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The Influence of Outcome Effects, Decision

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International Journal of Auditing 1(1), 43–59 (1997)

The Influence of Outcome Effects,

Decision Aid Usage, and Intolerance
of Ambiguity on Evaluations of
Professional Audit Judgement
D. Jordan Lowe1 and Philip M. J. Reckers2
1
Department of Accounting, Virginia Polytechnic Institute and State
University, Blacksburg, Virginia 24061-0101, USA 2 Department of Account-
ing, Arizona State University, Tempe, Arizona 85287-3606, USA

Auditors’ performance is evaluated in a variety of contexts and at

various time intervals following professional conduct. Outcome
knowledge is often available prior to evaluation, and accordingly,
evaluations may reflect hindsight biases. The purpose of this
paper is to examine the effects of outcome knowledge on
evaluations of professional audit judgement. Specifically, we
hypothesize that outcome effects will be altered by two factors:
(1) conduct that involves the incomplete use (truncated applica-
tion) of available decision aids and (2) the degree to which
evaluators exhibit intolerance of ambiguity. We also examined the
interaction of these two factors. Results of our experiment
confirmed our hypotheses regarding the influence of decision
aid usage and individuals’ intolerance of ambiguity on outcome
effects. Negative, non-normative outcome effects were strongest
when available analytical procedures decision aids were only
partially utilized; participants who were intolerant of ambiguity
were subject to hindsight biases, while tolerant subjects were not.
Implications are discussed in terms relating to (internal) perfor-

#
mance evaluations and extensions to external legal liability.
1997 by John Wiley & Sons, Ltd. Int. J. Audit. 1(1), 43–59 (1997)

(No. of Figures: 1 No. of Tables: 1 No. of Refs: 60)

Key words: decision aids; outcome effects; tolerance of ambiguity;

hindsight; performance evaluation; analytical procedures; audit

judgement; decision process; liability; auditors.

SUMMARY and internally pursuant to audit scheduling and

Valid evaluations of auditor performance repre-
sent an important task to the profession. Apprai-
sals of auditors occur externally in courts of law
Data Availability: Data used in this study are available from
the authors.
renumeration decisions and, ultimately, pursuant
to retention and promotion decisions. In spite of
its importance, limited research has addressed
performance review in public accounting. This is
somewhat ironic given that internal performance
review is an essential element in the individual’s
development process and in the firm’s effort to

