Trait Skepticism Research Articles

Using Field-Based Evidence to Understand the Antecedents to Auditors’ Skeptical Actions

SUMMARY We provide field-based evidence on antecedents to auditors’ skeptical actions, with participants including over 600 auditors across all ranks from six audit firms. We evaluate the relative importance of situational, client, and individual auditor characteristics, along with measures of auditors’ cognitive processing in relation to their self-reports of skeptical actions on one of their own audits. We find that the most important antecedents are each audit firm’s overall professional orientation, auditors’ individual feelings of accountability, their trait skepticism, their motivation, and their intentions to behave skeptically. Auditors’ intentions are most influenced by social norms and less influenced by attitudes toward and self-efficacy about behaving skeptically. Other important antecedents include each audit firm’s quality control systems, certain individual auditors’ personality traits, their client-related industry expertise, and their audit knowledge. Our findings support various aspects of prior conceptual models and suggest ways in which audit firms can promote skeptical actions.

How does depletion interact with auditors' skeptical dispositions to affect auditors' challenging of managers in negotiations?

AbstractWe use multiple methods to examine how depletion and auditors' skeptical dispositions interact to affect auditors' challenging of managers in negotiations over financial statement amounts. We expect auditors are likely depleted from effortfully exercising self‐regulation during the busy times when these negotiations occur. Individuals in a depleted state tilt toward natural, less effortful behaviors. Thus, we posit that the effects of depletion will diverge depending on the auditor's skeptical disposition—a determinant of how natural or effortful they will find the skeptical behaviors (e.g., challenging) versus client service behaviors (e.g., maintaining the client relationship and audit efficiency) required for negotiations. We predict that client service auditors (i.e., low skeptics) will challenge managers less in negotiations when depleted versus non‐depleted, while high skeptic auditors will challenge more when depleted. We test this interactive prediction in an abstract experiment where we manipulate depletion and measure auditors' skeptical dispositions using trait skepticism. Findings support our predictions. We also develop a new measure of auditors' client service–skeptic disposition based on the skepticism literature that adds nuance to the traditional lower versus higher skeptic labels. In a second study, interviews with audit partners validate the realism of our depletion and client service–skeptic constructs and corroborate our experimental findings. Our study sheds light on depletion effects in auditors' negotiations with their clients and how the effects differ based on auditor personalities.

The effect of key audit matters reviewing on loan approval decisions?

The existing literature does not provide a definitive statement on whether the inclusion of Key Audit Matters (KAM) in accounting research increases the likelihood of loan approval by bank approvers. This study investigates the combined effects of approvers' trait skepticism, their professional background in accounting and auditing, as well as the familiarity and readability of KAM content, on loan approval probability. The findings indicate that an increased duration spent reading 'How' paragraph enhances the probability of loan approval by approvers. Moreover, this positive correlation is more pronounced for familiar and easily legible content, highly skeptical individuals, and those with expertise in accounting and auditing. These results offer novel insights and research perspectives for KAM while expanding upon the literature concerning factors influencing approvers' loan approvals.

Auditors’ perceptions of alternative performance measures – alternative truths and professional skepticism

ABSTRACT Alternative performance measures (APMs) may increase uncertainty and perceived risks concerning the audit, and rouse the auditor’s professional skepticism (PS), for example in case the APMs and official reporting diverge (e.g. one shows a profit and the other a loss). In this paper, using a survey of Finnish certified public auditors (N = 220), we study how auditors perceive relationships between audit work, PS, and APMs. When examining PS, we use both personal ‘trait skepticism’ and case-specific ‘state skepticism’. Our results show that state skepticism related to APMs can explain skeptical behavior and that it is a separate component from trait skepticism. Both state skepticism and considerations of the usefulness of APMs are helpful in assessing audit evidence and accounting figures. Further, we find that auditors hold various views of APMs and that ‘search for knowledge’ and ‘questioning mind’ are key dimensions of PS in coping with APMs.

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.

