Discussion of an Experimental Investigation of Auditor-Auditee Interaction Under Ambiguity

Experimental economics studies in auditing typically test for economic forces in multiperson settings and ignore psychological considerations. Behavioral studies in auditing typically test for psychological forces in single-person settings and ignore economic forces. Zimbelman and Waller [1999] (hereafter ZW) manipulate and test for both economic and psychological forces in a multiperson setting. The authors construct an experiment that places auditors in a strategic setting that also subjects them to the psychological force of ambiguity (uncertainty regarding a probability distribution). The auditors respond both to auditees' economic incentives and to ambiguity; auditees also appear to respond to the ambiguity faced by the auditors, although evidence of this effect is weaker. These results show how psychological responses to ambiguity can percolate through a strategic setting, from the auditors (who face ambiguity directly) to the managers (who face the auditors who face ambiguity). The audit setting is a natural one in which to integrate psychological and economic theory. The typical audit environment contains significant ambiguity, and the natural response to such ambiguity (to collect more data than would be predicted by traditional expected-utility theory) has important economic ramifications. The single-person environment of most behavioral studies would fail to capture the complete effects of ambiguity on audit behavior and outcomes, because the likelihood of