Received December 1995

#
CCC 1090–6738/97/010043-17 $17.50 Revised July 1996
1997 by John Wiley & Sons, Ltd. Accepted September 1996
44
retain competent and motivated professional staff.
Externally, litigation costs are one of the largest
costs born by public accounting firms.
Outcome knowledge is frequently available prior
to performance evaluation decisions such as those
noted above. Outcome knowledge (hindsight bias)
may inhibit evaluators’ ability to retrospectively
evaluate objectively. Therefore, it is important to
gain an understanding of the phenomenon and the
conditions in which it manifests itself. We hypothe-
size that outcome effects are exacerbated by two
factors: (1) incomplete decision aid usage by the
auditor and (2) intolerance of ambiguity by the
evaluator.
An experiment was conducted with 147 audit
seniors from an international public accounting
firm. Subjects were provided with a case scenario
in which the focal point related to analytical
procedures. In seeking to explain a significant
decrease in the inventory turnover ratio, the
supervising senior considered 10 explanations
generated by a firm-adopted decision aid. Decision
aid usage was manipulated such that the super-
vising senior either investigated (all) 10 of 10
explanations that the decision aid provided (full
utilization) or alternatively investigated (the same)
10 of 15 explanations (partial utilization). None of
the 10 items investigated explained the ratio
change. Since the supervising senior believed that
INTRODUCTION
Valid evaluation of professional conduct is very
important to individuals, firms, institutions and
society. To be successful, an individual must be able
both to direct and evaluate subordinates; only by
doing so can one (over time) expect to surround
oneself with competent individuals. No less so
must firms, institutions, and society strive for
responsible and accurate evaluation of professional
judgement. Within the context of the public
accounting profession, audit judgement is continu-
ously being evaluated, externally through the
judicial system and internally as a basis for job
scheduling, remuneration and, ultimately, retention
and promotion of employees.
A potential impediment to the sound evaluation
of professional judgement is the improper use of
outcome knowledge. When outcome knowledge is
available before performance is evaluated, the
evaluation is conducted from the perspective of
# 1997 by John Wiley & Sons, Ltd.
D. J. Lowe and P. M. J. Reckers
the likelihood of error (or irregularities) was
insignificant, and given that the audit budget was
tight, the supervising senior decided not to allocate
further attention to the matter. Outcome knowl-
edge was manipulated between subjects. Subjects
were either given no outcome or were provided a
negative audit outcome. Subjects’ tolerance of
ambiguity also was measured.
Results of the experiment confirmed our hypoth-
eses. Outcome effects were greatest when decision
aids were perceived as only partially utilized. Our
results suggest that, notwithstanding the intended
benefits of decision aids, auditors who are per-
ceived to only partially utilize available decision
aids may be evaluated significantly more nega-
tively. This tendency could lead auditors to be less
receptive to the implementation of decision aids in
their firms. Knowledge of an auditor’s partial
utilization of a decision aid may create the
perception of a failure of due diligence by the
auditor. In addition, subjects who were intolerant
of ambiguity were found to be more apt to reduce
ambiguity by focusing on the unfavourable out-
come exclusively. That is, these individuals were
more subject to outcome effects. Finally, ambiguity-
tolerant individuals did attend to additional in-
formation, and accordingly were found to be more
influenced by specific audit conduct.
hindsight. Under certain conditions, selected eva-
luators in an ex post position may systematically
perceive there to have been a predictable sequence
of events leading to the obtained outcome, and
therefore presume that the decision maker should
have known what outcome would occur (Janoff-
Bulman et al., 1985; Mitchell and Kalb, 1981).
Evaluators may assess whether they would have
foreseen the likelihood of an event and conse-
quently project that the decision maker ex ante (i.e
in foresight) should have foreseen or anticipated
what became clear ex post (i.e. in hindsight)
(Anderson, 1986). This reasoning suggests that
evaluative judgements of auditor’s competence,
judgement, and performance may be influenced by
audit outcome, potentially in a non-normative
fashion. That is, an objective performance evalua-
tion may be hindered if decision makers are held to
an unrealistic standard for predicting an outcome
and for the taking of a priori steps to avoid the
outcome (Kadous, 1996).
International Journal of Auditing, 1(1), 43–59 (1997)
Evaluations of Professional Audit Judgment
Limited research to date has addressed outcome
effects
Within an accounting context, Lipe (1993) de-
monstrated that managers making decisions to
investigate (versus not investigate) prevailing con-
ditions were evaluated more favourably when
investigations revealed problems in the control
systems (compared with managers making the
same decisions based on the same data but without
outcome information being provided to research
participants). Brown and Solomon (1987, 1993)
found similarly that outcome knowledge influ-
enced managers’ evaluations and judgements of
capital budgeting decisions. Lowe and Reckers
(1994) examined the effects of outcome knowledge
among jurors in an auditor evaluation task. Results
revealed that negative outcome information re-
garding client bankruptcy was associated with
significantly more unfavourable evaluative assess-
ments of auditor performance, relative to a no
outcome control group.
While certain types of outcome knowledge (e.g.
client bankruptcy, management fraud) may not
necessarily be available immediately following
performance for all evaluations (e.g. formal end-
of-engagement reviews), other outcome informa-
tion may be available in the near term (e.g.
workpaper errors, failure to meet client deadlines,
audit budget overruns). In addition, not all
evaluations of auditors are conducted immediately
following performance. For example, future job
assignments, annual reviews, remuneration deci-
sions and, particularly, retention and promotion
decisions will take place frequently after significant
intervals following performance. Thus, the risks of
tainted internal as well as external evaluations are
quite real in the auditing profession.
Given the limited but challenging prior research
on outcome effects, it is important to develop a
better understanding of how individuals are
differentially affected by outcome knowledge and
how selected characteristics might attenuate or
(alternatively) enhance outcome effects in auditor
performance evaluation. Specifically, this paper
examines whether outcome effects are influenced
by two factors: decision aid usage and individuals’
intolerance of ambiguity. Secondary to this objec-
tive was our interest in understanding the relation-
ship between these two factors. We hypothesized
1 audit trail whereby reconstructed evidence reveals
Baron and Hershey (1988) refer to ‘hindsight effects’ in
relation to studies utilizing a prediction task. Within the
context of decision evaluation, the phenomenon has been
termed ‘outcome effects’ (Brown and Solomon, 1993).
International Journal of Auditing, 1(1), 43–59 (1997)
45
that within an experimental setting, both factors
would interact with outcome knowledge such that
outcome effects would be greatest when a negative
reconstruction of events was feasible (which
challenged due diligence of effort, i.e. non-exhaus-
tive use of available decision aids are observed) or
when subjects’ intolerance of ambiguity was high.
We also hypothesized that ambiguity-tolerance
would interact with decision aids usage.
The remainder of this paper is organized as
follows. The next section discusses the literature
and develops our hypotheses. The section after
details the methodology and overall experimental
design. We then present the statistical results of the
study. Finally, we discuss our results and provide
important implications.
HYPOTHESES DEVELOPMENT
Outcome Effect Factors
Recently, a number of researchers (Baron and
Hershey, 1988; Fitschhoff, 1982; Hawkins and
Hastie, 1990) have observed that future research
would contribute more to the current state of
knowledge if research was to focus on the factors
that may attenuate (or amplify) outcome effects on
decision appraisals as opposed to merely continu-
ing to document the existence of outcome effects.
The present study responds to that call. A
significant contribution of the present study is the
examination of two such factors: (1) decision aid
usage and (2) intolerance of ambiguity.
Decision Aid Usage
Outcome effects involve backwards processing
(reconstruction of events) from the outcome to
antecedent factors. The given outcome acts as a cue
to retrieve antecedent events from memory (Dellar-
osa and Bourne, 1984; Slovic and Fischhoff, 1977).
Individuals tend to assimilate the outcome to
antecedent events by adding semantic links sig-
nifying causal relations to their knowledge struc-
ture. This assimilation of knowledge forces a ‘fit’
between the given outcome and antecedent events.
If a reasonably good fit is effected, it becomes
difficult for individuals to assess accurately the
likelihood that alternative outcomes could have
occurred (Janoff-Bulman et al., 1985).
In terms of audit judgement, a coherent causal
story would necessarily focus on an incriminating
certain arguable deficiencies in audit procedures
and decisions. Judgements otherwise perceived as
appropriate may take on the appearance of inept-
# 1997 by John Wiley & Sons, Ltd
46
ness or culpability in the presence of negative
outcome information. In a legal courtroom setting,
Kripke (1988, p. 361) observes that unfavourable
audit outcomes are magnified when the ‘seeds of
the subsequent failure were present in the audited
period, and that the auditors culpably overlooked
them’. The perceived partial utilization of a firm-
endorsed decision aid may create such an incrimi-
nating audit trail for both internal and external
review (Ellis, 1983). Ex post, attention may be
placed more on decision aid-based explanations
not investigated rather than on those that were
investigated. Knowledge of an auditor’s partial
utilization of a decision aid may call into question
the quality of his=her performance. In the context of
our study, outcome effects should be heightened
when the auditor’s decision process includes
partial (incomplete) utilization of audit decision
aids. This leads to hypothesis 1.
H1: Decision aids usage will interact with outcome
effects such that negative outcome effects will
be greatest under conditions of incomplete
application of decision aids (perceptually,
assimilated as the ‘cause’ of subsequent fail-
