

material compared to other instructions. This result indicates that hierarchical level and the

construal instructions have an interaction effect in the auditor’s materiality judgment. In this

sense, the study shows that even if the hierarchical position is favorable to concrete construal,

due to the encouragement of operational issues, the use of instructions guided the auditors to a

more abstract mentality. Besides, the study shows that cognitive aspects, as construal level,

have effects on the auditor's materiality judgment on the recommendation of adjustments in a

scenario with misstatements.

Keywords: Construal Level, Hierarchical Level, Construal instructions, Auditor’s Materiality

Judgment.


1 Introduction

The purpose of the financial audit is to increase the confidence of intended users in the

financial statements. This confidence is based on the opinion of the auditor, who, to express it,

needs to be sure that the financial statements are free from material misstatements (International

Standard on Auditing [ISA] 200). Materiality judgments are essential to ensure the reliability

of the financial statements, being essential to the entire audit process (Choudhary, Merkle, &

Schipper, 2019). The assessment of what is material depends on the auditor's professional

judgment, demanding quantitative and qualitative analyzes (Messier, Martinov-Bennie, &

Eilifsen, 2005; Eilifsen & Messier, 2015).

In this context, many factors can affect the auditor's materiality decisions or judgments,

as they make their assessment decisions based on their mental model (Moroney & Trotman,

2016). Thus, cognitive issues, such as the construal level, that is, the way in which individuals

interpret information and evidence, is a factor that can affect the auditor's materiality judgment

and decisions. According to the Construal Level Theory (CLT), individuals can assume an

abstract or concrete construal of the situations they face (Trope & Liberman, 2003; Liberman

& Trope, 2014)

The abstract construal level, also known as high level, is characterized by a focus on the

essence of the information, that is, on a general and broad panorama. On the other hand, the

concrete construal level, also called low level, focuses on details, that is, on the specificity of

an event or object (Trope & Liberman, 2003; Stillman, Fujita, Sheldon, & Trope, 2018). There

are some ways to direct an individual's thinking to a more abstract or concrete construal, such

as the hierarchical level and the construal instructions (Freitas, Gollwitzer, & Trope, 2004;

Smith & Trope, 2006; Magee & Smith, 2013; Efrat-Treister, Daniels, & Robinson, 2020).

The relationship between the hierarchical level and the construal level of individuals is

based on an element of companies' hierarchical structure, power. As Chen, Lee-Chai and Bargh

(2001) and Schaerer, Plessis, Yap and Thau (2018), individuals with power, with a high

hierarchical level, tend to feel independent from others and influence and control their

subordinates. Because they have these characteristics, they tend to have their mental

representation turned to the general picture of events to focus on strategic issues and the

essence. People with low power are dependent on others and are controlled and influenced by

their superiors (Smith & Trope, 2006; Magee & Smith, 2013). Subordinates generally focus on

operational issues and focus their thoughts on specifics and details. In the audit, where the

hierarchical level is well recognized and defined (Taylor & Curtis, 2013), partners/audit

managers and assistant auditors or newly promoted to seniors may present different materiality

judgments when there is evidence that they have different construal levels in terms of the way

they perceive reality (Hadar, Luria, & Liberman, 2020; Yin & Smith, 2020).

In addition to the hierarchical level, the construal instructions can also be important in

individuals' construal level. According to Freitas et al. (2004) and Efrat-Treister et al. (2020),

any action can be interpreted at different construal levels, high or low. Moreover, this abstract

or concrete construal can be induced in individuals through instructions, which leads them to

focus their attention on a more abstract or concrete representation (Freitas et al., 2004; Efrat-

Treister et al., 2020). Construal instructions are ways of directing individuals' thoughts to think

about why or how something is done (Rasso, 2015). An action being interpreted with a focus

on why it is done, that is, on the goal, encourages individuals to construes abstractly. On the

other hand, interpreting an action at the level of how it is performed activates concrete construal.

In the audit environment, construal instructions can be used as a technique to guide auditors to

present information processing that is more appropriate for a given scenario and facilitates the

assimilation of information (Rasso, 2015).


There is evidence of a bidirectional association between construal instructions and the

hierarchical level in addition to the direct relationship between construal instructions and

hierarchical level on the auditor’s materiality judgment. The study by Smith, Wigboldus and

Dijksterhuis (2008) found that an individual's behavior can be more influenced by the sense of

power than the power he/she exerts and the induction of a certain construal level through

instructions can determine that sense of power. Therefore, the construal instructions and the

hierarchical level are related, and this interaction can generate different impacts on the auditor’s

materiality judgment because different combinations can potentiate a certain mentality, abstract

or concrete, and thus generate evaluations more or less likely to adjust accounts receivable in a

materiality scenario. Given the above, the study examines the influence of hierarchical level

and construal instructions on auditor's materiality judgment.

We found that auditors with a high hierarchical level, as audit managers, recognize the

detected misstatements as more material than auditors with a low hierarchical level, as assistant

auditors. Auditors who receive abstract construal instructions tend to recognize the

misstatements identified as more material than auditors who receive concrete construal

instructions. Furthermore, auditors who occupy a low hierarchical level position, upon

receiving abstract construal instructions, tend to present a judgment more favorable to the

accounts receivable adjustment in scenarios with misstatements than when receiving concrete

construal instructions or when they do not receive instructions, which is possibly an interaction

effect between the construal instructions variable and the hierarchical level.

Researches that work with the auditor’s materiality judgment allow us to propose

solutions for the audit procedures and improve audit quality, which has been much discussed

(Trotman, Tan, & Ang, 2011). The materiality judgments are important because these

judgments may affect the reliability of the reported disclosures and are the key concept in the

assurance process (Eilifsen & Messier, 2015; Moroney & Trotman, 2016). According to

Weisner (2015), studies that work with CLT in behavioral accounting, mainly in auditing, offer

an opportunity to understand in greater depth the cognitive processes behind the auditors'

judgment and to have new ideas about the heuristics associated with their thoughts. In this

sense, the study is relevant when working with aspects that influence the auditors' construal

level and, consequently, their professional judgment.

The study brings some contributions, mainly related to audit judgment. When

investigating the influence of the hierarchical level on the auditor's judgment, the study provides

the understanding that power as a fundamental psychological phenomenon, present within the

hierarchical structure of audit firms, can stimulate a certain construal level in the auditors, and

thus affect the way that they process the information available in a context of materiality, and

may be more or less likely to adjust accounts receivable.

By studying the influence of construal instructions on the auditors' judgment, it was

possible to verify the use of instructions to direct information processing to a more abstract or

concrete construal can be decisive to affect how auditors are likely to make audit adjustments.

Also, studies that address interventions in the audit process, such as construal instructions, are

critical, as they reveal techniques that can be used with auditors to improve the cognitive

processing of audit information (Brewster, 2011; Plumlee, Rixom, & Rosman, 2015; Rasso,

2015). In this context, the study of construal instructions can bring insights to improve the

conducting judgments, the mentoring process, assigning tasks in the field, and training auditors.

The study results are relevant to stakeholders in the audit process, especially for

auditors, audit firms, regulators, and users of accounting information. It is understood that the

results lead to findings that may indicate ways to improve the quality of the audit, and

consequently the reliability of the accounting information in the financial statements when it is


understood that the hierarchical level and the use of construal instructions can lead to judgments

more likely to adjust accounts receivable in contexts with material misstatements.

