An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Ed Odonnell
University of Kansas

Abstract: This study searches for evidence that systems thinking might improve audit effectiveness. We develop a conceptual framework that describes how auditors might use systems thinking during diagnostic reasoning tasks. Based on this framework, we conduct two experiments to test whether using a systems-thinking interface can alter the mental representations that auditors develop for assessing the risk of financial misstatement in auditing tasks. Our findings suggest that systems thinking may help auditors create richer mental models that change their perceptions about the risk of misstatement. In both forward and backward reasoning tasks, auditors who used a systems-thinking interface were more likely to (1) consider interdependencies between fluctuations in related accounts and (2) recognize and respond to a pattern of inconsistent fluctuations in related accounts. These findings have implications for the integration of systems thinking methodologies in audit practice.

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