ure).
Intolerance of Ambiguity
Individual differences also deserve attention in
their relation to outcome effects, particularly
individuals’ intolerance of ambiguity (Einhorn
and Hogarth, 1985; Gul, 1984). Individuals have
often been observed to react differently to ambig-
uous situations (Frenkel-Brunswick, 1949). An
ambiguous situation can be defined as one that
cannot be totally categorized or structured because
of incomplete information. Ambiguity tolerance
refers to the way that individuals respond to
ambiguous situations. Compared with ambiguity-
tolerant individuals, ambiguity-intolerant indivi-
duals perceive ambiguous situations as being more
uncertain and psychologically threatening. Conse-
quently, individuals who are intolerant of ambi-
guity seek means to cope with ambiguous
situations (Budner, 1962; Duncan, 1972). Pratt
(1980) suggests that ambiguity-intolerant indivi-
duals seek to ‘ignore uncertainty, fail to recognize
uncertainty, or act to reduce the threat of un-
certainty’. Within a professional judgement con-
text, individuals are more likely to resort to actively
reducing the perceived threat by (1) applying fixed
rules in a ‘black and white’ manner and (2) quickly
adopting available answers to various questions
(MacDonald, 1970; Pincus, 1990; Zebda, 1991).
# 1997 by John Wiley & Sons, Ltd.
D. J. Lowe and P. M. J. Reckers
Little if any research has addressed the relation-
ship between intolerance of ambiguity and out-
come effects. An exception is Campbell and Tesser
(1983) who observed that individuals do have
varying tendencies to see their world as just,
predictable and certain, and to reconstruct the past
to make it appear deterministic and orderly.
H2: Tolerance of ambiguity will interact with
outcome effects such that evaluators who are
intolerant of ambiguity will be more influ-
enced by outcome information.
We were also interested in examining the
relationship of tolerance of ambiguity to decision
aid usage in an effort to gain a better under-
standing of underlying performance evaluation
factors (and for purposes of completeness). Ambi-
guity-intolerant individuals actively seek to reduce
uncertainty by focusing on simple solutions to
resolve apparent ambiguous situations. Once a
solution is identified, these individuals tend to
neglect other information. That is, ambiguity-
intolerant individuals are more apt to arrive at
premature closure of a decision process than are
ambiguity-tolerant individuals (Frenkel-Bruns-
wick, 1949; MacDonald, 1970). We conjecture that
as ambiguity-intolerant individuals focus upon
outcome knowledge (hypothesis 2), they will tend
to ignore other information such as the utilization
of decision aids. By doing so, these individuals are
more apt to close prematurely their decision
process in favour of outcome information.
Conversely, ambiguity-tolerant individuals are
not expected to focus exclusively on outcome
knowledge. These individuals should be in a
position to process additional information (such
as decision aid usage) and be more thorough in
their decision process. This reasoning leads to
hypothesis 3.
H3: Tolerance of ambiguity will interact with
decision aid usage such that evaluators who
are tolerant of ambiguity will be more influ-
enced by the utilization of decision aids.
However, it is an empirical question (that we
address, herein) whether ambiguity tolerant indi-
viduals will normatively process additional infor-
2
Campbell and Tesser (1983) originally assumed that the
tolerance of ambiguity construct was a motivational mechan-
ism contributing to hindsight effects. However, other
researchers (i.e. Davies, 1992; Hawkins and Hastie, 1990)
have interpreted Campbell and Tesser’s experimental con-
structs as evidence of cognitive processes.
International Journal of Auditing, 1(1), 43–59 (1997)
Evaluations of Professional Audit Judgment
mation, or fall prey to other biases (i.e. focus on
what the auditor did not do rather than on what the
auditor did do, with respect to completeness of
decision aids usage).
METHOD
An experiment was conducted using practising
auditors assigned an evaluation task. The subjects,
instrument development, task, independent and
dependent measures are described below.
Subject Group
The subjects consisted of 147 audit seniors from a
large international public accounting firm. The
experiment was conducted during senior auditor
training sessions with one of the researchers in
attendance. The subjects were assured of the
confidentiality of their responses. The mean age
of the auditors was 26 years. Forty-eight percent of
the auditors were women.
Auditors were believed to be a good subject
group that would provide a strong test of outcome
effects. Other groups such as jurors or students
may be more likely to anchor on the outcome given
their limited knowledge of the decision process or
task. Previous research suggests that greater famil-
iarity with the decision process or task may
moderate against outcome effects (Christensen-
Szalanski and Fobian-Willham, 1991; Voss et al.,
1980). In addition, auditors work in an environ-
ment that consists of conflicting risks and objec-
tives.
Instrument Development
We consulted many members to develop a case that
was representative of conditions found frequently
in practice. We designed our case instrument to
include an analytical procedures task in which a
declining inventory turnover ratio is the focal part
of the case (see Appendix A). The inventory
turnover ratio was selected for attention since it is
deemed to be a key ratio auditors consider as part
of their analytical procedures (Graham et al., 1991).
Task
Subjects were given a case booklet containing
instructions, the experimental materials, and a
debriefing questionnaire (see Fig. 1). The back-
ground information depicted a large public
International Journal of Auditing, 1(1), 43–59 (1997)
47
accounting firm performing an audit of a medium-
sized, publicly traded client. The client manufac-
tures a variety of plastic and ceramic=glass
products for both commercial and domestic use.
Summarized, unaudited financial information by
the client was presented for the current year.
The focal point of the case related to analytical
procedures and, more specifically, to an unusual
decline in the inventory turnover ratio (compared
with prior periods).
We then provided subjects with a description of
the firm’s analytical procedures decision aid soft-
ware which generates selected causal explanations
for account and ratio changes. In seeking to explain
the significant decrease in the inventory turnover
ratio, the supervising senior considered=investi-
gated ten of the decision aid generated explana-
tions. None of the ten items investigated were
found to explain the ratio change. Since the
supervising senior believed that the likelihood of
error (or irregularities) was insignificant, and given
that the audit budget was tight, the supervising
senior decided not to allocate further attention to
the matter. Following the case scenario, subjects
were instructed to respond to the dependent
measure and complete debriefing questions and
the Tolerance of Ambiguity Scale (see Appendix B).
Independent Measures
The experiment included three primary indepen-
dent measures (and their interactions), two ma-
nipulated within the scenario (decision aid usage
and outcome) and one measured (tolerance of
ambiguity). We also included the age and gender
measures to strengthen our regression design
rather than to test specific hypotheses. Prior
research has indicated their potential effect on
performance evaluation (Greenhaus and Parasura-
man, 1993; Hooks, 1992; Hunt, 1995; Lehman, 1988;
Reckers and Schultz, 1993).
3
Graham et al. (1991, p. 72) assert that, ‘Some audit issues are
easily identified through the use of simple analytical
procedures. For example, declining inventory turnover or
declining receivables turnover have certain implications with
respect to risks that the auditor should identify and assess.’
4
The 38 audit managers had an average of five years and
four months of audit experience (with a standard deviation
of 12.6 months). The managers stated that approximately
32% of their engagements involved the audits of inventory
and further that about 12% of their engagements involved
errors or irregularities relating to inventory. The average size
of the offices in which they worked was between 150–175
professionals.
# 1997 by John Wiley & Sons, Ltd
48
Decision aid
usage
No outcome Full
provided utilization
(foresight)
Partial
utilization
Background case
and instructions
Full
utilization
Outcome
provided Partial
(hindsight) utilization
Figure 1. Experimental procedures.
Decision Aid Usage
Decision aid packages in the analytical procedures
area are currently being developed by several
firms, with some packages (e.g. ANSWERS) now
being available commercially (Blocher and Will-
ingham, 1988). Their purpose is to provide lists of
explanations for unusual account or ratio trends.
These decision aids are not necessarily designed to
be comprehensive, rather they serve to identify
relatively common explanations. The manner in
which decision aids were utilized was represented
as being exhaustive or non- exhaustive. We
expected that full utilization of a decision aid
would be perceived to satisfy ‘due diligence’
professional standards. That is, the decision aid
may imply a standard of performance similar to
what other auditors would do in the same
situation. We expected this to be the case even if
the decision aid generated only ten high likelihood
explanations, not including the true explanation,
and the audit senior failed to self-generate and
explore other explanations. Conversely, we pre-
dicted that a situation in which the decision aid is
only partially (incompletely) used, might be per-
ceived as a non-normative decision process (even if
the decision aid included a more lengthy list of
explanations and the audit senior investigated the
same ten diagnostic explanations investigated
under the other condition). We expected the seeds
of failure would have been sown in the latter
5
The audit profession is placing increased emphasis on
analytical procedures as a source of audit evidence (Koonce,
1993; Tabor and Willis, 1985). In fact, a recent audit standard
‘requires the use of analytical procedures in the planning and
overall review stages of all audits’ (AICPA, 1988, SAS No. 56,
para. 1).
# 1997 by John Wiley & Sons, Ltd.
D. J. Lowe and P. M. J. Reckers
Evaluation and Debriefing and
promotion tolerance of
questions ambiguity questions
instance—the senior would be perceived as not
having satisfied the professional norm implicit in
the decision aid (see Anderson et al., 1994; Gournic,
1994; Jennings et al., 1993).
In the full utilization condition, the decision aid
was exhaustively used in that the supervising
senior considered and investigated all ten explana-
tions that the decision aid provided. The ten
explanations were among the 15 more frequently
cited explanations provided by the audit managers