Finally, the study also discusses the audit materiality judgment regarding the CLT theme

in the Brazilian context, which presents a very peculiar reality compared to other countries,

including emerging markets. According to the 2019 report of the International Monetary Fund

(IMF), Brazil presents an annual growth considered low for emerging markets. Besides, the

country is in a slow economic recovery from the last recessions faced, presenting an

environment of uncertainty regarding the approval of important reforms, such as fiscal and

structural reforms, to improve the business environment. Regarding the international market,

the country is considered one of the most closed and largest economies globally, with reforms

in the economy expected to attract investors. In the Brazilian stock exchange, there are more

than 400 companies listed and according to the data from Economatica (2020), 12 of the 20

most profitable companies in Latin America are Brazilian. The results presented are similar to

studies carried out in countries with developed economies, and it allows to identify that

cognitive factors can be elements to be used to improve the audit quality in emerging countries,

increasing the reliability of the audit reports, and therefore, guaranteeing the protection of the

auditors, investors and other users of accounting information. That is important, mainly in a

context where there are signs of economic openness and investors' entry.

2 Literature Review and Hypotheses

This section presents the theoretical questions about the Auditor's Materiality Judgment,

Construal Level Theory, Hierarchical Level, and Construal Instructions. Finally, we described

the hypotheses.

2.1 Auditor's Materiality Judgment

Judgment can be understood as the formation of an idea, opinion, or estimate about an

object, event, or phenomenon, making forecasts for the future or evaluations of the present, in

which there is almost always a reflection of the individual's beliefs (Bonner, 1999; Mala &

Chand, 2015). In a more normative aspect, especially in the audit, ISA 200 defines professional

judgment as the use of training, knowledge, and experience in conducting activities, being

essential for an adequate audit performance.

As presented by ISA 200, the audit's objective is to increase the confidence of the

financial statements by the users of accounting information. This objective is achieved by

expressing the auditor's opinion regarding the financial statements' conformity with the

financial reporting structure. To express his opinion, the auditor needs to ensure that the

statements are free from material misstatements.

In the audit environment, misstatement is understood as the difference between the way

information is reported and the form of disclosure recommended by the financial reporting

structure. Thus, there is a misstatement in the financial statements when there are differences

in the value, classification, presentation, or disclosure between what the company reports

compared to what is required for the item (ISA 200). Misstatements are considered material

when they may affect the decision of users who use financial statements as an information base

(Messier et al., 2005; Green & Cheng, 2019).

In addition to material misstatements, materiality is another element that needs to be

considered in the auditor's judgment (ISA 200). Materiality is understood as a measure

established by the auditor in the audit plan to assess the effects of the financial statements'

misstatements. Materiality postulates acceptable or tolerable parameters of uncorrected

misstatements, which would not materially compromise the financial statements in the


stipulated amounts. However, misstatements with values lower than materiality will not always

be of little relevance, requiring the analysis of other circumstances (ISA 320).

To determine whether misstatements is material, both quantitative and qualitative

factors need to be considered (Eilifsen & Messier, 2015). Quantitative factors consider the

estimation of values for materiality, being calculated from three elements: a base, possible

adjustments to this base, and a percentage. Materiality is generally calculated based on values

in the financial statements, such as earnings before taxes, revenues, net revenues, or assets, and

the percentages applied do not have a pattern. However, for the assessment of materiality, more

than quantitative rules is necessary; it is necessary to analyze other qualitative and contextual

factors of the audited company, where the auditor's judgment is even more required (Choudhary

et al., 2019).

It is perceived that the auditor's judgment is essential for the audit process and the

guarantee of the reliability of the financial statements. Among the auditor's various judgments,

decision making on materiality is crucial to the audit quality (ISA 200). With a focus on

ensuring audit quality, the Judgment and Decision Making theme investigates the possible

factors that influence the auditor's decisions or judgments, using many studies with a

psychological aspect (Libby & Luft, 1993; Nelson & Tan, 2005; Trotman, Bauer, &

Humphreys, 2015). Within psychology, the CLT has been identified as one of the main themes

to help understand the cognitive processes present in the audit process (Weisner, 2015).

2.2 Construal Level Theory

The CLT derived from the field of Social Psychology and was proposed by the studies

of Liberman and Trope (1998), Trope and Liberman (2000), Liberman, Sagristano and Trope

(2002) and Trope and Liberman (2003). CLT essentially deals with individuals' judgment and

decision-making about specific events. It is understood that distant-future events are interpreted

at a high-level, abstractly, while near-future events at a low-level, that is, concretely. Thus, CLT

proposes that individuals presented a more abstract construal and focused on general, central,

and decontextualized characteristics when faced with distant-future events, leading to more

superficial and more coherent representations. In comparison, the construal of near-future

events is more concrete and considers aspects that are more secondary, peripheral, and

contextual (Liberman & Trope, 1998; Trope & Liberman, 2010).

According to Trope and Liberman (2003), individuals' judgment, predictions, and

choices must be based on their construals. In this sense, high-level construal can remove

essential information from an event and identify actions in terms of principal objectives,

questioning the "why". On the other hand, low-level construal considers concrete and

contextual issues, leading to questioning actions at the "how" level (Liberman & Trope, 2014).

The abstract construal level facilitates the processing and assimilation of various

information, while the concrete construal level makes this task more difficult (Trope &

Liberman, 2003; 2010). Interpreting information through an abstract level allows for easy

assimilation of information, making it less ambiguous and more coherent. On the other hand,

low-level construals can allow one information to overlap the other, preventing the visualization

of the whole (Trope & Liberman, 2010).

After the seminal studies of CLT, other Social Psychology research was developed to

understand better the implications of psychological distance and the construal level in

individuals' cognitive processes. Among these studies, Smith and Trope (2006) and Magee and

Smith (2013) proposed that the hierarchical level, based on the concepts of power inherent in

hierarchical structures, is a factor that can activate more abstract or concrete construal due to

the increase or reduction of the social distance development of individuals.


2.3 Hierarchical Level

Power essentially means control, more precisely asymmetric control, in which one

person will always have greater control over the results of the other (Fiske, 1993; Joshi & Fast,

2013). In organizations, power is generally exercised by people who occupy higher positions at

the hierarchical level, consequently having the legitimacy to exert significant influence over

their subordinates (Vescio, Snyder, & Butz, 2003; Schaerer et al., 2018). For Smith and Trope

(2006) and Magee and Smith (2013), people with power have characteristics that distinguish

them from their subordinates.

In this way, power collaborates with the emergence of asymmetric social distance,

increasing its extent. It is defined as asymmetric because independent individuals perceive

greater social distance than those without power. Social distance is defined as the perception or

experience of distance from "self" to a person or a group. The distance may be related to the

perceived distinction of the workgroup or the proximity between individuals (Magee & Smith,

2013). As described in CLT, social distance is related to individuals' construal level (Trope &

Liberman, 2000, 2003; Stillman et al., 2018). Thus, a greater social distance related to power

leads to a high-level construal, an abstract representation. On the other hand, a smaller social

distance, characterized by the lack of power, leads to a low-level construal, to a more concrete

representation (Smith & Trope, 2006; Magee & Smith, 2013).

