Skeptical Judgments Research Articles

Seeing the Trees: How a Concrete versus Abstract Mindset Improves Performance on Low-Level Assurance Tasks

ABSTRACT Prior research shows that individuals benefit from abstract construals when performing broader high-level assurance tasks. We extend this research by studying the effects of different construal mindsets on skepticism and performance in a low-level assurance task setting. Using a sample of 195 online participants, we find that individuals benefit from concrete (versus abstract) mindsets when performing low-level assurance tasks because concrete construals better allow them to focus on detailed evidence that may contradict client assertions. Specifically, we show that assurance providers who utilize a concrete (abstract) construal mindset when performing a low-level task display better (worse) skeptical judgments and actions. Taken together with findings from past research, our results support the notion that assurance providers should utilize the construal mindset that best matches the characteristics of the task at hand. Exploratory analysis suggests that client retention incentives may moderate the relationship between skeptical judgment and skeptical action in our context. Data Availability: Data are available from the authors upon request.

Behavioral aspects of auditor's professional judgment and professional skepticism

The paper examines the behavioral aspects of auditing in the context of auditor’s independence, auditor’s professional judgment, and professional skepticism. Over the past 50 years, in the researches of foreign scientists, the issues of accounting and auditing have been considered through the theory of behavioral accounting. On the other hand, in the studies of Ukrainian scientists, behavioral accounting in accounting and auditing was almost not considered. The main meaning of the theory of behavioral accounting is not to consider accounting and auditing exclusively in numbers, but to consider that accountants and auditors are people with a specific profession who behave according to their feelings and thoughts. It is customary to consider the concept of behavioral accounting according to the following topics: the influence of accounting information on behavior, management control, audit, ethics. Behavioral aspects of the auditor's independence, which are influenced by an auditor's personal prejudices and the auditor-client relationship, are studied. Auditor’s independence is considered in two dimensions - organizational independence and operational independence. E.g., independent auditors may face the problem of conflicting interests of the public and clients. Behavioral aspects of negotiations between the auditor and the client are also considered. The negotiation tactics used by the participants matter. It can be a yielding tactic, or a tactic of disputes. In particular, in the study of accommodating tactics, it was found that both auditors and clients reciprocated the accommodating negotiation tactics. There are many models of professional skepticism that have been summarized. Nelson and Hurtt's models are considered, the two fundamental components of which are professional skeptical judgment and professional skeptical action. Auditors should exercise professional skepticism, making judgments based on audit evidence without being influenced by clients.

Preliminary Evidence on the Impact of the Felt Presence of Peers on Auditor Skeptical Judgment and Action in a Remote Work Setting

Preliminary Evidence on the Impact of the Felt Presence of Peers on Auditor Skeptical Judgment and Action in a Remote Work Setting

Cognitive dissonance and auditor professional skepticism

PurposeThis study aims to demonstrate how pressures (incentives) in the audit environment can lower audit quality because of a breakdown between professionally skeptical (PS) judgment (risk assessment) and PS action (testing).Design/methodology/approachThe authors used a Qualtrics-based experiment with attitude change as a proxy measure of cognitive dissonance (CD). The authors analyze the results using a one-way independent between-group ANOVA with post hoc tests and t-tests.FindingsThe authors find that auditors experience CD when they fail to take appropriate high PS action (audit tests) that are in line with high PS judgment (risk assessments). The motivational force to reduce CD drives auditors to revise their assessments upward (rank higher), lower diagnostic audit tests (PS actions) and lower risk assessments (PS judgments). This leads to lower overall professional skepticism, and hence lower audit quality.Originality/valueThis investigation provides an empirical investigation of Nelson’s (2009) model of professional skepticism and demonstrates a specific mechanism for how incentives in the audit environment lower audit quality. Based on the findings, treatments to enhance audit quality can benefit by strengthening the critical link between PS judgments (risk assessments) and PS actions (audit tests).

Inconsistent Auditor Responses to Uncooperative Client Manager Behavior: When Skeptical Judgments and Actions Diverge

Inconsistent Auditor Responses to Uncooperative Client Manager Behavior: When Skeptical Judgments and Actions Diverge

Linking skeptical judgment with skeptical action: Consideration of client identification and professional commitment

AbstractWe examine, in an experimental setting, how skeptical judgment translates into skeptical action, the influence of client identification on skeptical judgment, and of professional commitment on the link between judgment and action. We find that skeptical judgment decreases as client identification increases, and that higher professional commitment can improve the association between skeptical judgment and action. Our findings suggest that efforts to strengthen the commitment of auditors may prove beneficial, that different factors may affect judgment and action differently, and that it may be worthwhile to distinguish between skeptical judgment and skeptical action in academic research.

