Motivated Perspective Taking: Why Prompting Auditors to Take an Investor's Perspective Makes Them Treat Identified Audit Differences as Less Material*

Elizabeth C. Altiero, Yoon Ju Kang, Mark E. Peecher

Research output: Contribution to journalArticlepeer-review


Audit regulators and commentators propose prompting auditors to more fully take an investor's perspective as a remedy to their concern that auditors underreact to material misstatements. By contrast, we predict that prompting auditors in this manner will backfire, making them less (more) heavily weight indicia that misstatements are (not) material. We further predict auditors will apply this asymmetric weighting instrumentally—to a greater degree as needed—to justify management-preferred conclusions. We test these predictions in two experiments in which in-charge audit seniors judge the likelihood that identified audit differences are material and choose required adjustment amounts. Between-participants, we manipulate whether or not auditors are prompted to take an investor's perspective and, within-participants, whether these audit differences would or would not violate a qualitative criterion—by breaking or not breaking a favorable profitability trend. Study 1 uses a context in which a relatively low degree of motivated perspective taking is needed, as the audit difference is just below tolerable misstatement (TM). Investor-prompted auditors assess audit differences as less likely to be material than do unprompted auditors, but only when the qualitative criterion is not violated. Study 2 adds a between-participant manipulation of misstatement tolerability—that is, whether the audit difference is just below or well above TM. Consistent with an instrumental increase in motivated perspective taking, investor-prompted auditors assess audit differences that simultaneously are less tolerable and violate a qualitative criterion as significantly less likely to be material. Overall, our theory and experimental evidence suggest prompting auditors to take the investor perspective may have unintended consequences.

Original languageEnglish (US)
Pages (from-to)339-370
Number of pages32
JournalContemporary Accounting Research
Issue number1
StatePublished - Mar 1 2022


  • audit differences
  • instrumental bias
  • material
  • materiality
  • motivated reasoning
  • perspective taking

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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