In this way, the superiors, who have power, are concentrated in abstract construal, which

advocates reasoning based on heuristics and with the ability to extract the essence and the

general objective of situations, to think about strategic issues. Power facilitates abstract

construal by instigating its holders to have a distal perspective of the situation. This justifies

subordinates to focus their attention on the details and not on the general objective, presenting

a more concrete construal focused on operational issues (Smith & Trope, 2006; Magee & Smith,

2013).

Given the above, the hierarchical level can promote the auditor's construal in a more

abstract or more concrete representation, affecting their judgment in an audit activity on

materiality. For auditors with a higher hierarchical level, such as audit managers, it is

understood that the construal level stimulated by the hierarchical position will lead to abstract

construal, which will allow auditors to understand the big picture better and recognize

misstatements more easily. In this scenario, the higher hierarchical level should increase the

probability that the auditors will evaluate the misstatements identified as material, being more

likely to recommend an accounts receivable adjustment. Thus, the first hypothesis is presented:

H1: Auditors with a high hierarchical level are more likely to recommend an accounts

receivable adjustment than auditors with a low hierarchical level.

2.4 Construal Instructions

In addition to the hierarchical level, there are other ways to activate the construal level

of individuals. One of them is the construal instructions, which, unlike the hierarchical level, is

not linked to an individual's condition (having or not feeling of power due to the position held,

for example). Still, it is a way of stimulating a more abstract or concrete mental representation

based on instructions, which allow the individual's behavior to be molded into a new format

(Freitas et al., 2004; Cole, Laurent, & Stocco, 2013).

According to Freitas et al. (2004) and Efrat-Treister et al. (2020), it is possible to

promote abstract thinking based on instructions that focus on individuals' attention on broad

and general issues. Thus, the instructions can direct the individuals' thinking about why


something happens; that is, the purpose of the activity to be performed. Likewise, concrete

thinking can be promoted from instructions that emphasize individuals' attention to specific and

secondary issues. Thus, one can use instructions that guide thinking about how something

happens, that is, the process necessary for the activity to be carried out.

The repetition of these thinking exercises leads to the intensification of a type of

thinking. Thus, it is possible to induce a certain type of interpretation in an individual's

mentality from instructions. When recently activated through instructions, a certain mentality

can influence the processing of information in later activities (Freitas et al., 2004; Hadar, Luria,

& Liberman, 2019). In the field of auditing, this process was investigated by the study by Rasso

(2015) that used instructions to guide the construal level of the auditors and thus induce a certain

mentality during the process of collecting audit evidence.

In the study by Rasso (2015), the construal level was induced by means of instructions

made available to the auditors before the proposed audit activity. To activate abstract thinking,

instructions were used that encouraged the auditor to think broadly about all the evidence

collectively, emphasizing to think about why the evidence could be fair or materially incorrect.

On the other hand, concrete thinking was activated through instructions that instigated the

auditor to think specifically about each item of evidence, highlighting how the evidence could

be fair or materially incorrect.

Thus, the construal instructions can promote the auditor's construal in a more abstract

or more concrete representation, affecting his judgment in an audit activity on materiality. In

this sense, it is understood that the abstract construal instructions will lead to a greater

probability of recommending an accounts receivable adjustment in scenarios with

misstatements compared to the concrete construal instructions or when there are no instructions.

Therefore, the second hypothesis is presented:

H2a: Auditors receiving abstract construal instructions are more likely to recommend an

accounts receivable adjustment than auditors receiving concrete construal instructions.

H2b: Auditors receiving abstract construal instructions are more likely to recommend an

accounts receivable adjustment than auditors not given construal instructions.

As explained, the hierarchical level and the construal instructions can influence the

construal level of individuals and, consequently, their judgment. However, there are indications

of other relationships between these themes when examining the possible effect of interaction

between construal instructions and hierarchical level.

The studies by Smith et al. (2008) and Burgmer and Englich (2012) verified whether the

abstract style information processing influences individuals' sense of power and the results

indicated that abstract construal leads to a greater sense of power, that is, a greater sense of

control of the environment and preference for roles greater power than concrete construal.

Therefore, the studies suggest that there is a bidirectional relationship between power and the

abstract construal level. In the study by Smith et al. (2008), it is understood that the feeling of

power is more influential in the individual's behavior than the amount of power that he has and

that one of the ways to activate this sensation is the individual's style of information processing.

Given this, it is understood that individuals who have a greater tendency to abstract

construal due to their hierarchical level will be encouraged to activate even more the high

construal level when faced with abstract construal instructions that guide why something

happens, increasing the probability of recommending an accounts receivable adjustment, as

they recognize misstatements identified as more material. In contrast, concrete construal


instructions will lead to greater stimulation of concrete construal in individuals with a lower

hierarchical level, reducing the likelihood of recommending an accounts receivable adjustment.

Thus, the third hypothesis is presented:

H3a: Auditors with a high hierarchical level are more likely to recommend an accounts

receivable adjustment when receiving abstract construal instructions than either auditors

receiving concrete construal instructions or no construal instructions.

H3b: Auditors with a low hierarchical level are less likely to recommend an accounts receivable

adjustment when receiving concrete construal instructions than either auditors receiving

abstract construal instructions or no construal instructions.

3 Method and Procedures

3.1 Experimental design and participants

A between-subject experiment design is used. The experiment had a 3 x 2 factorial

analysis, with three levels (abstract, concrete and control condition) for the construal

instructions variable and two levels (high and low) for the hierarchical level variable, resulting

in 6 groups.

The sample consists of 208 external Brazilian auditors with a profile on the professional

social network Linkedin®. The experiment's data collection was carried out through the

SurveyMonkey® platform, and the link was sent to the participants' social network LinkedIn®.

The contact of the participants was carried out using filters to reach the target audience, such

as an external auditor position. From this selection, 2,220 invitations were sent, accompanied

by a brief explanation of the research. After accepting the invitation, the survey link was sent

to the participants. Of the 2,220 invitations sent, 1,364 were accepted, about 61% of the total

invitations.

3.2 Measurement of the variables

Table 1 presents the constructs, which describe the variables, sub-variables, metrics, and

studies. According to Table 1, the study used two independent variables, hierarchical level and

construal instructions, and a dependent variable, auditor's materiality judgment.

Table 1

Constructs

Variable Sub-variable Metric Studies

Independent variables

Hierarchical

Level

1. High

2. Low

1. Audit manager with control and

command activities.

2. Assistant auditor with submission

and dependency activities.

Smith and Trope (2006)

Construal

Instructions

1. Abstract

2. Concrete

3. Control condition

1. Induction to abstract construal

focused on why something is done.

2. Induction to concrete construal

focused on how something is done.

3. No construal instructions.

Freitas et al. (2004) and

Rasso (2015)

Dependent variables

Auditor's

Materiality

Judgment

1. Do not recommend

the adjustment

2. Recommend the

adjustment

The scenario on adjustment of

receivables, focusing on materiality.

11-point scale, ranging from 0 to 10.