The Effects of Firm Guidance on Auditors' Evaluations of Fair Value Estimates

SUMMARYRegulators are concerned that auditors are insufficiently skeptical in evaluating fair value estimates (PCAOB 2020). We employ Nolder and Kadous's (2018) professional skepticism model to examine how firm guidance impacts auditors' skeptical judgments and actions in the fair value context through their cognitive processing of confirming and conflicting evidence. We find that rewording firm guidance to include either a directional goal instructing them to oppose management's assertions or a bi-directional goal instructing them to support and oppose management's assertions lead auditors to gather more conflicting evidence than a directional goal instructing them to support management's assertions. However, gathering more conflicting evidence does not yield more skeptical actions unless auditors are instructed to support and oppose management's assertions. This is supported by theory suggesting that attending to both confirming and conflicting information forces individuals to reconcile the inconsistent information, enhancing the likelihood that it will be incorporated in their judgments.JEL Classifications: C91; G18; M42.

The Impact of Trait Skepticism and Ego Depletion on Auditor Judgment

ABSTRACTPrior research finds that trait skepticism influences auditors' judgments but that situational variables may interact with trait skepticism. We examine whether ego depletion, an exhaustion of individuals' self-control resources which limits one's ability to vigilantly process information and apply critical thinking, moderates the relationship between trait skepticism and auditor judgment. We contend that when not depleted, auditors' trait skepticism will influence judgment; conversely, when depleted, auditors' trait skepticism will not influence auditors' judgments due to a lack of necessary cognitive resources to vigilantly process information. Rather, depleted auditors are expected to adopt a less cognitively demanding strategy and simply make more skeptical judgments, as they expect this is the more acceptable, safer judgment when accountable. Results from an experiment involving a risk assessment task support our expectations: when not depleted, auditors' judgments are in-line with their trait skepticism but, when depleted, auditors make more skeptical judgments regardless of their trait skepticism.Data Availability: Data are available from the authors upon request.

Effects of Perceived Tournament Promotion Incentives in Audit Firms on citizenship and prosocial behavior: The mediating role of audit quality, skeptical judgment, and cooperation.

Effects of Perceived Tournament Promotion Incentives in Audit Firms on citizenship and prosocial behavior: The mediating role of audit quality, skeptical judgment, and cooperation.

Equity and Amerindians in Montaigne’s “Des cannibales” (1, 31)

Since the first publication of the Essais in Bordeaux in 1580, readers of this work have recognized skepticism underlying the judgment of its author, Michel de Montaigne. Arguing that the Pyrrhonist school of skepticism relies upon cultural diversity, or that Montaigne was influenced by sixteenth-century proto-ethnographic accounts of European travellers to the New World, many scholars of the Essais have read “Des cannibales” (1, 31) as proto-anthropological. In my close reading of this chapter, however, I contend that Montaigne’s rhetorical use of equity, and not his debated practice of a proto-anthropological cultural relativism, shares a special reciprocity with his skeptical judgment in the Essais. Equity, a para-legal procedure that Montaigne used to judge while he was a magistrate in the Bordeaux parlement (1557–70), remains largely underdeveloped in scholarship on the Essais.

How Auditors’ Approach to Client Inquiry May Affect Skeptical Judgment: A Mixed-method Examination of Client Inquiry and Note Taking

ABSTRACT Client inquiry is a foundational financial statement audit procedure. However, the literature offers little evidence regarding how auditors perform client inquiry and how note taking during client inquiry is associated with audit quality. We conduct a mixed-methods study to examine these issues. First, we conduct interviews with seven highly-experienced auditors and five staff auditors to understand current practices regarding client inquiries, as well as evaluating and documenting evidence gathered from client inquiries. These interviews provide a thorough description of inquiry, highlighting that auditors routinely take notes during inquiry but can have difficulty with the interrelated, complex cognitive tasks of asking questions, processing client answers, and taking notes during inquiry. Second, we conduct two experiments to examine the impact of note taking during inquiry on skeptical judgments. Results from both experiments indicate that auditors taking note of more ideas during the inquiry is positively associated with memory accuracy. However, this does not improve skeptical judgments, and may lead to less skeptical judgments. Our second experiment indicates a prompt to develop expectations prior to the inquiry improves identification of inconsistencies in the inquiry, leading to more skeptical judgments. We offer contributions to the academic literature and practice, and suggestions for future research.

