Biography
Kathryn Kadous is the Schaefer Chaired Professor of Accounting at Emory University's Goizueta Business School. She served as Director of Graduate Studies and Associate Dean of the Goizueta PhD Programs from 2017-2023. Professor Kadous earned a PhD from the University of Illinois.
Her research considers judgment and decision-making issues in auditing and accounting. Her current research is focused primarily on using psychology theory to improve auditor and investor decision making and on methodological issues in experimental research.
Professor Kadous' research has been published in The Accounting Review, Contemporary Accounting Research, Journal of Accounting Research, Organizational Behavior and Human Decision Processes, The Journal of Behavioral Finance, and Auditing: A Journal of Practice and Theory.
Professor Kadous has extensive editorial experience and currently serves as Senior (Managing) Editor of The Accounting Review. She has held several positions with the American Accounting Association, including President of the Auditing Section.
Education
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BSBA in AccountingCreighton University
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MAS in AccountancyUniversity of Illinois at Urbana-Champaign
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PhD in AccountancyUniversity of Illinois at Urbana-Champaign
Are juries more likely to second-guess auditors under imprecise accounting standards?
U.S. auditors are concerned that less precise accounting standards will cause more second-guessing of their judgments and thus greater legal liability. We report the results of an experiment that tests the validity of this concern. We manipulate the aggressiveness of the client's reporting decision and the precision of the accounting guidance related to the reporting decision. When the client's reporting is conservative, we observe more second-guessing of auditor judgments under the imprecise standard than the precise standard. However, when the auditor allows aggressive client reporting, we observe less tendency toward second-guessing under the imprecise standard. Indeed, rather than being overly harsh, juries appear to be overly lenient when auditors allow aggressive accounting under an imprecise standard. Our results suggest a need for tools to help jurors evaluate auditor judgments under imprecise standards.
How insights from the “new” JDM research can improve auditor judgment: Fundamental research questions and methodological advice
We examine recent developments in judgment and decision-making (JDM) research to provide insight into how two big ideas in this area can be leveraged as overlapping frameworks to examine and improve auditor judgment. The ideas are (1) that human thinking and reasoning can be characterized by a dual-process model and (2) that conscious and nonconscious goals drive cognition. Despite that these ideas are well established in the broader JDM literature and have great promise for improving auditor judgment, we observe minimal use of them in the audit JDM literature. Thus, we briefly outline these ideas, and we develop fundamental, high-level research questions related to audit JDM research that are based on these ideas. Finally, we provide guidance for designing and evaluating experiments that effectively use these frameworks, whether in auditing or other rich decision-making contexts. The frameworks can help researchers improve audit quality by enhancing our understanding of auditors' judgment processes and the factors that influence them, by allowing for new ways of thinking about how to improve auditor judgment, and by suggesting new interventions for improving auditor judgment.
Auditor Mindsets and Audits of Complex Estimates
Auditors experience significant problems auditing complex accounting estimates, and this increasingly puts financial reporting quality at risk. Based on analyses of the specific errors that auditors commit, we propose that auditors need to be able to think more broadly and incorporate information from a variety of sources in order to improve audit quality for these important accounts. We experimentally demonstrate that a deliberative mindset intervention improves auditors’ ability to identify unreasonable estimates by improving their ability to identify and incorporate into their analyses contradictory information from diverse parts of the audit and improving their ability to think critically about the evidence. We perform additional analyses to demonstrate that our intervention improves auditor performance by causing them to think differently rather than simply to work harder. We demonstrate that critical thinking can improve the identification of unreasonable estimates and, in doing so, we provide new directions for addressing audit quality issues.