Nationality and differences in auditor risk assessment: A research note with experimental evidence Ed O’Donnell a, * , Jenice Prather-Kinsey b a School of Accountancy, Southern Illinois University, Carbondale, IL, United States b School of Accountancy, University of Missouri, Columbia, MO, United States article info abstract This study examines whether auditors from different countries come to different conclu- sions when they perform analytical procedures to assess the risk of misstatement in accounts. During a laboratory experiment, auditors who worked for the same firm in the United Kingdom, France, and the United States performed analytical procedures on identi- cal case materials. Although auditors from all three countries came to similar conclusions about the overall risk of misstatement, they attributed risk differently across the individual financial statement accounts they evaluated. Ó 2010 Elsevier Ltd. All rights reserved. Introduction People of different nationalities develop different ‘‘software of the mind” for decision making and, as a result, often come to different conclusions after evaluating the same information (Hofstede, 2001). Professional standards describe the types of information that auditors should evaluate when they form conclusions about risk, and audi- tors rely on their risk assessments when planning the auditing procedures they will perform to test financial statement accounts (IFAC, 2008, ISA 315). If nationality changes conclusions about risk that auditors develop when evaluating a common set of information, then programs of audit tests may not be consistent from one country to the next, even when those programs have been developed by auditors from the same firm. Differences in the way that auditors evaluate patterns of fluctuations in accounts explain a significant portion of variations in the way auditors attribute risk to individual accounts (Bedard & Biggs, 1991). Auditors’ predisposition for grouping information into causal patterns influences the way they attribute misstatement risk to related accounts (Hammersley, 2006). Because research suggests that nationality fosters a predisposition for evaluating accounting information in ways that often differ between countries (Chanchani & MacGregor, 1999; Doupnik & Tsakumis, 2004), we suggest that nationality could influence auditor judgment about the likelihood of mis- statement for individual accounts by changing the strategy auditors use to assess risks. This study examines whether auditors from different countries respond differently to a pattern of inconsistent fluctuations in accounts when they assess misstatement risk during the planning phase of an assurance engage- ment. Audit firms have developed uniform audit method- ologies intended to produce consistent conclusions about audit evidence regardless of nationality (Allen, Hermanson, Kozloski, & Ramsay, 2006; Bell, Peecher, & Solomon, 2005; Knechel, 2007). If nationality alters decisions based on the same accounting information, then mandating uniform audit methodologies may not lead to consistent conclu- sions about audit evidence across national boundaries. If so, audit firms may want to re-evaluate whether uniform audit methodologies encourage global consistency in audi- tor judgment. In the following paragraphs we explain why we expect to find an association between nationality and the way auditors reach conclusions based on audit evidence. 0361-3682/$ - see front matter Ó 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.aos.2010.01.003 * Corresponding author. Tel.: +1 618 453 1497. E-mail address: edodonnell@siu.edu (E. O’Donnell). Accounting, Organizations and Society 35 (2010) 558–564 Contents lists available at ScienceDirect Accounting, Organizations and Society journal homepage: www.elsevier.com/locate/aos