Adapted from DeZoort,

Hermanson and Houston

(2003), DeZoort, Harrison

and Taylor (2006) and


Utami, Kusuma, Gudono

and Supriyadi (2017)

3.3 Scenarios

From the perspective of CLT, the hierarchical level is a factor that can influence the

judgment of individuals based on the concept of power linked to the position held in the

hierarchical structure, which can lead to a more abstract or concrete mental representation of

situations. Therefore, it is necessary to operationalize the hierarchical level variable based on

the concepts of power used in Social Psychology. According to the study by Smith and Trope

(2006), the activation of the concept of power leads individuals to perceive stimuli in abstract

terms, while the activation of the concept of powerlessness leads to a concrete mental

representation. The construction of the concepts of power or lack of power in individuals can

be done by exposing the participant to "clues" related to power or lack of power, more precisely

from scenarios that induce roles of power or lack of power, in addition to the use of words that

refer to this circumstance.

Therefore, the hierarchical level variable was manipulated into two levels, high and low,

similar to Smith and Trope (2006). The high hierarchical level was used in a scenario that

activated the concepts of power; thus, the participant was assigned the position of audit manager

and was described as having command and control activities. The low hierarchical level was

used with concepts that activated the sensation of subordination, that is, a feeling of low power,

thus the participant was assigned the position of assistant auditor, and activities of submission

and dependency were described.

Instructions can be used to shape individuals' behavior in a new format, including to

guide individuals' construal level. The studies by Freitas et al. (2004) and Rasso (2015) used

instructions to guide individuals' construal level using the basic concepts of CLT for this

purpose. Instructions that lead the individual to think about why something happens or think

broadly about all available information tend to activate abstract construal. Instructions that

stimulate thinking about how something happens or to construes specifically about each

information available leads to concrete construal.

Thus, construal instructions were manipulated from the activation of the abstract or

concrete construal level and with the control condition, similar to Freitas et al. (2004) and Rasso

(2015). The participants were directed to an activity that guided them to keep the focus on a

certain way of thinking, to activate the abstract or concrete construal. Participants who were

randomly assigned the abstract construal instructions were asked to think and describe why

"audit the financial statements". In the concrete construal instructions, the participants were

guided to think and describe how to "audit the financial statements". Control condition

participants did not receive any instruction type in this regard and were directed to the audit

scenario. After this activity was finished, the participants were invited to analyze the audit

scenario, guided to maintain the thought pattern stimulated in the construal instructions activity.

In this way, the abstract construal instructions group was asked to think broadly of all evidence

collectively. As for the concrete construal instructions group, they were asked to think

specifically about each evidence item.

The auditor's materiality judgment is the study's dependent variable, which was operated

from a scenario of adjustment of receivables, focusing on materiality, based on DeZoort et al.

(2003) and DeZoort et al. (2006). The study by DeZoort et al. (2003) asks an audit committee

member to analyze two opinions, external auditor and management position on accounts

receivable adjustment of a company, and indicate which he/she support. In our study, the two

opinions were compiled and transformed into a single perception, in case, the perception of the

company's auditor. Thus, was ask the participants to assume that they are the company's auditor,


and then, need to analyze this perception and make the judgment, as was done in the study by

DeZoort et al. (2006).

We opted to approach the auditor's judgment in the context of materiality because it is

a comprehensive concept within the audit, being an assessment that can occur at several levels,

from the balance of accounts to the financial statements. Besides, materiality assessments

demand much judgment from the auditor, as they depend on both quantitative and qualitative

analyzes. Still, materiality judgments are important because these judgments may affect the

reliability of the reported disclosures and are the key concept in the assurance process (DeZoort

et al., 2006; Eilifsen & Messier, 2015; Moroney & Trotman, 2016).

The auditor's materiality judgment was dealt with in a scenario that involves an accounts

receivable adjustment, more precisely on the allowance for doubtful accounts. In this context,

the participant was invited to become involved in the audit process of a fictitious company

called TCH. The participant needed to put himself in the role of an auditor of the company Beta

Auditors. Participants received information about the audited company, such as the activity

performed, previous audits, quantitative information for the sector and the company. In the

scenario, TCH receives after the preparation of the financial statements an indication that the

client, Global S.A., is unable to honor all its obligations at the moment. The central issue is to

capture the participants' judgment, as auditors, regarding the adjustment of the allowance for

doubtful accounts of the Global client, based on materiality of the accounting information.

Respondents were asked to answer their judgment about the situation, more likely to make the

adjustment or less likely to make the adjustment, on an 11-point scale, ranging from 0

(Definitely not recommending adjustment) to 10 (Definitely recommend adjustment).

The scenario had adaptations in relation to previous studies to adapted to the Brazilian

context, such as the company names, the currency, and the inclusion of Brazilian technology

sector information, as the average selling price and purchasing price. The complete scenario is

available in this link <https://pt.surveymonkey.com/r/H2QR3VL>.

4 Discussion and Analysis of Results

This section contains the discussion and analysis of results. In the subsections are

presented descriptive statistics of data, hypotheses tests, and discussion of results.

4.1 Descriptive Statistics

The sample was composed of 54.8% (114) male participants and 45.2% (94) female

participants. The results are similar to the study by Green and Cheng (2019), who also

investigated the auditor’s materiality judgment and found a male predominance in the sample

composition. About 54% (113) of the participants are in the age group from 25 to 29 years old.

The participants' average age is 28 years old, 21 years old being the minimum age, and 52 years

old the maximum age. The findings are similar to Rasso (2015) study, which investigated CLT

in the audit context and found an average age of 29 years among the auditors.

Auditors from various positions participated in the experiment, such as assistant,

supervisor, senior, manager, and partner. The position of the senior auditor was more prevalent,

with 39.4% (82) of representativeness, followed by manager positions 26.4% (55), assistant

19.2% (40), supervisor 11.1% (23), and audit partner 3.8% (8). This same composition was

verified in the studies by Rasso (2015) and Backof, Carpenter and Thayler (2018), which had

higher participation of senior auditors and managers and fewer audit partners' participation.

As for the experience, about 29% (62) of the participants have 4 to 5 years of experience

as auditors. The average time of audit experience is six years, with one year being the minimum

and 26 years the maximum. The results are similar to Rasso (2015) and Moroney and Trotman

https://pt.surveymonkey.com/r/H2QR3VL


(2016) studies, who found in the research participants an average of 5 years of experience in

the audit area.

The sample comprises auditors with and without CNAI (Cadastro Nacional dos

Auditores Independentes) registration, a register of external auditors in Brazil. The auditors who

have the CNAI registration represent 37.5% (78) of the participants, while 62.5% (130) are

auditors without a CNAI registration. Auditors with CNAI registration may be qualified to audit

more than one area. Among registered auditors, 97.4% (76) have QTG qualification, which is

the general technical qualification, 61.5% (48) have CVM qualification that qualifies to act in

the capital market, 17.9% (14) have BCB qualification that qualifies to work in financial

institutions, and 6.4% (5) have SUSEP qualification that qualifies to work in institutions

regulated by Superintendence of Private Insurance.

Regarding education, about 63% (132) of the auditors have a bachelor’s degree, 33.7%

(70) have a post-graduation and/or MBA, and 2.9% (6) have a master's degree. The experiment

was attended by auditors from all Brazil regions, emphasizing the Southeast region, which

presented most of the answers, 75.5% (157). The South region presented 13.5% (28) of the

answers, the Northeast 5.8% (12), the Central-West 3.8% (8), and the North 1.4% (3).

Table 2 shows the composition of experimental groups after the random distribution of

the participants. According to Table 2, the distribution of participants between groups was

balanced, with each group having at least 30 individuals. The minimum percentage of

participants per group is 14.4% (30), and the maximum is 20.2% (42) concerning the total

number of respondents.

