Expectation of errors in unaudited book values: The effect of control procedures and financial condition

An experiment was conducted to investigate the effects of 2 risk factors - financial condition and control procedures - on auditors' judgments regarding the expected balance of selected accounts. Auditors' expected error judgments were found to be sensitive to the client's control system; strong control procedures led to predictions of smaller errors in unaudited book values, consistent with the audit risk model. The patterns of responsiveness to the financial condition manipulation were more complex. Auditors' error expectations for inventory, and to a marginal extent, accounts receivable, were sensitive to the financial condition. The financial condition, however, did not systematically affect auditors' error expectations for accounts payable, depreciation and sales.