Download or read book Auditor Inability to Use Professional Skepticism written by Tiffany D. Schuster and published by . This book was released on 2021 with total page 204 pages. Available in PDF, EPUB and Kindle. Book excerpt: This qualitative study sought to understand challenges to Louisville, Kentucky Certified Public Accounting firms and the development of auditor professional skepticism. The research considered the problem of the lack of professional skepticism and the importance of the skill in the auditor's role. The study focused on three levels of auditing roles, their experience in auditing, education levels, and overall experience in their current role. The research methodology was a single case study design and interviewed participants through gaining insight from their experiences in the auditing field, and the challenges faced. The research deepened the understanding of problems and contributing factors for professional skepticism development and identified potential solutions.

Download or read book The Influence of Information Order Effects and Trait Professional Skepticism on Auditors Belief Revisions written by Kristina Yankova and published by Springer. This book was released on 2015-02-10 with total page 321 pages. Available in PDF, EPUB and Kindle. Book excerpt: Kristina Yankova addresses the question of what role professional skepticism plays in the context of cognitive biases (the so-called information order effects) in auditor judgment. Professional skepticism is a fundamental concept in auditing. Despite its immense importance to audit practice and the voluminous literature on this issue, professional skepticism is a topic which still involves more questions than answers. The work provides important theoretical and empirical insights into the behavioral implications of professional skepticism in auditing.

Download or read book An Examination of Issues Related to Professional Skepticism in Auditing written by Erin Burrell Nickell and published by . This book was released on 2012 with total page 75 pages. Available in PDF, EPUB and Kindle. Book excerpt: The third general standard of fieldwork requires auditors to maintain a skeptical mindset with regards to the collection and critical assessment of audit evidence. While professional skepticism is frequently referenced by professional standards, a lack of precision in defining the concept presumably leads to variation in how skepticism is exercised in practice. Drawing on theories from the fields of psychology, economics and organizational justice, this dissertation considers different perspectives of what constitutes sufficient professional skepticism and examines how those perspectives differ between audit practitioners and regulators. First, I consider competing perspectives of professional skepticism--neutral versus presumptive doubt--and whether asking auditors to adopt alternative perspectives of skepticism may have implications for audit efficiency and effectiveness. While, too little skepticism may endanger audit effectiveness and lead to audit failure or enforcement action, too much skepticism may arguably lead to unnecessary costs and inefficiency. Second, I consider whether the nature of the auditor-client relationship threatens an auditor's ability to maintain an attitude of professional skepticism. For example, theoretical perspectives from the fields of psychology and economics suggest that auditors may, consciously or unconsciously, be less skeptical of clients with whom they have developed close, positive working relationships or financial dependencies. More specifically, I consider whether skeptical behavior is impeded by management who display low-risk attitudes towards fraud or by client's who are considered to be highly important to the profitability of the local office. Finally, I examine how professional skepticism is defined from a regulator's perspective. When a public company is accused of fraudulent financial reporting, regulators may determine that the audit performed on the fraudulent financial statements was deficient. Prior research has suggested that in such cases, insufficient skepticism is often a leading cause of alleged audit failure. Within a fairness theory framework, this study examines enforcement actions against auditors between 1999 and 2009, and identifies certain factors that are associated with a citation for a lack of professional skepticism. Overall, results suggest that regulators approach the issue by determining whether auditors should have been more skeptical. Factors found to affect this determination include whether the auditor was perceived as having been aware of an elevated risk of fraud or whether the client was accused of having provided the auditor with false or misleading information during the course of their investigation.

Download or read book A Study of Professional Skepticism written by Carmen Olsen and published by Springer. This book was released on 2017-01-31 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book describes how auditors exercise different levels of professional skepticism and how they are exposed to different types of affective information on clients’ behavior. Based on the author’s empirical study of 56 auditors, it shows that auditors’ skepticism and affective reactions towards a client interact to influence their appraisal of valuation problems. It also suggests that the effects of auditors’ affective reactions on their skeptical judgments depend on the level of risk in the audit engagement.

Download or read book The Influence of Information Order Effects and Trait Professional Skepticism on Auditors Belief Revisions written by Kristina Yankova and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Kristina Yankova addresses the question of what role professional skepticism plays in the context of cognitive biases (the so-called information order effects) in auditor judgment. Professional skepticism is a fundamental concept in auditing. Despite its immense importance to audit practice and the voluminous literature on this issue, professional skepticism is a topic which still involves more questions than answers. The work provides important theoretical and empirical insights into the behavioral implications of professional skepticism in auditing. Contents Belief Revision and Information Order Effects Professional Skepticism Empirical Analysis Target Groups Researchers and students in the fields of accounting and auditing Practitioners in these areas The Author Dr. Kristina Yankova completed her doctoral studies under the guidance of Prof. Dr. Annette Köhler at the Chair of Accounting and Auditing at the Mercator School of Management, University of Duisburg-Essen.