Table 2

Distribution of auditors in experimental groups

Group Construal Instructions Hierarchical Level Number of Auditors (%)

1 Abstract High 36 17.3

2 Concrete High 31 14.9

3 Abstract Low 38 18.3

4 Concrete Low 31 14.9

5 Control Condition High 42 20.2

6 Control Condition Low 30 14.4

TOTAL 208 100.0

Table 3 displays ANOVA test for auditor’s characteristics and materiality judgment. It

appears that no characteristics, such as gender, age, time of experience in the audit, CNAI

registration, or education, showed significant differences in the materiality judgment.

Table 3

ANOVA test for auditor’s characteristics and materiality judgment

Auditor's Materiality Judgment

Df F-statistic Significance

Gender 1 0.07 0.79

Age 24 1.17 0.27

Position 4 0.49 0.74

Experience 20 0.95 0.52

CNAI registration 1 0.47 0.49

Education 2 0.41 0.66

Thus, there are indications that the auditor's characteristics are not significant enough to

influence the materiality judgment in the context of an accounts receivable adjustment. These

results are similar to the studies by Utami et al. (2017) and Fehrenbacher, Triki and Weisner


(2020). The effects identified in the auditor’s materiality judgment are due to the treatments

performed on the independent variables hierarchical level and construal instructions.

4.2 Hypotheses Tests

To test the hypotheses, we use ANOVA and Tukey test, as shown in Table 4. Panel A

shows the results of ANOVA and Panel B shows the results of Tukey test.

Hypothesis 1 predicts that auditors with a high hierarchical level are more likely to recommend

an accounts receivable adjustment than auditors with a low hierarchical level. According to

Panel A, the difference between the experimental treatments of the hierarchical level variable

is significant at the 5% level, suggesting that hierarchical level has effects on auditor’s

materiality judgment. Panel B displays that the comparison between low hierarchical level and

high hierarchical level is significant at the 5% level. Therefore, the results indicate that auditors

with a high hierarchical level are more likely to recommend an accounts receivable adjustment

in scenarios with misstatements than auditors with a low hierarchical level. This result provides

support for Hypothesis 1.

Table 4

Test of hypotheses

Panel A – ANOVA test

df Mean square F-statistic p-Value

Hierarchical Level 1 47.677 5.50 0.0200**

Construal Instructions 2 23.478 2.71 0.0691*

Hierarchical Level x Construal Instructions 2 23.298 2.69 0.0705*

Error 202 8.670

Panel B – Tukey test

Contrast Std. Err. t-statistic p-Value

Hierarchical Level

Low Hierarchical Level x High Hierarchical Level -0.964 0.411 -2.34 0.020**

Construal Instructions

Concrete x Abstract -1.098 0.507 -2.17 0.079*

Control Condition x Abstract -0.868 0.491 -1.77 0.182

Hierarchical Level x Construal Instructions

Group 2 x Group 1 -0.262 0.721 -0.36 0.999

Group 5 x Group 1 0.218 0.668 0.33 1.000

Group 4 x Group 3 -1.934 0.712 -2.71 0.077*

Group 6 x Group 3 -195.614 0.719 -2.72 0.076*

Note. **p<0.05. ***p<0.01. Group 1 = high hierarchical level and abstract construal instructions; Group 2 = high

hierarchical level and concrete construal instructions; Group 3 = low hierarchical level and abstract construal

instructions; Group 4 = low hierarchical level and concrete construal instructions; Group 5 = high hierarchical

level and control condition; Group 6 = low hierarchical level and control condition.

Hypothesis 2a predicts that auditors receiving abstract construal instructions are more

likely to recommend an accounts receivable adjustment than auditors receiving concrete

construal instructions. Hypothesis 2b predicts that auditors receiving abstract construal

instructions are more likely to recommend an accounts receivable adjustment than auditors not

given construal instructions.

According to Panel A, there are significant differences between at least two of the three

levels of the construal instructions on the auditor’s materiality judgment, this difference being

significant at the level of 10%.


Panel B displays that the first comparison, concrete construal instructions and abstract

construal instructions showed significant differences by 10%. Thus, it appears that there are

effects of the construal instructions in the auditor’s materiality judgment when comparing

abstract and concrete construals. Thus, auditors who receive abstract construal instructions tend

to be more likely to adjust accounts receivable in scenarios with misstatements than auditors

who receive concrete construal instructions. This result provides support for Hypothesis 2a.

The second comparison, control condition and abstract construal instructions, did not

present significance, indicating that receiving an instruction that guides abstract construal or

receiving no instruction has no significant effect on the auditor’s materiality judgment. This

result does not provide support for Hypothesis 2b.

Hypothesis 3a predicts that auditors with a high hierarchical level are more likely to

recommend an accounts receivable adjustment when receiving abstract construal instructions

than either auditors receiving concrete construal instructions or no construal instructions.

Hypothesis 3b predicts that auditors with a low hierarchical level are less likely to recommend

an accounts receivable adjustment when receiving concrete construal instructions than either

auditors receiving abstract construal instructions or no construal instructions. According to Panel A, there are significant interaction effects between hierarchical level

and construal instructions to the auditor’s materiality judgment, these differences being

significant at the level of 10%. Panel B displays that two comparisons present significant

differences at the level of 10%, between Groups 4 and 3 (-2.71) and Groups 6 and 3 (-2.72).

As for Groups 4 and 3, the differences suggest that auditors with a low hierarchical level

present a difference in materiality judgment when they receive abstract construal instructions

or concrete construal instructions. When they receive abstract construal instructions, they tend

to be more likely to recommend adjustment than when they receive concrete construal

instructions. This interaction effect indicates that auditors who occupy a low hierarchical level

position, which tends to lead to concrete construal, upon receiving abstract construal

instructions, tend to present a more favorable judgment on the accounts receivable adjustment

in a scenario with misstatements, which possibly it is an interaction effect between the construal

instructions variable and the hierarchical level.

Regarding Groups 6 and 3, the differences indicate that auditors with a low hierarchical

level present a difference in materiality judgment when they receive abstract construal

instructions or when they receive no instruction. When they receive abstract construal

instructions, they tend to be more likely to recommend adjustment than when they do not

receive construal instructions. This interaction effect corroborates the evidence between Group

4 and 3, as it finds an interaction effect between the construal instructions and hierarchical level

variables; however, this effect occurs only for the low hierarchical level.

These results provide support for Hypothesis 3b, but not provide support for Hypothesis

3a.

Figure 1 shows the effects plot of the independent variables on auditor’s materiality

judgment.


Figure 1. Effects plot of independent variables on auditor's materiality judgment

Figure 1 shows graphically the relationships identified in Table 4. Regarding

hierarchical level, Figure 1 displays that auditors with a high hierarchical level present a

judgment more likely to adjust accounts receivable than auditors with a low hierarchical level.

About construal instructions, auditors receiving abstract construal instructions present a

judgment more likely to adjust accounts receivable than auditors receiving concrete construal

instructions. Regarding the interaction, auditors receiving abstract construal instructions present

a judgment more likely to adjust accounts receivable when they occupy a low-level position

than when they occupy a high-level position. As for the control condition, auditors present a

judgment more likely to adjust accounts receivable when they occupy a high-level position than

when they occupy a low-level position.

4.3 Results and Discussion

This section discusses the main results regarding the confirmation of the hypotheses.