in Anderson et al. (1994). Our list contained five
error and five non-error (e.g. changing client
circumstances) explanations. In this regard, the
materials read, in part:
In seeking to explain the significant decrease in the
inventory turnover ratio, during the course of the
audit, Bill INVESTIGATED ALL 10 OF THE ITEMS
ON THE ANALYTICAL PROCEDURES DECISION
AID LIST.
Having the decision aid produce ten plausible
explanations is comparable to the current stage of
development of analytical procedure packages. For
instance, ANSWERS, a widely used analytical
procedures package, lists seven explanations for a
significant decrease in the inventory turnover ratio.
In the partial utilization condition, the decision
aid was incompletely utilized in the sense that not
all listed explanations were investigated by the
audit team. The decision aid listed 15 explanations,
of which only ten were investigated by the super-
vising senior. These ten explanations were the same
as those provided (and investigated) in the full
utilization condition.
Outcome
Outcome was manipulated between subjects at two
International Journal of Auditing, 1(1), 43–59 (1997)
Evaluations of Professional Audit Judgment
levels: no outcome (foresight) and negative out-
come (hindsight). In the foresight condition, sub-
jects were given the general case scenario but were
not given information regarding subsequent events
as the outcome was withheld. Subjects formed their
judgements from an ex ante perspective.
In the hindsight condition, subjects were given
the general case scenario followed by the following
outcome:
Three months after release of the financial statements
of Springdale, the correct explanation for the decrease
in the inventory turnover ratio was discovered. The
correct explanation was an ERROR, and thus THE
PUBLISHED FINANCIAL STATEMENTS WERE IN
ERROR. The correct explanation was an error in
application of labor rates (for manufactured products)
to inventory, resulting in an overstatement of inven-
tory. The firm and its labor union agreed to new wage
rates during the audit year effective the following year.
These new rates were prematurely used in calculating
the labor portion of the cost of inventory in the year of
the audit.
The Clarkson Group had purchased Springdale
stock shortly after publication of the erroneous
financial statements. Following discovery and dis-
closure of the inventory and net income misstate-
ments Springdale’s stock price dropped sharply.
The Clarkson Group is now suing Springdale and
its external auditors.
The actual error, related to the misapplication of
labor rates, was among the five explanations that
were not investigated by the supervising senior (in
the partial utilization condition).
With regard to the hindsight condition, it was
important to establish a proper methodological
setting to measure outcome effects. Decision theory
methodology maintains that the decision process
(and not the decision outcome) is the main criterion
for assessing decision quality. Decision quality
should depend upon such things as the wisdom
or consistency of the decision at the time it is
implemented, without reference to the outcome
(Brown and Solomon, 1987; Fisher and Selling,
1993). Our objective was to allow subjects to focus
upon the audit process and particularly the ex ante
nature of the auditor’s decision. Following Baron
and Hershey (1988) and Hershey and Baron (1992),
we provide a methodological means to ensure
measurement of the non-normative use of outcome
6 8
Of the seven explanations for a significant decrease in the
inventory turnover ratio, four relate to errors and three relate
to non- errors—changing client circumstances (ANSWERS
version 2.5A).
International Journal of Auditing, 1(1), 43–59 (1997)
49
information. First, we explictly instructed subjects
to make their judgements based only on informa-
tion that the auditors had at the time they
conducted the audit. That is, to base their judge-
ments on ex ante information which existed before
learning of the outcome. In the absence of this
explicit directive, it might be argued that some
subjects would alter their ex post judgements in a
fashion similar to a Bayesian process (with the
adjustment being normative) (Hawkins and Hastie,
1990; Hoch and Loewenstein, 1989). Secondly, we
were careful to provide subjects with enough
information so that they will not be induced to be
dependent on the given outcome (Baron and
Hershey, 1988; Helleloid, 1985; Slovic and Fischh-
off, 1977). The three-page, single spaced scenario
provides considerably more information than is
generally found in studies of this nature (see Baron
and Hershey, 1988). We provided enough informa-
tion to depict a realistic case, but not so much
information that subjects became susceptible to
information overload (Casper et al., 1989). In
addition, we intentionally designed the case such
that it was not possible to know with certainty the
eventual outcome of the audit.
Tolerance of Ambiguity
We used the AT-20 scale (MacDonald, 1970) to
measure this attribute. This scale consists of 20
true–false questions and has been found to be more
reliable than other available measures (e.g. Budner,
1962; Rydell and Rosen, 1966).The scale is designed
so that lower scores indicate ambiguity intolerance
and higher scores indicate ambiguity tolerance. The
MacDonald Scale is particularly appropriate as it
was developed to operationalize intolerance of
ambiguity from the related concept of rigidity
(Campbell and Tesser, 1993). MacDonald (1970)
indicates that reliability estimates range from a low
of 0.63 (test–retest, six month interval) to a high of
0.86 (split-half corrected by Spearman-Brown).
Dependent Measures
After reviewing the case information, subjects were
asked to answer two dependent measure questions.
7
By keeping the number of explanations investigated (10)
constant across both the full and partial usage conditions,
differential results could be interpreted to be due to the
utilization of the decision aid and not to the amount of audit
work performed.
The actual error was not considered to be an unusual error.
In the developmental pretest of the case instrument, 11 of the
38 audit managers generated this error. This error was the
ninth (out of 35) most common listed error.
# 1997 by John Wiley & Sons, Ltd
50
The first question requests a generic (non- con-
textual) evaluation of the audit senior’s judgement
not to modify the standard audit program in light
of the inventory ratio change. This evaluation is
intended to generalize to various performance
evaluation settings such as annual reviews, future
job assignments=scheduling, and remuneration
decisions, each of which has the potential for
outcome effects. Specifically, the question read as
follows.
Please evaluate Bill’s decision not to make further
inquiries regarding the significant ratio change.
0 . . . 1 . . . 2 . . . 3 . . . 4 . . . 5 . . . 6 . . . 7 . . . 8 . . . 9 . . . 10
Very Inappropriate
In the second question, we focused on a context-
specific performance evaluation setting—a promo-
tion decision. We believed this to be potentially the
most important type of evaluation made internally
of an auditor. Further, it was anticipated that
significant negative outcome knowledge could be
especially damaging to an individual when s=he
comes up for promotion. Subjects were asked to
assess the audit senior’s pending promotion as
follows.
To what extent do you believe Bill should be
supported for promotion to manager?
0 . . . 1 . . . 2 . . . 3 . . . 4 . . . 5 . . . 6 . . . 7 . . . 8 . . . 9 . . . 10
Not at All Very Strongly Supported
RESULTS
Ordinary least-squares regression was used to test
the three hypotheses. Regression analysis was
considered appropriate as two of the independent
measures were continuous (of particular impor-
tance being the tolerance of ambiguity measure).
The model included, as independent measures,
decision aid usage, outcome, tolerance of ambi-
guity, age, and gender. In addition, the model
contained three two-way interactions (related to the
three primary independent measures) of outcome
by decision aid usage, outcome by tolerance of
ambiguity, and decision aid usage by tolerance of
ambiguity.
As Tables 1 and 2 indicate, all three independent
measures were significant. Decision aid usage was
significant in predicting the evaluation judgement
(t ˆ ÿ2.53, p < 0.01) and promotion judgement
(t ˆ ÿ2.18, p ˆ 0.015). The results also provide
evidence that (in)tolerance of ambiguity signifi-
cantly influenced subjects’ responses (respectively,
# 1997 by John Wiley & Sons, Ltd.
D. J. Lowe and P. M. J. Reckers
t ˆ ÿ2.81, p < 0.01 for generic evaluations;
t ˆ ÿ2.13, p ˆ 0.02 for promotion).
Tests of Hypothesis 1
Hypothesis 1 predicted that outcome effects would
interact with decision aid usage. Specifically, out-
come effects were expected to be greatest when
there was only partial (incomplete) usage of
decision aids. As shown in Table 1, the interaction
was found to be marginally significant for the
evaluation judgement (t ˆ 1.26, p ˆ 0.105).
For the promotion decision, the interaction was
found to be statistically significant at the 0.05 level:
Very Appropriate t ˆ 1.70, p ˆ 0.045) (see Table 2). Practical interpre-
tation of these findings may be facilitated by a
review of the mean responses for the promotion
decision under the four experimental conditions.
Tests of Hypothesis 2
Hypothesis 2 proposed that tolerance of ambiguity
will interact with outcome knowledge. We antici-
pated that (negative) outcome information would
register progressively greater influence on auditor
respondents who were relatively less tolerant of
ambiguity. Conversely, we hypothesized that out-
come information would affect the evaluation and
promotion decisions of more ambiguity-tolerant
subjects to a lesser extent. Table 1 reveals that for
the evaluation judgement the interaction was
marginally significant at traditional levels
(t ˆ 1.24, p ˆ 0.11). For the promotion decision, the
interaction between tolerance of ambiguity and
outcome knowledge was significant at the 0.05
level (t ˆ 1.72, p ˆ 0.045) (see Table 2). In each
instance, the results were in the direction
predicted.
The AT-20 scale measures tolerance for ambi-
guity on a 20-point scale. To partition categorically
subjects based on that scale involves a significant
loss of information (thus the propriety of using
regression analysis rather than ANOVA). None-
theless, categorical partitioning may facilitate a
basic understanding of the above empirical find-
ings. Accordingly, participants were classified as
intolerant if included in the bottom third of
respondents; and tolerant if included in the top
third. The distribution of responses was unimodal
with a kurtosis measure of ÿ0.26; accordingly, the
9
The three hypotheses were directional in nature. Therefore,
one-tailed tests were performed on the t-statistics for each of
these coefficients.
International Journal of Auditing, 1(1), 43–59 (1997)
Evaluations of Professional Audit Judgment 51

