We conduct an experiment in which we assign 94 senior-level auditors
from three Big 4 firms to one of three mindset conditions (deliberative,
implemental, or control) and ask them to audit a client’s step-one analysis
of a goodwill impairment test.1,2 In our case, the client concluded that
the calculated fair value of its business unit exceeds book value, and, thus,
no goodwill impairment has occurred. However, the case contains seeded
errors and inconsistencies among certain assumptions that imply the stepone
analysis is biased and overstates the fair value. Consequently, goodwill
is likely impaired. We expect that auditors in a deliberative mindset will be
more critical of the client’s fair value analysis than auditors in other conditions
because they will be more likely to identify the seeded issues and use
the contradictory information in making their judgments.