Do Tax Professionals Act Like Auditors when Evaluating Tax-Related Audit Evidence?

ABSTRACTThe audit of the financial statement income tax accounts is ultimately the responsibility of the audit engagement team; however, tax professionals are often involved because of their knowledge of the tax functional area. Auditors are expected to exercise professional skepticism and independence when performing audits, while tax professionals are expected to be advocates for their tax clients. This study investigates whether the auditor and/or tax professionals' typical role influences how they evaluate evidence on an audit engagement, especially when provided evidence by individuals with whom they are closely affiliated. Results of an experiment with experienced auditors and tax professionals suggest that despite differing in their trait skepticism and client advocacy attitudes, tax professionals and auditors make similar judgments when in the role of an audit engagement team member. We also find evidence that both auditors and tax professionals are more persuaded by individuals with whom they have a closer affiliation.Data Availability: Data are available from the corresponding author.

The link between trait and state professional skepticism: A review of the literature and a meta‐regression analysis

Motivated by the need to better understand the trait–state skepticism relationship, and also building upon prior literature syntheses, this study examines the literature that empirically investigates the trait–state skepticism relationship using experimental methodology. A meta‐regression analysis is conducted on Pearson correlations between trait skepticism and state skepticism to identify the overall effect and key drivers of this relationship. On average, there is no noticeable effect size for the relation between trait and state skepticisim across the studies; however, there are three key determinants of the correlation across studies mainly (1) the use of the Inverse Rotter trait measure compared to other measures reduces the correlation, (2) the use of graduate auditor samples compared to seasoned professionals intensifies the correlation and (3) the use of a low risk environment in the research design reduces correlation. The review and analysis are timely as the literature re‐examines how professional skepticism is conceptualized and operationalized moving forward.

The Joint Effect of Ethical Idealism and Trait Skepticism on Auditors’ Fraud Detection

Although regulators have identified ethical lapses as a key factor contributing to auditors’ failure to detect their clients’ fraudulent financial reporting (fraud), research using ethical theory to examine auditors’ fraud detection remains limited. We provide evidence on the joint effect of ethical idealism and trait skepticism on auditors’ fraud judgments. Ethical idealism reflects an individual’s concern for the welfare of others while trait skepticism reflects an individual’s disposition to validating a proposition. Forsyth (J Pers Soc Psychol 39:175–184, 1980) theorizes that there is an association between ethical idealism and tolerance for deception. Drawing on that insight, we posit that ethical idealism and trait skepticism have a complementary effect on auditors’ fraud planning performance. This is because the former determines an auditor’s tolerance for allowing a client to get away with an ethically questionable act while the latter is important in determining how evidence is generally sought and evaluated. We used the Forsyth (1980) ethical position questionnaire to measure ethical idealism and the Hurtt (Auditing: A J Pract Theory 29(1):149–171, 2010) scale to measure trait skepticism. Our results indicate that there is a significant positive association between trait skepticism and the number of effective audit procedures but only for auditors who have high ethical idealism. The results highlight the importance of measuring and controlling for the effects of these traits when evaluating fraud detection performance. The paper also contributes by showing that an ethics theory can generate additional understanding of and insights into an important accounting phenomenon.

Audit Partner Trait Skepticism and Going-Concern Reporting Decisions

Audit Partner Trait Skepticism and Going-Concern Reporting Decisions

Fraud Brainstorming Group Composition in Auditing: The Persuasive Power of a Skeptical Minority

ABSTRACT We experimentally examine the effects of trait professional skepticism on fraud brainstorming performance. We find that groups with a minority, but not a majority, of high trait skeptics develop more fraud ideas than control groups with no high trait skeptics. Mediation analyses indicate that minority high trait skeptic groups also assess higher fraud risk, in part because they consider more fraud ideas. Low trait skeptics who brainstorm in groups with a minority of high trait skeptics tend to view the minority high trait skeptic as the best member of the group because of that member's unique insights. Their individual, post-brainstorming fraud risk assessments remain high, indicating conversion to the minority (skeptical) viewpoint. Our study contributes to the brainstorming literature by highlighting the importance of group composition. It suggests that firms can promote skeptical team judgments by leveraging individuals' high trait skepticism in thoughtfully composed interacting groups.