We show the results of the hypotheses in Table 5.

Table 5

Summary of hypotheses results

Hypotheses Result

H1: Auditors with a high hierarchical level are more likely to recommend an accounts receivable

adjustment than auditors with a low hierarchical level. Supported

H2a: Auditors receiving abstract construal instructions are more likely to recommend an

accounts receivable adjustment than auditors receiving concrete construal instructions. Supported

H2b: Auditors receiving abstract construal instructions are more likely to recommend an

accounts receivable adjustment than auditors not given construal instructions.

Not

supported

H3a: Auditors with a high hierarchical level are more likely to recommend an accounts

receivable adjustment when receiving abstract construal instructions than either auditors

receiving concrete construal instructions or no construal instructions.

Not

supported

H3b: Auditors with a low hierarchical level are less likely to recommend an accounts receivable

adjustment when receiving concrete construal instructions than either auditors receiving abstract

construal instructions or no construal instructions.

Supported


According to Table 5, hypothesis 1 is supported. We found that auditors with a high

hierarchical level are more likely to recommend an accounts receivable adjustment in scenarios

with misstatements than auditors with a low hierarchical level. This result suggests that auditors

with a high hierarchical level, as audit managers, recognize the detected misstatements as more

material than auditors with a low hierarchical level, as assistant auditors.

This result indicates that the hierarchical level affects the auditor’s materiality judgment

and that these effects are caused by the mentality orientation activated by the feeling of power

and lack of power in audit firms' positions. This finding supports the study by Smith et al.

(2008) that the positions of power that people occupy can change their cognitive processes,

such as the processing or interpretation of information.

The result also corroborates with the study by Smith and Trope (2006), that power is

linked to abstract construal and makes individuals perceive stimuli in terms of the general

picture, focusing their attention on essential elements of an event or information. Thus, auditors

with a higher-level position within an audit firm, that is, who hold power, are more likely to

turn their attention to the main or central aspect of an audit task (Freitas et al., 2004).

In a scenario with detected misstatements, the central issue to be analyzed is the

account's materiality; from this assessment, the auditor can judge the need for adjustment

(Messier & Schmidt, 2018). In this sense, audit managers, who have a greater tendency to

abstract construal, will process an audit task's information better, being more likely to

recommend adjustments when analyzing the detected misstatements' materiality.

Thus, it appears that the construal level of an auditor can be influenced by the position

he occupies within an organization due to the power he exercises. However, the construal level

does not depend only on an individual's position in a hierarchy. The individual's construal can

be guided to a more abstract or concrete construal level by instructions, according to hypotheses

2a and 2b of the study.

Hypothesis 2a is supported. Thus, auditors who receive abstract construal instructions

tend to be more likely to recommend an accounts receivable adjustment in scenarios with

misstatements than auditors who receive concrete construal instructions. The result supports

the study by Freitas et al. (2004) that providing instructions that guide thinking about why

something happens makes individuals perceive stimuli in terms of the general picture, focusing

their attention on the essential aspects of an event or information. Thus, auditors who receive

abstract construal instructions are more likely to turn their attention to an audit task's principal

or central aspect.

As already mentioned, in a scenario with detected misstatements, the central issue to be

analyzed is the account's materiality; from this assessment, the auditor can judge the need for

adjustment (Messier & Schmidt, 2018). In this sense, auditors oriented to abstract construal will

process an audit task's information better, being more likely to recommend adjustments when

analyzing the detected misstatements' materiality.

This result is consistent with the study by Rasso (2015), which found that auditors who

receive instructions that promote an abstract construal of audit evidence think and act with

greater professional skepticism when auditing complex estimates than auditors who receive

instructions that promote concrete construal or that do not receive any type of instruction. In

this sense, the study indicates that the abstract construal level improves the processing and

assimilation of evidence, leading to an understanding of the general picture of the scenario. The

result also supports the findings by Backof, Bamber and Carpenter (2016) that auditors are more

skeptical when adding the judgment framework, abstract construal, which encourages the

auditor to think about why the transaction should be accounted for using a specific accounting

method.


Hypothesis 2b is not supported. We found no significant effect on auditor’s materiality

judgment between the combination of abstract construal instructions and control condition. The

findings of hypothesis 2b do not support the study results by Rasso (2015), which found that

auditors who receive abstract construal instructions present a skeptical judgment superior to

those who do not receive any type of instruction.

This result can be derived from the inclusion of the hierarchical level in the study, which

is not investigated by Rasso (2015). As there were participants who received the manipulation

of high power, which tends to lead to abstract construal, the high-level construal guidance did

not demonstrate significant effects in the auditor’s materiality judgment, as it is a cognitive

process similar to the practice of this group. This evidence may explain why abstract construal

instructions present, on average, a judgment more likely to adjust accounts receivable than the

control condition, as shown in Figure 1, but this difference is not significant, as shown in Table

4.

Thus, it appears that the construal level of an auditor can be influenced both by the

hierarchical level he occupies and by the construal instructions he receives and that in some

conditions, these factors have effects on the auditor’s materiality judgment. For example, for

the hierarchical level, it was found that holding a higher position, such as audit manager, leads

auditors to a judgment that is more likely to adjust accounts receivable in a scenario involving

receivables and materiality than lower-level auditors, such as assistants.

For the construal instructions, it was found that receiving abstract construal instructions

that guide broader thinking, focused on the general framework of information, leads auditors to

a judgment more likely to adjust accounts receivable than auditors who receive concrete

construal instructions that guide the thought focused on the details of the information. However,

there were no differences in the materiality judgment when comparing the abstract construal

instructions with the control condition.

What happens to the auditor's judgment when the hierarchical level and the construal

instructions are combined? For example, what are the effects on the materiality judgment of an

audit assistant who receives abstract construal instructions? We proposed Hypotheses 3a and

3b to investigate these questions.

Hypotheses 3a is not supported. We found no significant interactive effect on auditor’s

materiality judgment between the combination (abstract construal instructions and concrete

construal instructions or control condition) for the high hierarchical level group.

The study by Smith and Trope (2006) reports that power is fundamentally linked to

abstract construal, allowing individuals to be predisposed to a distal orientation of situations.

Also, the study by Chen et al. (2001) shows that individuals with high power tend to follow

their goals and attitudes. In this sense, the findings of hypotheses 3a may be an indication that

auditors with a high hierarchical level, due to their hierarchical position, have, in a certain way,

a defined mentality oriented to strategic thinking and a general view of situations that they

encounter. Thus, the use of instructions to guide abstract or concrete construals ends up not

interfering significantly in the decisions and judgments made.

Hypothesis 3b is supported. Thus, auditors who occupy a position of low hierarchical

level, when receiving abstract construal instructions, tend to present a more favorable judgment

to the accounts receivable adjustment in a scenario with misstatements than when receiving

concrete construal instructions or control condition, which is possibly an interaction effect

between the construal instructions variable and the hierarchical level.

The results that the hierarchical level and the construal instructions have an interaction

effect in the auditor’s materiality judgment corroborate the study by Smith et al. (2008), who

found that the abstract style information processing influences the sense of power of


individuals, in which abstract thinking leads to a greater sense of power, that is, a greater sense

of control of the environment and preference for roles greater power than concrete thinking. In

this study, it is understood that the feeling of power is more influential in the individual's

behavior than the amount of power that he has and that one of the ways to activate this sensation

is the individual's style of information processing.

