How does 'fit' versus 'non-fit' affect audits of estimates? The compatibility between focus and mindset.

Auditors frequently fail to critically evaluate management's accounting estimates, jeopardizing financial reporting quality (PCAOB 2017). I propose that one way to potentially improve audits of estimates is to align an auditor's focus (prevention/promotion) and mindset (concrete/abstract) in a compatible way. I predict that judgment quality will be higher when the focus and mindset fit versus do not fit each other, but I find the opposite. To reconcile my results with the typical findings in non-judgment tasks that performance is higher under fit versus non-fit, I develop a new prediction. I propose that whether judgment quality is higher under fit versus non-fit depends on a third factor: auditors' willingness to engage in the judgment task before receiving any manipulations. I find that for auditors who are initially less engaged, judgment quality is higher under fit versus non-fit, consistent with the typical findings in non-judgment tasks. However, for auditors who are initially more engaged, judgment quality is higher under non-fit versus fit, consistent with my main results. My study suggests that how 'fit' versus 'non-fit' affects performance is more complex than previously thought. My study implies that firms should consider auditors' initial willingness to engage in the judgment task when using fit and non-fit to improve audits of estimates. (PsycInfo Database Record (c) 2020 APA, all rights reserved)