The influence of professional identity and outcome knowledge on professional judgment

In response to the release of one of its Public Company Accounting Oversight Board
(PCAOB or Board) inspection reports, Deloitte notes that “[p]rofessional judgments of
reasonable and highly competent people may differ as to the nature and extent of
necessary auditing procedures, conclusions reached and required documentation”
(PCAOB, 2008, 30). Other responses to PCAOB findings echo this sentiment.
Stakeholders need to understand causes of differences between experts’ professional
judgments to effectively utilize PCAOB inspection findings and firms’ responses to those
findings. This study uses Social Identity Theory to explore whether role identity as an
audit partner, internal reviewer, or PCAOB inspector, influences an expert’s judgments in
an ambiguous decision environment. I find that professional judgments do not differ
based on professional identity. This study also examines whether the presence or absence
of outcome knowledge explains judgment differences among auditing experts. Consistent
with prior research, e.g. Peecher & Piercey, 2008, outcome knowledge does affect experts’ professional judgment. I also find that experts’ level of organizational identification and membership esteem impacts professional judgment.