This paper reports on an experiment that investigates auditors' abilities to assess expectation precision and incorporate their assessments into judgments related to substantive analytical procedures, as required by professional standards. Auditors appear sensitive to both account predictability and level of information detail in assessing expectation precision overall; however, their assessments do not reflect differences in level of detail when the account is less predictable. This finding supports regulators' and prior researchers' calls for additional guidance to assist auditors in forming expectations that consider the nature of the account. We also find that auditors judge the level of assurance from analytical procedures consistent with their precision assessments. However, in contrast to guidance specified in professional standards, we find that auditors do not always incorporate their precision assessments into judgments about the range of possible differences between expected and recorded amounts, nor the likelihood of misstatement causes. Failing to do so may lead auditors to make important decision errors.