Thus, even if the auditor, under his position, tends to analyze the information more

operationally, with concrete construal, it is possible to use instructions to guide the auditor's

construal towards a more abstract thought. The results agree with the study by Plumlee et al.

(2015), who investigated the use of metacognition training in the performance of lower-level

auditors. The results showed that from metacognition training (divergent thinking and

convergent thinking), it is possible to improve the quality of performance of lower-level

auditors, who have less experience than higher-level auditors, in tasks involving analytical

procedures.

5 Conclusions and Recommendations

The study aimed to analyze the influence of hierarchical level and construal instructions

on auditor’s materiality judgment. In general, the study presented three main findings. First,

auditors with a high hierarchical level are more likely to recommend adjusting receivables in

scenarios with misstatements than auditors with a low hierarchical level. Then, auditors with a

high hierarchical level, as audit managers, recognize the misstatements identified as more

material than auditors with a low hierarchical level, as assistant auditors.

Second, auditors who receive abstract construal instructions tend to be more likely to

adjust receivables in scenarios with misstatements than auditors who receive concrete construal

instructions. This result suggests that auditors who are guided to think about why something

happens and to broadly analyze all the evidence of an audit task recognize the misstatements

identified as more material than auditors who are oriented to think about the process of how

something happens and to analyze each evidence of an audit task specifically.

Third, auditors who occupy a low hierarchical level position, upon receiving abstract

construal instructions, tend to present a judgment more favorable to the accounts receivable

adjustment in scenarios with misstatements than when receiving concrete construal instructions

or when they do not receive instructions, which is possibly an interaction effect between the

construal instructions variable and the hierarchical level. In this sense, even if the hierarchical

position is favorable to concrete construal, due to the encouragement of operational issues, the

use of instructions allows the auditors to be guided to a more abstract mentality. Thus, if the

audit task requires broader information processing and needs to focus on central issues, abstract

construal instructions are an alternative to improve audit performance.

Based on the results, the study presents some findings for the audit context. When

working with the theme of CLT in the face of the audit materiality judgment, the study shows

that cognitive aspects have effects on the auditor's judgment on the recommendation of

adjustments in a scenario with misstatements. Thus, in an audit task that requires the analysis

of various information concurrently, such as the assessment of detected misstatements, the use

of a more abstract construal can guarantee a higher quality judgment, as it leads the auditor to

focus on the most critical aspects of the scenario, which facilitates information compression. In

this way, audit firms can use the construal level as an artifice to improve audit quality and

ensure accounting reports' reliability.

As for the auditors' hierarchical level, the study shows that auditors who occupy a higher

hierarchical position, as managers, have a predisposition to an abstract cognitive process. Thus,

these auditors' work can be directed in audit firms to tasks that require more comprehensive


thinking, which involves the evaluation of various evidence and qualitative premises, for

example. In this sense, the study's discussion shows that in addition to experience and vast

knowledge, the auditors who occupy higher positions in the hierarchy are different from the

auditors of a lower hierarchical level in the way they interpret the information, presenting a

more strategic vision and focused on the general picture of events.

Furthermore, the study provides evidence that the use of interventions, such as construal

instructions, can be important in the audit process, as they can be used with auditors as

techniques to improve the cognitive processing of information. The use of construal instructions

can be an essential resource in training new auditors, such as trainees and assistant auditors.

These auditors end up not having the same level of experience as the managing and partner

auditors, who have the greater technical knowledge and a considerable number of previous

solutions that can recover from memory, as highlighted by Plumlee et al. (2015). In this way,

the use of construal instructions can be used to mitigate the possible differences in performance

between auditors of a higher hierarchical level and a lower hierarchical level.

As it is an experimental study, the scenario created has risks of conception and operation

arising from this method. However, in structuring and applying the experiment scenarios, the

inherent aspects of internal and external validity threats were carefully observed. The study's

implications for the auditor's judgment cannot be generalized to audit activities very different

from the context studied, such as the propensity to adjust accounts receivable.

For future research, it is proposed to investigate other auditing contexts against the CLT.

The research addressed the materiality judgment, more precisely the auditor's degree of

agreement to recommend an accounts receivable adjustment in a context with misstatements,

which involved a broad context of information. The audit judgment allows for several

investigations, so it is interesting to explore CLT in the context of professional skepticism,

auditing complex estimates, analytical procedures, and risk assessment.

The survey investigated only one of CLT's elements in the audit trail, the construal level

(abstract and concrete). Thus, it is suggested for future research to add in the investigations the

element of Psychological Distance, which brings other concepts related to the audit

environment, such as temporal distance, spatial distance, social distance, and hypotheticality,

expanding the possibilities of CLT analysis in the judgment auditing.

One of the treatments of the construal level in the study was from the use of instructions.

The orientation of thought based on instructions can have superficial and momentary effects on

auditors. In this way, future research is recommended to investigate the construal level

orientation based on training in audit firms. In this sense, there is the possibility of verifying

whether stimulating a mentality (abstract or concrete) for a longer time and in a more in-depth

way, such as training, has different effects on the auditor's judgment than just instructions.

REFERENCES

Backof, A. G., Bamber, E. M., & Carpenter, T. D. (2016). Do auditor judgment frameworks

help in constraining aggressive reporting? Evidence under more precise and less precise

accounting standards. Accounting, Organizations and Society, 51, 1-11.

Backof, A. G., Carpenter, T. D., & Thayer, J. (2018). Auditing Complex Estimates: How Do

Construal Level and Evidence Formatting Impact Auditors’ Consideration of Inconsistent

Evidence? Contemporary Accounting Research, 35(4), 1798-1815.

Bonner, S. E. (1999). Judgment and Decision-Making Research in Accounting. Accounting

Horizons, 13(4), 385-398.


Brewster, B. E. (2011). How a Systems Perspective Improves Knowledge Acquisition and

Performance in Analytical Procedures. The Accounting Review, 86(3), 915-943.

Burgmer, P., & Englich, B. (2012). Bullseye! How Power Improves Motor Performance. Social

Psychological and Personality Science, 4(2), 224-232.

Chen, S., Lee-Chai, A. Y., & Bargh, J. A. (2001). Relationship Orientation as a Moderator of

the Effects of Social Power. Journal of Personality and Social Psychology, 80(2), 173-187.

Choudhary, P., Merkley, K., & Schipper, K. (2019). Auditors’ Quantitative Materiality

Judgments: Properties and Implications for Financial Reporting Reliability. Journal of

Accounting Research, 57(5), 1303-1351.

Cole, M. W., Laurent, P., & Stocco, A. (2013). Rapid instructed task learning: A new window

into the human brain’s unique capacity for flexible cognitive control. Cognitive, Affective,

& Behavioral Neuroscience, 13, 1-23.

Dezoort, F. T., Hermanson, D. R., & Houston, R. W. (2003). Audit committee support for

auditors: The effects of materiality justification and accounting precision. Journal of

Accounting and Public Policy, 22(2), 175-199.

Dezoort, T., Harrison, P., & Taylor, M. (2006). Accountability and auditors’ materiality

judgments: The effects of differential pressure strength on conservatism, variability, and

effort. Accounting, Organizations and Society, 31(4), 373-390.