Download or read book A Model and Literature Review of Professional Skepticism in Auditing written by Mark W. Nelson and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews research that examines professional skepticism (hereafter, PS) in auditing. Consistent with much research and with recent regulatory concerns, the paper defines PS as ''indicated by auditor judgments and decisions that reflect a heightened assessment of the risk that an assertion is incorrect, conditional on the information available to the auditor.'' In many circumstances the assertion in question will be a client's assertion that the financial statements are free of material misstatement, but the definition could apply to other assertions as well (e.g., attesting to the effectiveness of a client's internal controls). This definition reflects more of a ''presumptive doubt'' than a ''neutral'' view of PS, implying that auditors who exhibit high PS are auditors who need relatively more persuasive evidence (in terms of quality and or quantity) to be convinced that an assertion is correct. Depending on how an auditor's decisions are evaluated, it is possible under this definition for an auditor to exhibit too much PS, in that they could design overly inefficient and expensive audits.

Download or read book Promoting Professional Skepticism in the Audit Environment written by Mary C. Parlee and published by . This book was released on 2015 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The objective of this dissertation is to examine professional skepticism in the audit environment and identify methods to promote professional skepticism in an overall effort to improve auditor judgment and decision making. This dissertation is made up of three studies, and each study’s purpose, methodology, and findings are summarized below.

Download or read book Government Auditing Standards 2018 Revision written by United States Government Accountability Office and published by Lulu.com. This book was released on 2019-03-24 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt: Audits provide essential accountability and transparency over government programs. Given the current challenges facing governments and their programs, the oversight provided through auditing is more critical than ever. Government auditing provides the objective analysis and information needed to make the decisions necessary to help create a better future. The professional standards presented in this 2018 revision of Government Auditing Standards (known as the Yellow Book) provide a framework for performing high-quality audit work with competence, integrity, objectivity, and independence to provide accountability and to help improve government operations and services. These standards, commonly referred to as generally accepted government auditing standards (GAGAS), provide the foundation for government auditors to lead by example in the areas of independence, transparency, accountability, and quality through the audit process. This revision contains major changes from, and supersedes, the 2011 revision.

Download or read book Auditors Professional Skepticism written by Luc Quadackers and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Although skepticism is widely viewed as essential to audit quality, there is a debate about what form is optimal. The two prevailing perspectives that have surfaced are 'neutrality' and 'presumptive doubt'. With neutrality, auditors neither believe nor disbelieve client management. With presumptive doubt, auditors assume some level of dishonesty by management, unless evidence indicates otherwise. The purpose of this study is to examine which of these perspectives is most descriptive of auditors' skeptical judgments and decisions, in higher and lower control environment risk settings. This issue is important, since there is a lack of empirical evidence as to which perspective is optimal in addressing client risks. An experimental study is conducted involving a sample of 96 auditors from one of the Big 4 auditing firms in the Netherlands, with experience ranging from senior to partner. One of the skepticism measures is reflective of neutrality (the Hurtt Professional Skepticism Scale - HPSS) whereas the other reflects presumptive doubt (the inverse of the Rotter Interpersonal Trust scale - RIT). The findings suggest that the presumptive doubt perspective of professional skepticism is more predictive of auditor skeptical judgments and decisions than neutrality, particularly in higher risk settings. Since auditing standards prescribe greater skepticism in higher risk settings, the findings support the appropriateness of a presumptive doubt perspective and have important implications for auditor recruitment and training, guidance in audit tools, and future research.

Download or read book Cognitive Dissonance and Auditor Professional Skepticism written by Ruwan K.B. Adikaram and published by . This book was released on 2016 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt: I show that auditors experience cognitive dissonance when they fail to take appropriate professionally skeptical (hereafter PS) action in line with high PS judgment. I specifically show that cognitive dissonance leads auditors to revise their attitudes on low ranking audit actions upward and lower their risk assessments, consequently, lower overall professional skepticism. I also find that auditor cognitive dissonance leads to exaggerated ex-post auditor self-assessments professional skepticism. Professional skepticism is fundamental to performing an audit according to auditing standards and critical to audit quality. Extant research that investigates treatments to enhance professional skepticism predominantly treats both skeptical judgment and skeptical action as analogous outcomes of professional skepticism. If, however, there is a breakdown between PS judgment and PS action, the overall benefits of these treatments will be trivial. I show that cognitive dissonance due to the incongruence between PS judgments and PS actions leads to an unforeseeable corollary of lower overall professional skepticism. I also demonstrate a specific mechanism of how auditor incentives lead to lower professional skepticism, hence, lower audit quality. Both researchers and practitioners can benefit from this study by better understating the intricacies in the critical link between PS judgment and action. Additionally, I provide an empirical investigation of the components in Nelson's (2009) model of professional skepticism and extend the model to reflect the intricacies between PS judgment and PS action. I test my hypotheses via a three-group research design with attitude change as a proxy measure of cognitive dissonance.