Facilitating the application of auditors’ underlying skeptical disposition

PurposeMotivated by ongoing calls for auditors to exercise an elevated level of professional skepticism, this paper aims to examine the relationship between basic human values (values) and an underlying skeptical disposition (trait skepticism). Understanding the values that are associated with levels of trait skepticism will help in the design of audit environments that make the application of an underlying skeptical disposition more likely.Design/methodology/approachA survey was administered in which 140 postgraduate auditing students responded to the Schwartz value survey to measure the relative importance of different values, and the Hurtt trait skepticism scale to measure trait skepticism. The relative importance of the ten values was regressed against trait skepticism.FindingsThis study finds that the importance placed in the values of tradition and power, relative to other values, is negatively associated with levels of trait skepticism.Research limitations/implicationsThe use of postgraduate auditing students as participants may limit the generalizability of the study’s findings.Practical implicationsQualified by the need for future research to test the generalizability of the findings to an audit practitioner sample, the results of this study suggest that auditors with higher levels of trait skepticism may experience negative affect in environments that emphasize values of power and tradition. To the extent that current audit environments emphasize tradition and power, the results may help explain why trait skepticism is not consistently reflected in audit judgments and actions.Originality/valueThe affective implications of the environment within which auditors exercise professional skepticism is emerging as an important area by which to understand and improve audit quality. By identifying the values that those with a high skeptical disposition place relatively less importance in, this study informs an understanding of the circumstances where an underlying skeptical disposition is more or less likely to be reflected in auditor judgments and actions.

Auditors’ Professional Skepticism: Traits, Behavioral Intentions, and Actions

We integrate existing conceptual models of auditors’ professional skepticism with the Theory of Planned Behavior to develop an empirically testable model that explains the processes underlying the association between trait skepticism and skeptical actions. We use data from a sample of 663 auditors across all ranks who each completed an experiential questionnaire. The results reveal that partners and managers are more skeptical than seniors and staff and that individual differences and personality traits (agreeableness, conscientiousness, openness, narcissism, and psychopathy) are associated with differential levels of trait skepticism. In empirical tests of our conceptual model, we find that trait skepticism is positively associated with attitudes, subjective norms (i.e., social pressure to behave skeptically), and perceived behavioral control over skepticism (i.e., self-efficacy), which in turn affect intentions to act skeptically. Subjective norms are the strongest predictor of intentions. Attitudes, subjective norms, and perceived behavioral control are positively associated with skeptical actions (in terms of evidence collection and evaluation), and intentions to act skeptically positively mediate these associations. Results of testing the associations in our conceptual model do not differ by rank, revealing that antecedents to skeptical action do not differ based upon auditor experience.

Professional Skepticism Traits and Fraud Brainstorming Quality

Auditing standards emphasize that fraud detection is an important objective of an audit and require the exercise of professional skepticism (PS) and a discussion among the engagement team to prevent and detect fraud. The purpose of this study is to examine whether professional skepticism is a driver of fraud brainstorming quality. We investigate the relationship between fraud brainstorming quality, using the measure of Brazel et al. (2010), and auditor’s professional skepticism traits. Using proprietary data from Dutch audit firms on 125 engagements, we find that neutral trait skepticism and professional moral courage of the partner have a significant effect on fraud brainstorming quality. We observe a higher attendance rate and contribution of specialists, more extensive discussion, longer preparation, and longer sessions for engagements led by partners with high neutral trait skepticism and high moral courage. We find no significant results for partners with a high presumptive doubt trait. Additional cross-sectional analyses show that the effect of professional skepticism on FBQ depends on situational, organizational conditions.

