Determining the individual microeconomic demand for continuous online assurance given specific types of decisions

The accounting profession is studying the viability of a new potential assurance service, continuous auditing (continuous online assurance [COA]). The ability to begin developing COA as a professional service is due to the proliferation of information technology, which has provided more timely information, as well as the potential for more timely assurance. The purpose of this study is to investigate the relative demand for COA by individual decision-makers given specific types of decision-making situations. This study provides a framework based on the information hypothesis and information microeconomics for explaining the demand for COA when making individual repetitive decisions. Using an experimental methodology, five decision aspects are studied: (1) the level of precision in the COA report, (2) choice versus judgment decisions, (3) the level of similarity or dissimilarity of options when making choice decisions, (4) the number of decision criteria and (5) the benefit/penalty to be earned/incurred from making decisions. Markets are developed and compared to determine which situations have relatively more significant and consistent demand for COA.

Results indicate that (1) more precise COA reports are significantly demanded more than less precise COA reports when an equal economic benefit can be obtained from either option, (2) COA demand is significantly greater and more consistent for judgment decisions than choice decisions, (3) while no significant difference in COA demand is found for choice decisions based on the similarity/dissimilarity of options. COA purchase patterns differ with changes in the similarity/dissimilarity of options, (4) COA demand is significantly greater and more consistent with an increase in the number of decision criteria when making judgment decisions, but only more consistent when making choice decisions, (5) no significant difference is found in the level or consistency of COA demand with an increase in reward/penalty to be earned/incurred, whether the decisions are judgment or choice in nature. Based on the results, because judgment decisions are more indicative of internal decisions and choice decisions are more indicative of external decisions to an organization, the accounting profession should first develop COA towards meeting the needs of internal decision-makers.