The Influence of Accountability on Professional Skepticism

Abstract

Professional skepticism (PS) is an important component of the auditor’s mindset and exercising appropriate PS is an essential characteristic of a quality auditor. However, the Public Company Accounting Oversight Board (PCAOB) suggests that auditors may not be consistently or diligently applying PS. While existing literature (Hurtt, Brown-Liburd, Earley, and Krishnamoorthy 2013) suggests that PS can be affected by various internal and external factors, the question arises regarding how PS is currently being operationalized and employed in practice. We employ an in-depth survey using both quantitative and qualitative questions to elicit perceptions of numerous factors promoting or inhibiting PS. We examine responses from 77 auditors of varying experience to gain insight into multiple sources of accountability and their perceived effects on auditor skepticism. To follow up on the survey findings in greater depth, we also conduct ten interviews with current or former partners and senior managers. Results indicate that professionals believe PS is a necessary but not sufficient condition for being an effective auditor. Our data suggest that sources of accountability that hold auditors accountable for quality (PCAOB inspections and workpaper review) promote auditor skepticism. Conversely, sources of accountability that hold auditors accountable for defensibility and profitability (time budget pressure and excessive documentation) may attenuate an auditor’s PS. We present implications for research and practice.