Can We Shape Trait Professional Skepticism through University Accounting Programs? Evidence from Polish University

This paper examines whether it is possible to shape trait professional skepticism of accounting students through undergraduate and graduate university programs. Using Hurtt’s Professional Skepticism Scale (HPSS), we surveyed 432 students of the Poznań University of Economics, who follow either one of the accounting programs or the management program. Comparing the mean scores of first-year undergraduates from each program, who have been studying only for two weeks (initial level of skepticism), with the mean scores of the final-year students as proxies for the entry-level auditors (audit assistants), we calculated the change in the mean scores of students’ trait skepticism over four years of study. The results show that only the ACCA-accredited (Association of Chartered Certified Accountants) accounting program significantly increased the level of trait skepticism of the accounting students in comparison to the control group and students who followed the standard accounting program. The robustness analysis shows that independent variables, such as age, the future job that subjects wish to occupy, and the length of professional experience, have no significant impact on the results obtained. However, that both gender and professional experience have a significant impact on the mean scores may be considered as variables supporting the change of professional skepticism within the four years of study.

Examining the Impact of Audit Firms' Use of Skepticism Feedback in Auditor Training

In response to PCAOB concerns about auditors’ professional skepticism, certain international auditing firms instituted a training practice that involves providing feedback on staff auditors’ trait skepticism levels as measured by the Hurtt Professional Skepticism Scale (“HPSS”), coupled with a prompt to increase skepticism if they scored low in trait skepticism. To test the efficacy of the firms’ training approach, we conducted an experiment in which participants responded to the HPSS and, one week later, examined two simulated accounts receivable confirmation exceptions. We varied whether participants receive HPSS score feedback and/or a skepticism prompt. We find that the audit firms' training practice increases skeptical actions and improves skeptical judgment accuracy compared to a control condition. However, separate analyses reveal that score feedback increases skeptical actions without improving skeptical judgment accuracy (i.e., feedback decreases efficiency without an improvement in effectiveness), whereas the prompt to increase skepticism improves skeptical judgment accuracy and does not affect skeptical actions (i.e., the prompt improves effectiveness without reducing efficiency). Further, the HPSS itself does not predict skeptical behavior in our setting, suggesting the score feedback may not be accurate. Together, these findings suggest that skepticism prompts can be effective, but providing trait skepticism score feedback may lead to unintended negative consequences for audit quality.

A Live Simulation-Based Investigation: Interactions with Clients and Their Effect on Audit Judgment and Professional Skepticism

SUMMARYThreats to professional skepticism are embedded in the social relationships and interactions between auditors and management. These can affect auditor skepticism and the extent of audit procedures performed. In this study, we conduct an experiment using live simulation to create a realistic audit setting to investigate the effect of these interactions on professional skepticism. Each participant (n = 49) completed a measure of trait skepticism and conducted an audit interview with a professional actor trained to play the role of a client controller. Findings indicate that, in general, participants who interview a friendly controller (rather than an intimidating controller) are less likely to determine questionable cash disbursements to be control exceptions and less likely to recommend more intensive follow-up. However, consistent with social psychology research on construct accessibility, planned contrasts indicate that participants who score low on trait skepticism are least likely to identify control exceptions and recommend more intensive follow-up when interviewing a friendly controller. This study advances research on professional skepticism by examining the impact that type of social interaction (friendly, intimidating) has on professional skepticism using a methodology (live simulation) that allows us to simulate a realistic audit environment. Use of this methodology increases external validity and generalizability of our findings. As a result, this study corroborates concerns that the social relationships/interactions between management and the auditor can be a threat to professional skepticism, and allows us to understand better how, when, and where these threats occur.