Download or read book The Role of Professional Skepticism Attitudes and Emotions on Auditor s Judgments written by Christine J. Nolder and published by . This book was released on 2012 with total page 280 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Professional Skepticism and Fraud Risk Assessment An Internal Auditing Perspective written by Porschia C. Nkansa and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation focuses on examining the professional skepticism of internal auditors related to fraud risk assessment and environmental characteristics. The dissertation is comprised of three separate studies but the overall research question that is addressed is: How do certain environmental pressures affect the professional judgment (in this case, fraud risk assessment) and skeptical actions of internal auditors? The specific environmental factors examined in this dissertation are: (1) the level of coordination with external auditors, (2) a perceived conflict with legal counsel, and (3) the Chief Audit Executive's emphasis on professional skepticism. Each study consists of case materials (adapted from previous studies) with three parts: a fraud risk assessment, an indication of skeptical action, and personality trait questionnaires (including a professional skepticism scale). The results of this dissertation will be useful to audit committees, boards of directors, chief audit executives, corporate managers, external auditors, and regulators. The purpose of the first study is to investigate how the level of coordination with the external auditor affects internal auditors' fraud-related actions. Planned audit hours are the measure of skeptical action in this study. Prior research suggests that accountability strength influences auditor effort. The effect of external auditor coordination on internal auditors' planned audit hours has important implications for efficiency and perceived accountability to external stakeholders. Regulators and stakeholder organizations have encouraged more collaboration between external and internal auditors to improve efficiency and fraud detection. An experiment is conducted with 112 internal auditors to examine the theorized effects. The study uses a 2 x 2 between-subjects design and manipulates fraud risk (low or high) and external auditor coordination (low or high). Consistent with predictions, I find that internal auditors increase planned audit hours when fraud risk is high and that coordination moderates the relationship between fraud risk and hours. The results illustrate that although high external auditor coordination decreases internal auditors' hours (reflecting efficiency), internal auditors are more sensitive to responding to fraud risk when coordination is high (reflecting accountability).

Download or read book Do superstar CEOs Impair Auditors Independence and Professional Skepticism written by Oscar Harvin and published by . This book was released on 2016 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: The study examines the potential threat to an auditor's independence in fact which may result from the extraordinarily favorable personal reputation (superstar status) of an audit client's CEO. This potential threat to an auditors' independence is the result of a halo effect bias which can distort an individual's judgment and behavior. Accounting firms use a business risk audit approach which involves conducting a strategic risk assessment which assesses the overall threats to the business model of an audit client. Prior research has demonstrated that the strategic risk assessment can bias the judgment of auditors pertaining to financial account level risk assessments. For example, the Bernie Madoff Ponzi scheme demonstrated how an extraordinarily well respected individual with superstar status can distort the judgment of knowledgeable and normally skeptical individuals. An experiment was conducted to examine the potential threat of a superstar CEO on an auditor's independence as demonstrated by the ability to distort the judgment of the auditor during the performance of the strategic risk assessment. In addition, the experiment was designed to examine whether the halo cognitive bias can lessen the impact that an auditor's professional skepticism has on his or her judgment and behavior during the audit of a client's financial statement. Unlike other studies which have sought only to demonstrate that a cognitive bias exist which impairs auditor judgment; the study also examined whether the influence of a halo effect bias can be mitigated by the formal rating of audit evidence in a similar manner that was used by Embu and Finley (1977) to successfully mitigate a framing effect. The experiment did not support the main hypothesis of the study that auditors assess the strategic risk at a lower risk level for firms that employ a superstar CEO than for those whom employ a non-superstar CEO. This result may primarily be due to the inability of the scenario used in the experiment to sufficiently differentiate the characteristics of the superstar and non-superstar CEO. Without establishing that the participants' judgment was being distorted by a superstar CEO; the other hypotheses which involved testing a debiasing method to mitigate the halo effect caused by a superstar CEO and investigating whether a halo effect reduces the impact that auditors' trait skepticism level has on their judgment could not be properly tested.