Using Cultural Mindsets to Reduce Cross‐National Auditor Judgment Differences

ABSTRACTIn a globalized audit environment, regulators and researchers have expressed concerns about inconsistent audit quality across nations, with a particular emphasis on Chinese audit quality. Prior research suggests Chinese audit quality may be lower than U.S. audit quality due to a weaker institutional environment (e.g., lower litigation and inspection risk) or cultural value differences (e.g., greater deference to authority). In this study, we propose that lower Chinese audit quality could also be due to Chinese auditors' different cognitive processing styles (i.e., cultural mindsets). We find U.S. auditors are more likely to engage in an analytic mindset approach, focusing on a subset of disconfirming information, whereas Chinese auditors are more likely to take a holistic mindset approach, focusing on a balanced set of confirming and disconfirming information. As a result, Chinese auditors make less skeptical judgments compared to U.S. auditors. We then propose an intervention in which we explicitly instruct auditors to consider using both a holistic and an analytic mindset approach when evaluating evidence. We find this intervention minimizes differences between Chinese and U.S. auditors' judgments by shifting Chinese auditors' attention more towards disconfirming evidence, improving their professional skepticism, while not causing U.S. auditors to become less skeptical. Our study contributes to the auditing literature by identifying cultural mindset differences as a causal mechanism underlying lower professional skepticism levels among Chinese auditors compared to U.S. auditors and providing standard setters and firms with a potential solution that can be adapted to improve Chinese auditors' professional skepticism and reduce cross‐national auditor judgment differences.

Getting from Skeptical Judgment to Skeptical Action: A Field Study of Auditor Behavior

Professional skepticism is clearly an important and timely topic in the practice and regulation of auditing. In this paper, we apply Bandura’s self-efficacy construct within Social Cognitive Theory to auditor efficacy and skeptical action in an audit context. This study uses a multiple-interview design to explore the exercise of professional skepticism by experienced auditors. An auditor can be skeptical about the facts and circumstances of a client but may not always manifest that skeptical judgment as skeptical action. We adopt a social constructivist approach applied through a self-efficacy model for auditing to better understand auditors’ experience when considering skeptical action. Our evidence suggests that efficacy expectations associated with skeptical actions are increased by the presence of three primary factors: (1) the support/collectivism within the audit team (consensus), (2) the preparation/homework of the auditor (cognizance), and (3) the quality of the relationship with the client counterpart (consonance). These three themes are further illustrated by specific actions that can be taken by an auditor. The study contributes to our understanding of how auditors make decisions that influence skeptical actions during the course of the audit, the resources and strategies employed to do so, and the motivations that underlie skeptical actions.

Real effects of reporting key audit matters on auditors' judgment and choice of action

This experimental study analyzes whether reporting an accounting estimate as a key audit matter (KAM) can influence auditor judgment about the accounting estimate and the corresponding action. We find that skeptical action in the form of proposed adjustment amounts is significantly lower when the accounting estimate is reported as a KAM. Thus, the disclosure of a KAM can serve as a moral license to waive an adjustment. Taking into account that the KAM disclosure does not affect auditors' skeptical judgments in the form of a reasonableness assessment of the accounting estimate, our results indicate the existence of a judgment–action gap. Furthermore, implicit client pressure does not enlarge the moral licensing effect of the KAM disclosure. We also find evidence that audit effort is not affected by reporting a KAM. Overall, our study contributes to the current debate about the audit reporting model by showing that reporting a KAM might have unintended “real effects” on auditors' actions.

Can Simple Metaphors Be Used as Decision Aids to Promote Professional Skepticism?

ABSTRACTThis study examines the potential for metaphorical priming to promote professional skepticism. Results of an experiment with 99 senior auditors from two Big 4 audit firms indicate that reading metaphors that are entirely unrelated to audit evidence can promote professional skepticism and influence auditors' judgments. Relative to auditor participants who did not read a metaphor, participants who read a metaphor related to concerns about the honesty of the sources of information (client-skeptical metaphor) or concerns about one's own ability to detect problems (self-skeptical metaphor) assessed higher levels of fraud risk. These auditors also perceived that fraud-based explanations were more likely to cause fluctuations in client ratios. Importantly, metaphorical primes improved auditors' fraud-related actions and caused them to focus on issues that were the most likely explanations for the audit evidence. Results suggest that metaphorical priming may represent a powerful and efficient tool for promoting high-quality and professionally skeptical judgments.

Client Data Files and Auditor Skepticism: How Do 'Dirty' Files Influence Auditors’ Skeptical Judgments and Actions?

Auditors receive an abundance of client-prepared data files when performing audit work. With today’s increasingly data-rich environment, these files are likely becoming even more challenging for auditors to cognitively process. Specifically, these data files may have characteristics (e.g., contain errors or irrelevant information; aka “dirty” files) that could challenge their ease of use and interpretation (i.e., processing fluency). Depending on this ease, auditors may view these files as relatively less reliable and trustworthy, resulting in skeptical judgments and actions that are sometimes excessive. This paper reports two experiments examining whether two features of the data files, the presence of minor errors (absent or present) and information load (low or high), influence auditors’ processing fluency, skeptical judgments, and actions. While minor errors should raise auditors’ concerns, greater information load should not. However, we find the lowest processing fluency and highest skeptical judgments and actions when minor errors are present and information load is higher. Our study contributes to the literature by presenting an alternative issue to those raised by regulators (i.e., too much skepticism rather than too little) that can occur when auditors struggle to interpret large amounts of data. From a practical perspective, while access to increased amounts of client data may have benefits, audit firms and clients need to be wary of the potential for wasted time that could create inefficiencies that may affect audit quality.