Table 1. Regression results. Dependent measure: evaluation judgement

Source Coefficient Std error t-Statistic Probability

Decision Aid (D) ÿ4.0801 1.61 ÿ2.53 < 0.010

Outcome (O) ÿ2.2353 1.60 ÿ1.39 0.085
ÿ0.3880 ÿ2.81 < 0.010
6
Tolerance (T) 0.14

6
D O 1.2274 0.98 1.26 0.105

6
O T 0.1856 0.15 1.24 0.110
D T 0.3718 0.15 2.52 < 0.010
Age ÿ0.1504 0.09 ÿ1.73 0.045
Gender 0.4884 0.50 0.97 0.165
F-ratio ˆ 1.671

Table 2. Regression results. Dependent measure: promotion decision

Source Coefficient Std error t-Statistic Probability

Decision Aid (D) ÿ2.4837 1.13 ÿ2.18 0.015

Outcome (O) ÿ2.8868 1.13 ÿ2.55 < 0.010
ÿ0.2077 ÿ2.13
6
Tolerance (T) 0.09 0.020

6
D O 1.1713 0.69 1.70 0.045

6
O T 0.1829 0.11 1.72 0.045
D T 0.2453 0.10 2.35 0.010
Age ÿ0.1153 0.06 ÿ1.88 0.030
Gender 0.7229 0.36 2.03 0.020
F-ratio ˆ 2.916

centrist classification sacrifices significant informa-
tion, value, and interpretation will rely on mean
responses of tolerants and intolerants. So defined,
ambiguity-intolerant subjects provided higher
evaluations in foresight (6.76) than in hindsight
(5.74). On the other hand, ambiguity-tolerant
subjects provided essentially the same responses
across foresight and hindsight conditions (5.45
compared with 5.49). Similarly, subjects intolerant
of ambiguity rendered higher mean promotion
decision in foresight (6.54) compared with hind-
sight (5.46). Conversely, subjects who were tolerant
of ambiguity were unaffected by outcome knowl-
edge; mean decisions were substantively the same
over the foresight and hindsight conditions (6.19
compared with 6.14, respectively). These findings
provide support for hypothesis 2.
Tests of Hypothesis 3
10
Tolerance of ambiguity scores have a total range of nought
to 20. Auditors’ scores ranged from a low of two to high of
19, with each of the values in between having at least one
auditor score. The variance of the scores was 10.77 with a
standard deviation of 3.38.
Hypothesis 3 explored the potential interaction
between tolerance of ambiguity and decision aid
usage. We expected that individuals who were
more tolerant of ambiguity would attend more to
available non-outcome information (such as deci-
sion aid usage.) It was our purpose to explore the
risk that they then might be influenced (potentially
non-normatively) by the auditors’ full versus
partial utilization of decision aids, even if not
influenced directly by the outcome effects. As
shown in Tables 1 and 2, the results of the
experiment confirm this risk for both the evaluation
and promotion dependent measures (t ˆ 2.52,
p < 0.01; t ˆ 2.35, p ˆ 0.01, respectively).
In response to evaluation questions, ambiguity-
11
For the evaluation judgement, subjects provided a partial
utilization of a decision aid gave lower mean judgements in
hindsight (5.17) than in foresight (5.65). For subjects provided
a full utilization of a decision aid, mean judgements were
higher in hindsight (5.93) than in foresight (5.13).
12
Alternatively, the comparative conditions could have been
interpreted through regression such that changes between
regression points are calculated and assessed (see Reckers et
al., 1994). Analyses using this method is more informative,
however, the interpretation may be somewhat less intuitive.

