This study provides evidence on how decision aid use affects auditor judgment in fraud risk assessment. Specifically, I examine the nature of the relation between decision aid use and auditors' susceptibility to dilution, an information processing bias where non-predictive cues "water down" or dilute the predictive value of diagnostic cues.; In a fraud risk assessment task, dilution is believed to occur when an auditor mis-classifies irrelevant characteristics as relevant characteristics inconsistent with fraud. Incorporating these irrelevant factors ultimately reduces fraud risk assessment. Because use of a decision aid could encourage auditors to adopt a similarity-based inference process that fails to properly distinguish the relevant from the irrelevant, I predict that auditors using a decision aid would exhibit more dilution than auditors making unaided judgments.; This prediction is tested in a between-subjects experiment where 149 supervising senior auditors were asked to assess fraud risk after reviewing a brief case describing a hypothetical client. Results indicate that use of a decision aid exacerbated dilution. Decision-aided auditors had lower assessments than their counterparts making unaided judgments.; The implications to audit practice are significant. This study suggests that audit firms may be exposing themselves to greater levels of legal liability as a result of using decision aids that may increase the risk of not detecting frauds.
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