The Effect of Fraud Risk Assessment Frequency and Fraud Inquiry Timing on Auditors' Skeptical Judgments and Actions

SYNOPSIS Identifying ways to improve and maintain professional skepticism, particularly for the purpose of reducing the risk of material misstatement due to fraud, continues to be a top priority for the auditing profession. This study examines two strategies for improving skeptical behavior in a fraud-related task: (1) practicing inward-directed skepticism through repeated risk assessments and (2) performing timely fraud inquiries of operational-level employees. Results indicate auditors made more skeptical judgments when revisiting and reassessing fraud risk assessments. Further, when auditors performed operational-level fraud inquiries prior to substantive testing, participants exhibited significantly greater increases in skeptical judgment than those who performed inquiries subsequently or not at all. We also observed a greater tendency toward skeptical action, but only on the part of participants who were highly skeptical by nature. These findings support the effectiveness of two strategies for improving skepticism throughout an audit engagement that can improve fraud detection.

Does considering key audit matters affect auditor judgment performance?

This study examines the impact of considering key audit matters (KAM) on auditor judgment performance. This study uses a 2×2 between-subjects experiment based on a goodwill impairment testing case with 73 auditors. The two independent variables KAM consideration (present vs. absent) and client pressure (high vs. low) are manipulated. As dependent variables, skeptical judgment and action as different facets of auditor judgment performance are used. The results suggest that auditors exhibit significantly less skeptical judgment when KAM consideration is present than when KAM consideration is absent. This implies that, when considering KAM, auditors are more willing to acquiesce to their clients’ desired accounting treatments due to moral licensing. By showing that KAM consideration leads to less skeptical judgment, it can be documented that the new KAM reporting requirement, intended to improve the communicative value of the auditor’s report for users (IAASB, 2012), comes at the expense of auditor judgment performance. As in every experiment, the risk that the results are case-specific has to be acknowledged.

Дискуссия о европейском опыте при обсуждении судебной реформы в русской журнальной периодике (1857–1864).

Purpose. Analyzed articles about past and present European of justice, published in the periodical socio-political (“Russian Gerald”, “Domestic notes”, “Contemporary”) and departmental (magazines published by ministries) publications in 1857–1864 in the context of discussions on judicial reform. Results. A total of 43 texts on the past and present of European justice were identified, which belong to 25 authors. The authors identify as professors of low and civil servants. At the heart of their professional worldview was the state-historical school of law, so they revealed through the press its values. Refined of the most discussed topics: the organization of local justice, advocacy and jury. There is a discussion between the supporters of the English and French justice systems, their argumentation is considered. Supporters of the English judicial system argued that England is not as similar to Europe as Russia, so its experience may be interesting. But they stressed that the judicial institutions of England are very closely connected with its specific history and culture. Adherents of the French model of justice found positive its organization, uniformity and high educational level for judicial officials and lawyers. They also pointed out that in the countries of continental Europe, where justice has been reformed in the French model, it is functioning successfully. Proved the dependence between the final orientation of the printing on the French model and the assumption of office of Minister of justice D. N. Zamyatnin. Conclusion. It is emphasized that, in addition to respect for the judicial systems of European countries, there were skeptical judgments about the use of these samples in the Russian Empire.

How Does Intrinsic Motivation Improve Auditor Judgment in Complex Audit Tasks?

ABSTRACTIntrinsic motivation is generally thought to be positively associated with performance on a variety of tasks. However, there is only sparse experimental evidence supporting this idea and we know little about the specific mechanisms behind any effect. We develop theory about how auditors’ intrinsic motivation for their jobs can improve their judgments about complex accounting estimates. We experimentally test whether a prompt to make auditors’ intrinsic motivation for their jobs salient improves the specific information processing behaviors necessary for high‐quality judgments in complex audit tasks. It does: Prompted auditors attend to a broader set of information, process information more deeply, and request more relevant additional evidence. Supplemental analyses show that these processing behaviors mediate between salient intrinsic motivation and an improved ability to identify a biased complex estimate. Our theory and analyses indicate that auditors’ intrinsic motivation for their work provides unique value for improving judgment quality, particularly in the context of performing complex audit tasks. Our study supports the view that high‐quality cognitive processing can improve auditors’ professional skepticism by providing a foundation for skeptical judgments.