International Journal of Auditing, 1(1), 43–59 (1997) # 1997 by John Wiley & Sons, Ltd
52
tolerant individuals (as defined above) provided
higher mean judgements for the full utilization
condition (6.27) than for the partial utilization
condition (4.60), confirming expectations that these
individuals will use decision aid utilization infor-
mation. Also as expected, ambiguity-intolerant
individuals were less influenced by decision aid
utilization, as their mean judgements (6.63 and
5.82) were more comparable across these same
conditions. This was as expected as intolerant
individuals anchor on outcome information almost
exclusively, as reported in the prior section.
Similarly, with respect for the promotion decision,
ambiguity-tolerant individuals gave higher mean
judgements for the full utilization condition (7.00)
compared with the partial utilization condition
(5.26), whereas, ambiguity-intolerant individuals
displayed almost the same mean judgements (6.04
and 5.89) for these same conditions. These results
provide support for hypothesis 3.
Other Results
The age measure was found to be significant in the
model for both the evaluation and promotion
decisions (t ˆ ÿ1.73, p ˆ 0.045; t ˆ ÿ1.88, p ˆ 0.03).
Younger subjects tended to provide higher evalua-
tions and greater support for the senior’s promo-
tion. Gender was not significant for the evaluation
judgement (t ˆ 0.97, p ˆ 0.165) however it was
significant for the promotion decision (t ˆ 2.03,
p ˆ 0.02). Women tended to provide greater sup-
port for the senior’s promotion.
DISCUSSION, IMPLICATIONS, AND
FUTURE RESEARCH
The primary objective of this study was to
investigate the effects of outcome knowledge on
performance evaluations and specifically to deter-
mine whether outcome effects are influenced by
two factors: the presence and relative usage of
decision aids and intolerance of ambiguity. We
were also interested in understanding the relation-
ship between these two factors. These effects were
examined for (1) a generalizable, context-free (i.e.
generic) evaluation of an auditor’s performance
as well as for (2) a pending context-specific
promotion decision. Results were generally stron-
ger for the promotion decision (and with less
variance) compared with the evaluation judge-
ment. The greater importance of the promotion
# 1997 by John Wiley & Sons, Ltd.
D. J. Lowe and P. M. J. Reckers
decision may explain the difference in responses.
Promotion decisions are infrequent and have
significant consequences to the individual as
well as for the firm. Also, given the defined
(context-specific) purpose of the promotion
assessment, subjects may have been more atten-
tive to this decision (as suggested by Hunt and
Messier, 1995).
Before discussing the results of our study, it is
first appropriate to note certain limitations. First,
our selection of subjects may limit the external
validity of our results.
Secondly, our study excluded many factors that
may be related to performance evaluation. The
experimental materials may not have contained the
richness of a real world setting. Given time
constraints we were limited in what information
we could provide.
Finally, as with behavioural experiments in
general, this experiment is subject to other inherent
limitations; therefore, results should be interpreted
with care as to their generalizability. This study
involves a limited sample of subjects from a single
firm, deciding a single hypothetical case (of which
the unfavourable outcome was rather extreme).
Also, this study measured decisions that were
actually intentions to act rather than actual beha-
viours. Therefore, the associations between inde-
pendent measures and decision responses may be
overstated. Given these limitations this study
yields the following important findings in order
of the three hypothesized interactions.
Perhaps the major finding of this study relates to
our first hypothesis. In spite of receiving instruc-
tions ‘to exercise care not to be influenced by
outcome information’, our subjects were suscepti-
ble to outcome information when also provided
with a subordinate’s non-exhaustive use of an
audit decision aid. These results have implications
for the use of decision aids in the audit
environment. Cushing and Loebbecke (1986) and
Willingham (1986) identify a trend of some firms
toward more structured methods of operation to
deter the inconsistent judgements of various
auditors in respective firms. This lack of consensus
may be considered problematic for the audit
profession in general and for certain auditors it
suggests that the accuracy and statistical rationality
of their audit decisions are apt to be faulty (Ashton,
1985; Ashton and Willingham, 1988). Decision aids
are intended to reduce the occurrence of incon-
sistent decisions in similar situations by different
auditors (Abdolmohammadi, 1991; Ashton and
Willingham, 1988; Messier, 1995).
International Journal of Auditing, 1(1), 43–59 (1997)
Evaluations of Professional Audit Judgment
Our results suggest that, notwithstanding the
intended benefits of decision aids, auditors who are
perceived to utilize them partially may be viewed
negatively in performance evaluations, even when
those aids are not intended to be deterministic. This
tendency could lead auditors to be less receptive to
the implementation of decision aids in their firms.
Alternatively, auditors may tend to follow decision
aids completely even when perceived costs exceed
benefits (Messier, 1995). CPA firms may need to
implement further policies regarding the use of
decision aids. Future research should substantiate
these claims as well as examine related issues such
as the perceived effects of auditors choosing not to
use firm-designed decision aids or auditors electing
to override them.
While our study has important implications for
internal performance evaluations, its focus could be
extended to external evaluation of auditors in the
legal arena. Presently, CPA firms can only con-
jecture ‘how reliance on a decision aid will be
judged in hindsight’ by judicial litigants (Boatsman
et al., 1995, p. 5). Judicial litigants may interpret
decision aid information (and its adherence) as
representative of due diligence. That is, the auditor
may not be perceived to have satisfied the profes-
sional standard implicit in the decision aids if they
are not fully-utilized. Jennings et al. (1993) surmise
that ‘when standards of auditor conduct are not
readily at hand, jurists will use internal decision
aids as surrogate standards against which to
measure performance.’ Given that auditor liability
is determined from a perspective that includes
outcome information, knowledge of auditor’s
partial utilization of a decision aid may create an
incriminating audit trail directly calling into ques-
tion the due diligence of the auditor (especially
among jurists who are likely to be less knowledge-
able of audit practice and less supportive of the
auditing profession than the auditors participating
in this study). Future research should extend our
13
A large contingent of research involving performance
evaluation has (by necessity) utilized subjects that were not
directly responsible for evaluating subordinate behaviour.
Baron and Hershey (1988) utilized undergraduate students in
a study that evaluated the competence of medical decisions.
In another medical study, Mitchell and Kalb (1981) used
nurses to take the role of the (nurse) supervisor of poorly
performing subordinates. Brown and Solomon (1987, 1993)
and Lipe (1993), in a managerial context, used undergraduate
and graduate students as subjects. Kaplan and Reckers (1985)
employed audit seniors to make performance evaluations of
hypothetical audit seniors.
International Journal of Auditing, 1(1), 43–59 (1997)
53
study to a legal liability context to ascertain
whether partial utilization of a decision aid (lead-
ing to an unfavourable outcome) amplifies negative
outcome effects among juries and judges.
With respect to the second hypothesis, we found
that ambiguity-intolerant auditors were more apt
to reduce uncertainty by focusing on an unfavour-
able outcome. These results have both theoretical
and practical implications for the study of outcome
effects on performance evaluation. From a theore-
tical standpoint, our study confirms that individual
differences may affect the underlying cognitive
processes that are at the heart of the hindsight
phenomenon (Hawkins and Hastie, 1990). An
increased understanding of the basis for outcome
effects may assist researchers in developing meth-
ods to mitigate their effects, assuming these effects
are perceived to be non- normative. If these
mitigation methods prove to be successful, they
could be integrated into the performance evalua-
tion task.
Future research could also be directed toward
confirming our findings that tolerance of ambiguity
is a relevant factor in professional judgement
evaluation. From a practical perspective, evaluators
who are intolerant of ambiguity may be more likely
to be subject to outcome effects, which may
contribute to negative performance evaluations of
subordinates. Therefore, evaluators need to be self
aware of their tolerance for ambiguity and how this
factor may affect their evaluation of subordinates.
Also, if our findings are replicated in a legal setting,
it could indicate that certain judicial litigants (those
intolerant of ambiguity) would be more apt to
focus on a negative outcome. Jury selection (voir
dire) procedures could be developed as a means of
identifying individuals who are intolerant of
ambiguity.
Reaction to the evaluatee’s decision aid usage
was also affected by subject’s tolerance of ambi-
guity, as proposed by hypothesis 3. Ambiguity-
tolerant individuals provided higher assessments
when the evaluatee fully utilized the decision aid.
We suggest that these individuals did not fixate on
outcome knowledge and thus were willing to
examine additional information such as the utiliza-
tion of decision aids. While ambiguity-tolerant
individuals displayed normative behaviour in
being thorough in their decision process, they
may have succumbed to non-normative behaviour
in their assessments of decision aid usage. For both
the partial and full utilization conditions, the
auditor performed the same ten analytical proce-
dure investigations. However, the partial utiliza-
# 1997 by John Wiley & Sons, Ltd
54 D. J. Lowe and P. M. J. Reckers