A Person-Situation Approach to the Examination of Professional Skepticism: Consideration of Time Pressure and Goal Framing

Regulators believe increased skepticism improves audit quality (e.g., PCAOB 2011; Frazel 2013), and a lack of skepticism contributes to audit deficiencies (e.g., Doty 2011a, 2011b; PCAOB 2012). Therefore, in order to achieve as great a level of professional skepticism as appropriate in each audit situation, it is important to more thoroughly understand the various influences on skepticism. While prior research suggests personality traits and state (situational) factors influence professional skepticism (e.g., Hurtt 2010; Nelson 2009), this literature tends to focus on either skepticism as a trait (e.g., Hurtt 2010) or state factors that influence skeptical behavior (e.g., Bowlin et al. 2012), rather than viewing state skepticism as a separate component of the attitude of skepticism. In our experiment using professional auditors, we measure and disentangle the trait and state components of professional skepticism, and examine the influence of both on auditor behavior. Furthermore, we examine whether two situational factors, time pressure and goal framing, affect state skepticism. We find that auditors higher in state professional skepticism display a higher level of skeptical behavior, and that an increase in state skepticism has a greater effect on auditors with low trait skepticism than high trait skepticism. We also find a positive relationship between time pressure and state skepticism. We offer conclusions for practice and research.

Professional Skepticism and Auditor Judgment: Does Trait Skepticism Mitigate the Recency Bias?

In two experiments with experienced auditors, we examine whether and how trait skepticism mitigates the tendency to place a greater emphasis on the most recently presented information, the so-called recency bias. We measure trait skepticism using the Hurtt scale (Hurtt 2010), manipulate information order, and vary presentation mode across two experiments. When information is presented sequentially (experiment 1), we find that auditors who score higher on the subconstructs of trait skepticism related to evidence examination are less likely to overweight contrasting evidence and thus are less prone to the recency bias. When information is presented simultaneously and the task is complex (experiment 2), we observe that auditors with higher trait skepticism exhibit higher cognitive effort which mitigates the recency bias. Our main contribution is the identification and detailed investigation of trait skepticism as a factor mitigating the recency bias, thereby providing evidence for its behavioral manifestation.

Are 'Good' Auditors Impacted More by Depletion? Limitations of Trait Skepticism and Professional Identity

Despite regulatory and audit firm initiatives, the PCAOB continues to identify a high rate of audit deficiencies. We identify depletion as a pervasive threat to auditor effectiveness and therefore as one potential root cause to help explain audit deficiencies. Depletion is a widespread phenomenon that harms performance, causing reduced effort and lower quality judgments. Essentially, depletion arises when individuals use resources for one action involving self-regulation and then their limited resources are depleted when performing subsequent actions that require self-regulation resources (e.g., complex audit tasks). We develop new theory that depletion impairs individuals’ performance in complex audit tasks, especially for “good” auditors (those who work harder via inherent attributes). We conduct two experiments examining how depletion interacts with two examples of these auditor attributes — professional identity and trait skepticism. Consistent with predictions, results show that the positive effects of each attribute on performance dissipate when individuals are depleted. Process-based analysis further reveals that depletion erodes (and even reverses) the benefits of these attributes by inhibiting individuals’ effort, which impacts performance. These findings help explain why “good” auditors sometimes fail to provide effective audits and answer regulator calls to identify threats to auditor attributes that impact the quality of audits.

An Empirical Investigation of the Relationship between Professional Skepticism, Trust Level and Audit Skeptical Judgments and Decisions

We used a survey to investigate whether accounting students’ trait professional skepticism, assessed by the Hurtt Professional Skepticism Scale (HPSS), relate to personality dimensions and facets, in particular their trust, as assessed by the Revised NEO Personality Inventory (NEO PI-R1). We then investigated how levels of trait skepticism as measured by these two instruments (the HPSS and NEO PI-R) are associated with accounting students’ skeptical judgments and decisions. The results showed that auditors’ skeptical judgments (what they think they will do) were significantly associated with the students’ trait skepticism as assessed by HPSS, but was not associated with whether the student was generally suspicious or trustful of people as assessed by NEO PI-R. By contrast, HPSS trait skepticism did not contribute to an understanding of the students’ skeptical decision (what they actually do). This was more closely related to student’s reports on the NEO PI-R Trust facet. Taken together, our findings suggest that being highly skeptical may be beneficial to the audit decisions quality.