Lee Roy Beach University of Arizona
James R. Frederickson Indiana University
In 1984, Waller and Felix proposed a new model for describing how financial auditing decisions are made. Their thesis was that the auditor reaches an opinion about the absence of material error in a set of financial statements through a series of revisions and modifications of his or her knowledge structure. These revisions and modifications are made in light of audit evidence about account balances and about the procedures used by the client to collect and store accounting information. The auditor's knowledge structure both guides the search for and the interpretation of the evidence that modifies it, and the structure's modified form represents the current state of that evidence vis-à-vis the requirements that the client's data and procedures must meet.
The Waller and Felix ( 1984) analysis was quite bold, especially because behavioral accounting has enthusiastically adopted the concepts provided by classical decision theory and the heuristics and biases research ( Ashton, 1982). Their analysis was a profound departure from the established view, but because it rejected the classical view, it lacked a decision model to which it could be tied. Since then, image theory has been developed. What follows is an extension of Waller and Felix's thinking using image theory.____________________