tion condition was presented against a background
of a larger population of explanations (10 of 15).
Future research is needed to examine these
concepts more fully as these results are exploratory
and require replication.
supervision by senior internal audit personnel.
The internal audit staff numbers sixteen, including
three new college graduates hired last summer.
One senior member of the department resigned last
year, accepting a position at another firm at a
significant pay increase.

ANALYTICAL PROCEDURES: In performing

mandated analytical procedures for preliminary
ACKNOWLEDGEMENTS audit planning, typically several ratios are consid-
Financial support is greatly appreciated for the ered. One significant ratio is inventory turnover
first author from a summer research grant at (cost of sales divided by average inventory).
Virginia Polytechnic Institute and State Uni- Presented below is the set of inventory turnover
versity. We also acknowledge the valuable com- ratios for Springdale:
ments received from participants at the 1995
Annual Meetings of the American Accounting PRIOR YEAR CURRENT YEAR PER
Association and the Society of Judgement and (audited) (unaudited) CHA
Decision Making. INVENTORY TURNOVER 5.47 5.20 ÿ

APPENDIX A The SIGNIFICANT difference between the two

years’ inventory turnover ratios could be the result
Case Instrument of: (a) an environmental change (including normal
CLIENT: This case deals with the external audit of year-to-year variation), or (b) an accounting error
Springdale Industries. Sprindale is a medium-size, or irregularity in the unaudited financial state-
publicly-traded (Pacific Stock Exchange) US cor- ments. Environmental changes include all explana-
poration, founded in 1949. Springdale engages in tions other than accounting errors and
the manufacture of a variety of plastic and irregularities. If the significant difference between
ceramic=glass products for both commercial and the two year’s ratios is caused by an environmental
domestic use. Summarized, unaudited financial explanation, then the financial statements do not
information provided by the client for the current require an adjustment. However, if the difference is
year is provided below: caused by a material error or irregularity, then the
financial statements must be adjusted.
INCOME STATEMENT BALANCE SHEET
DECISION AIDS: Some audit firms have devel-
SALES $48,017,200 oped or are
CASH & SECURITIES developing decision aid packages to
$1,323,600
COST OF SALES 38,379,500 NET RECEIVABLES assist their5,093,300
professionals in conducting analytical
SELLING & ADMIN 3,647,100 INVENTORY procedures. 7,407,500
Commercial software packages also
OTHER EXPENSES 1,672,500 OTHER CURRENT ITEMS
are becoming 333,600
available and are finding increased
INCOME TAXES 2,329,300 LONG TERM ASSETS
adoption 28,527,300
by public accounting firms and internal
NET INCOME $1,988,800 $42,685,300 who choose not to develop their
audit departments
ACCOUNTS PAYABLEown decision aids. Among these decision aids are
7,705,900
diagnostic decision
CURRENT LIABILITIES 990,000 aid packages which provide
LONG TERM LIABILITIES 12,497,300
lists of viable explanations for unusual financial
EQUITY 21,492,100
relationships or perceived significant change in
financial$42,685,300
relationships across time.

INTERNAL AUDIT: The internal audit department
of the client is evaluated to be of MEDIUM quality
based on past performance, educational back-
ground, experience and objectivity. Last year about
90% of internal audit procedures examined pro-
vided evidence of satisfactory instruction and
AUDIT TEAM: The supervising senior on the
Springdale engagement is Bill Ward. Bill is an
aggressive, individual with a sharp focus on career
advancement. Bill is married and has two young
children—both pre-school age. Bill has been with
the firm six years and is being considered for

# 1997 by John Wiley & Sons, Ltd. International Journal of Auditing, 1(1), 43–59 (1997)
Evaluations of Professional Audit Judgment 55

promotion to manager in the fall. Bill has nearly always had his jobs come in at- or under-budget. He has
exhibited good client relations. The staff consider him a tough senior to work for though. Among the staff
assigned to the Springdale audit are two new juniors and one staff member who served on the audit last
year. Neither Bill nor the audit manager were on the Springdale audit team last year, although the
engagement partner is continuing. The audit fee was renegotiated with the client since the last audit and
reduced. The resulting audit time budget is tight this year.