Economatica Insights. (2020). Vale é a empresa mais lucrativa da América Latina no 3º

trimestre de 2020. https://insight.economatica.com/vale-e-a-empresa-mais-lucrativa-da-

america-latina-no-3-trimestre-de-2020/

Efrat-Treister, D., Daniels, M. A., & Robinson, S. L. (2020). Putting time in perspective: How

and why construal level buffers the relationship between wait time and aggressive

tendencies. Journal Organizational Behavior, 41(3), 294-309.

Eilifsen, A., & Messier, W. F., Jr. (2015). Materiality Guidance of the Major Public Accounting

Firms. Auditing: A Journal of Practice & Theory, 34(2), 3-26.

Fehrenbacher, D. D., Triki, A., & Weisner, M. M. (2020). Can multitasking influence

professional scepticism? Accounting & Finance, In Press.

Fiske, S. T. (1993). Controlling other people: The impact of power on stereotyping. American

Psychologist, 48(6), 621-628.

Freitas, A. L., Gollwitzer, P., & Trope, Y. (2004). The influence of abstract and concrete

mindsets on anticipating and guiding others’ self-regulatory efforts. Journal of

Experimental Social Psychology, 40, 739–752.

Green, W. J., & Cheng, M. M. (2019). Materiality judgments in an integrated reporting setting:

The effect of strategic relevance and strategy map. Accounting, Organizations and Society,

73, 1-14.

Hadar, B., Luria, R., & Liberman, N. (2019). Concrete mindset impairs filtering in visual

working memory. Psychonomic Bulletin & Review, 26, 1917-1924.

Hadar, B., Luria, R., & Liberman, N. (2020). Induced Social Power Improves Visual Working

Memory. Personality and Social Psychology Bulletin, 46(2), 285-297.

International Auditing and Assurance Standards Board (IAASB). (2008). International standard

on auditing (ISA) 200. Overall Objectives of the Independent Auditor and the Conduct of

an Audit in Accordance with International Standards on Auditing. New York, NY 10017:

IFAC.

International Auditing and Assurance Standards Board (IAASB). (2008). International standard

on auditing (ISA) 320. Materiality in Planning and Performing an Audit. New York, NY

10017: IFAC.


International Monetary Fund (IMF). (2019). Brazil Country Report No. 19/242. IMF:

Washington.

Joshi, P. D., & Fast, N. J. (2013). Power and Reduced Temporal Discounting. Psychological

Science, 24(4), 432–438.

Libby, R., & Luft, J. (1993). Determinants of judgment performance in accounting settings:

Ability, knowledge, motivation, and environment. Accounting, Organizations and Society,

18(5), 425-450.

Liberman, N., & Trope, Y. (1998). The role of feasibility and desirability considerations in near

and distant future decisions: A test of temporal construal theory. Journal of Personality

and Social Psychology, 75(1), 5–18.

Liberman, N., Sagristano, M. D., & Trope, Y. (2002). The effect of temporal distance on level

of mental construal. Journal of Experimental Social Psychology, 38(6), 523–534.

Liberman, N., & Trope, Y. (2014). Traversing psychological distance. Trends in Cognitive

Sciences, 18(7), 364-369.

Magee, J. C., & Smith, P. K. (2013). The Social Distance Theory of Power. Personality and

Social Psychology Review, 1-29.

Mala, R., & Chand, P. (2015). Judgment and Decision-Making Research in Auditing and

Accounting: Future Research Implications of Person, Task, and Environment Perspective.

Accounting Perspectives, 14(1), 1-50.

Messier, W. F., Jr., Martinov-Bennie, N., & Eilifsen, A. (2005). A Review and Integration of

Empirical Research on Materiality: Two Decades Later. Auditing: A Journal of Practice &

Theory, 24(2), 153-187.

Messier, W. F., Jr., & Schmidt, M. (2018). Offsetting Misstatements: The Effect of

Misstatement Distribution, Quantitative Materiality, and Client Pressure on Auditors’

Judgments. The Accounting Review, 93(4), 335-357.

Moroney, R., & Trotman, K. T. (2016). Differences in Auditors’ Materiality Assessments When

Auditing Financial Statements and Sustainability Reports. Contemporary Accounting

Research, 33(2), 551-575.

Nelson, M., & Tan, H. (2005). Judgment and Decision Making Research in Auditing: A Task,

Person, and Interpersonal Interaction Perspective. Auditing: A Journal of Practice &

Theory, 24, 41-71.

Plumlee, R. D., Rixom, B. A., & Rosman, A. J. (2015). Training Auditors to Perform Analytical

Procedures Using Metacognitive Skills. The Accounting Review, 90(1), 351-369.

Rasso, J. T. (2015). Construal instructions and professional skepticism in evaluating complex

estimates. Accounting, Organizations and Society, 46, 44–55.

Schaerer, M., Plessis, C., Yap, A. J., & Thau, S. (2018). Low power individuals in social power

research: A quantitative review, theoretical framework, and empirical test. Organizational

Behavior and Human Decision Processes, 149, 73–96.

Smith, P. K., & Trope, Y. (2006). You focus on the forest when you're in charge of the trees:

Power priming and abstract information processing. Journal of Personality and Social

Psychology, 90(4), 578-596.

Smith, P. K., Wigboldus, D. H. J., & Dijksterhuis, A. (2008). Abstract thinking increases one’s

sense of power. Journal of Experimental Social Psychology, 44, 378-385.

Stillman, P. E., Fujita, K., Sheldon, O., & Trope, Y. (2018). From “me” to “we”: The role of

construal level in promoting maximized joint outcomes. Organizational Behavior and

Human Decision Processes, 147, 16–25.

Utami, I., Kusuma, I. W., Gudono, G., & Supriyadi, S. (2017). Debiasing the halo effect in audit

decision: evidence from experimental study. Asian Review of Accounting, 25(2), 211-241.


Taylor, E. Z., & Curtis, M. B. (2013). Whistleblowing in Audit Firms: Organizational Response

and Power Distance. Behavioral Research in Accounting, 25(2), 21-43.

Trope, Y., & Liberman, N. (2000). Temporal construal and time-dependent changes in

preference. Journal of Personality and Social Psychology, 79(6), 876-889.

Trope, Y., & Liberman, N. (2003). Temporal construal. Psychological Review, 110(3), 403-

421.

Trope, Y., & Liberman, N. (2010). Construal-Level Theory of Psychological Distance.

Psychological Review, 117(2), 440-463.

Trotman, K. T., Tan, H. C., & Ang, N. (2011). Fifty-year overview of judgment and decision-

making research in accounting. Accounting and Finance, 51, 278–360.

Trotman, K. T., Bauer, T. D., & Humphreys, K. A. (2015). Group judgment and decision

making in auditing: Past and future research. Accounting, Organizations and Society, 47,

56-72.

Vescio, T. K., Snyder, M., & Butz, D. A. (2003). Power in Stereotypically Masculine Domains:

A Social Influence Strategy X Stereotype Match Model. Journal of Personality and Social

Psychology, 85(6), 1062–1078.

Weisner, M. M. (2015). Using Construal Level Theory to Motivate Accounting Research: A

Literature Review. Behavioral Research in Accounting, 27(1), 137-180.

Yin, Y., & Smith, P. K. (2020). Power and cognitive functioning. Current Opinion in

Psychology, 33, 95-99.

Documents

Influence of Hierarchical Level and Construal Instructions