Pattern identification and industry-specialist auditors

Misstatements that are difficult to diagnose because they are complex or are being hidden from auditors may be described by multiple pieces of information that form a pattern. Individual auditors may receive incomplete patterns that are suggestive of misstatement, so it is important to understand how well auditors interpret incomplete patterns. In this dissertation, I provide evidence that one advantage of using industry-specialist auditors is that their knowledge allows them to fill in the missing pieces in incomplete industry-specific patterns. I posit that specialists will augment the information from incomplete patterns with their knowledge about the industry to identify procedures that would discriminate whether the full pattern, and thus heightened misstatement risk, exists.; I experimentally examine whether industry specialists' knowledge differences lead to task-performance differences concerning a seeded misstatement. Industry-specialist auditors complete two cases, one matching and one not matching (as a benchmark) their industries of specialization. I manipulate whether they receive full, partial, or no patterns diagnostic of a misstatement embedded in case materials. They judge the likelihood of misstatement, explain what misstatement(s), if any, about which they are concerned, determine necessary additional audit procedures, and perform surprise recalls for each case.; The results demonstrate that matched specialists are able to interpret and fill in partial cue patterns, whereas mismatched specialists do not recognize the implications of even full patterns. Matched specialists respond to a partial cue pattern that potentially indicates misstatement by developing better mental models about the seeded misstatement, increasing the assessed risk of misstatement and suggesting procedures that will be efficient and effective at discriminating the presence of the seeded misstatement. Despite increased assessments of general misstatement risk when receiving a partial cue pattern, mismatched specialists' mental models and suggested procedures do not indicate a focus on the seeded misstatement.