AUDIT ISSUE: To facilitate the analytical procedures phase of the external audit your firm has developed
and approved for field application analytical procedures decision aid software which generates selected
causal explanations for account=ratio changes. This diagnostic decision aid, however, does not necessarily
include all non-trivial explanations. In developing the software, your firm (the external auditor of
Springdale) reviewed over 2000 audits which the firm performed over the last five years.

In seeking to explain the significant decrease in the inventory turnover ratio, during the course of the
audit, Bill INVESTIGATED ALL 10 OF THE ITEMS [ALTERNATE DECISION AIDS’ VERSION: 10 of
the 15 ITEMS] ON THE ANALYTICAL PROCEDURES DECISION AID LIST (see below).

10 EXPLANATIONS INVESTIGATED BY BILL

Error=Irregularity Explanations:
1. Incorrect test counts of inventory.
2. Unbooked physical adjustments to inventory, including obsolete or unsalable inventory, or unrecorded shrinkage.
3. Incorrect cut-off of inventory, accounts payable, cost of sales, or sales, including unrecorded finished goods or sales,
incorrect beginning inventory, and improper revenue recognition.
4. Misclassified transaction (posted to the wrong account).
5. Transfer pricing errors.

Environmental Explanations:
1. Change in product mix or change in production method, including new process or plant, or change in production due
to new regulation.
2. Change in accounting method.
3. Increase in raw materials inventory costs.
4. Sales down due to defective product(s), bad publicity, strike(s), change in marketing, decrease in advertising, or
increased personnel turnover in sales department.
5. Sales down due to downturn in the economy, change in credit policy, loss of a major customer, change in credit
terms, increase in competition, or technology changes.

ALTERNATE DECISION AIDS VERSION ˆ [ ]

[5 EXPLANATIONS NOT INVESTIGATED BY BILL

Error=Irregularity Explanations
1. Misapplied or miscosted overhead, or misapplication of variances.
2. Error in recording and=or applying direct labor rates to inventory.
3. Consigned goods incorrectly included in inventory.

Environmental Explanations
1. Efficiency problems in production.
2. Inventory up due to poor anticipation of needs or poor ordering practice, resulting in excess inventory.]

None of the 10 items investigated was found to explain the ratio change. Bill believed that the likelihood
of other error (or irregularity) explanations were insignificant. The audit time budget was tight and Bill

International Journal of Auditing, 1(1), 43–59 (1997) # 1997 by John Wiley & Sons, Ltd
56 D. J. Lowe and P. M. J. Reckers

did not believe it prudent at the end of the audit to allocate further special attention to the matter, and did
not do so. Other normal audit procedures and tests of samples did not suggest an error basis.

OUTCOME VERSION

Three months after release of the financial statements of Springdale, the correct explanation for the
decrease in the inventory turnover ratio was discovered. The correct explanation was an ERROR, and thus
THE PUBLISHED FINANCIAL STATEMENTS WERE IN ERROR. The correct explanation was an error in
application of labor rates (for manufactured products) to inventory, resulting in an overstatement of
inventory. The firm and its labor union agreed to new wage rates during the audit year effective the
following year. These new rates were prematurely used in calculating the labor portion of the cost of
inventory in the year of the audit.

The Clarkson Group had purchased Springdale stock shortly after publication of the erroneous financial
statements. Following discovery and disclosure of the inventory and net income misstatements
Springdale’s stock price dropped sharply. The Clarkson Group is now suing Springdale and its external
auditors.

APPENDIX B

Tolerance of Ambiguity (MacDonald) Scale

Please answer the following True–False questions. Do not spend too much time on any one question; there
are no right or wrong answers and therefore your first response is important. Mark T for True and F for
False. Be sure to answer every question.

—— 1. A problem has little attraction for me if I don’t think it has a solution.

—— 2. I am just a little uncomfortable with people unless I feel that I can understand their behaviour.
—— 3. There’s a right way and a wrong way to do almost everything.
—— 4. I would rather bet 1 to 6 on a long shot than 3 to 1 on a probable winner.
—— 5. The way to understand complex problems is to be concerned with their larger aspects instead
of breaking them into smaller pieces.
—— 6. I get pretty anxious when I’m in a social situation over which I have no control.
—— 7. Practically every problem has a solution.
—— 8. It bothers me when I am unable to follow another person’s train of thought.
—— 9. I have always felt that there is a clear difference between right and wrong.
—— 10. It bothers me when I don’t know how other people react to me.
—— 11. Nothing gets accomplished in this world unless you stick to some basic rules.
—— 12. If I were a doctor, I would prefer the uncertainties of a psychiatrist to the clear and definite
work of a surgeon or X-ray specialist.
—— 13. Vague and impressionistic pictures really have little appeal for me.
—— 14. If I were a scientist, it would bother me that my work would never be completed (because
science will always make new discoveries).
—— 15. Before an examination, I feel much less anxious if I know how many questions there will be.
—— 16. The best part of working a jigsaw puzzle is putting in the last piece.
—— 17. Sometimes, I rather enjoy going against the rules and doing things I’m not supposed to do.
—— 18. I don’t like to work on a problem unless there is a possibility of coming out with a clear-cut and
unambiguous answer.
—— 19. I like to fool around with new ideas, even if they turn out later to be a total waste of time.
—— 20. Perfect balance is the essence of all good composition.

# 1997 by John Wiley & Sons, Ltd. International Journal of Auditing, 1(1), 43–59 (1997)
Evaluations of Professional Audit Judgment 57

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AUTHOR PROFILES
D. Jordan Lowe is an Assistant Professor of
Accounting and John E. Peterson, Jr. Research
Fellow at Virginia Polytechnic Institute and State
University. He teaches undergraduate auditing and
researches behavioural issues in auditing. His
research has been published in Accounting
Horizons, Auditing: A Journal of Practice and Theory,
Decision Sciences, and Journal of Economic Psychology.
Philip Reckers is Professor and Director of the
School of Accountancy and Information Manage-
ment at Arizona State University. He is editor of
Advances in Accounting and serves on the editorial
boards of Auditing: A Journal of Practice and Theory
and Behavioural Research in Accounting, as well as
the International Journal of Auditing. He is author of
Intermediate Accounting (West Publishing Co., 1995).
International Journal of Auditing, 1(1), 43–59 (1997)