The Outcome Effect and Professional Skepticism: A Replication and an Attempt at Mitigation

Abstract

In this research note, we replicate Brazel, Jackson, Schaefer, and Stewart’s (2016) study of how auditors evaluate skeptical behavior. Like the original study, we find that evaluators reward audit staff who exercise appropriate levels of skepticism and identify a misstatement (positive outcome). However, when no misstatement is identified (negative outcome), evaluators penalize staff who exercise appropriate levels of skepticism. One factor causing this outcome effect may be that exercising skepticism typically causes budget overages due to additional testing. Hence, we examine whether formally attributing the budget overage to skeptical judgments and actions in the audit budget file reduces outcome effects. However, while replicating the initial effect across three separate studies, we have been unable to reduce this effect. Thus, it is clear that the outcome effect in this context is very robust.