Download or read book Encouraging Professional Skepticism in the Industry Specialization Era a Dual process Model and an Experimental Test written by Jonathan H. Grenier and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I develop a framework that elucidates how the primary target of auditors0́9 professional skepticism 0́3 audit evidence or their own judgment and decision making 0́3 interacts with other factors to affect auditors0́9 professional judgments. As an initial test of the framework, I conduct an experiment that examines how the target of auditors0́9 skepticism and industry specialization jointly affect auditors0́9 judgments. When working inside their specialization, auditors make more automatic, intuitive judgments. Automaticity naturally manifests for industry specialists as a result of industry experience, social norms to appear knowledgeable and decisive, and their own expectations to proficiently interpret audit evidence. Priming industry specialists to be skeptical of audit evidence, therefore, has little influence on their judgments. In contrast, priming such auditors to be skeptical of their otherwise automated, intuitive judgment and decision making substantially alters their decision processing. They begin to question what they do and do not know, in an epistemological sense and, as a result, elevate their overall concern about material misstatements due to well-concealed fraud. This pattern of results is consistent with my framework0́9s predictions and suggests that specialization is more about improving the interpretation and assimilation of domain evidence rather than enhancing reflective, self-critical thinking. It also suggests it would be beneficial to identify other factors that promote industry specialists0́9 skepticism towards their judgment and decision making to make them more circumspect about the possibility of management fraud (cf., Bell, Peecher, and Solomon 2005).

Download or read book What Personality Traits Make Auditors Professionally Skeptical Opportunities for Future Research on Trait Professional Skepticism written by Carmen Olsen and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is unclear what personality traits determine the enduring trait of professional skepticism among auditors. Examining determinants of professional skepticism may be important to the profession in recruitment, evaluation and team-building activities and ultimately as an element in the documentation of professional skepticism in audit firms' methodologies. This paper examines what personality traits are associated with an auditors' trait professional skepticism. Eighty-three Norwegian master-level accounting students with an average of one year of audit experience responded to items in two instruments; one instrument assesses trait professional skepticism using the multidimensional Hurtt Professional Skepticism Scale. The other instrument, the Revised NEO Personality Inventory, measures all traits associated with the personality of participants. We gathered rich data comprising 42 measurements of our participants' personalities; seven scores measuring various dimensions of trait professional skepticism and 35 scores measuring general personality traits including that of trust. We expect the trait of trust to be associated with the trait of professional skepticism. Surprisingly, the results suggest that personality traits that make auditors professionally skeptical comprise far more complex and diverse personality traits (e.g., being both extroverted and reserved, both sympathetic and distrustful, and a tendency to experience emotional reactions) than initially thought (i.e., in addition to curiosity, conscientiousness, extraversion and trust). More surprisingly, the “questioning mind” dimension of trait professional skepticism was associated not with the opposite of trust, as initially conceptualized, but rather with frankness, no reluctance to express anger, and competence to deal with any situation. We extend professional skepticism theory by mapping the determinants of trait professional skepticism dimensions which audit firms can use for recruitment and team-building purposes. Finally, we suggest opportunities for future research on professional skepticism.

Download or read book The Role of Behavioral Mindsets on Auditors Professional Skepticism written by J. Owen Brown and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Auditing standards require auditors to maintain a skeptical mindset throughout an audit. However, research indicates that mindsets are flexible such that cognitive procedures (e.g., bolstering or providing counterarguments) activated when performing a particular task can carryover and influence subsequent task performance. We examine whether natural features within the audit environment, such as routine planning tasks, can create a mindset that influences evidence evaluation and skeptical judgments in a second, unrelated audit task. In an experiment, auditors who developed a counterarguing mindset during a planning meeting and subsequently evaluated internal control evidence potentially indicative of a significant deficiency (moderate severity) were more skeptical of management's explanation for the control deficiency and rated the deficiency more severe than auditors who initially developed a bolstering mindset. This effect diminished when the severity rose to potentially indicate a material weakness (high severity), as there were no differences in ICFR assessments between auditors who developed a counterarguing or a bolstering mindset. Path analyses confirm that the moderate severity condition processed client persuasive communications by utilizing a strategy consistent with previously developed mindsets which, in turn, influenced ICFR assessments. The high severity condition, instead, followed a content-focused processing strategy that focused on items indicative of increased risk which was invariant to the mindset condition. Thus, the flexibility of auditor mindsets can impact professional skepticism and have efficiency and effectiveness consequences under certain conditions. These results have implications for audit training and for improving regulators' understanding of why auditors do not always exhibit adequate skepticism.

Download or read book The Outcome Effect and Professional Skepticism written by Joseph F. Brazel and published by . This book was released on 2016 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite the importance placed on professional skepticism by the accounting profession and regulators, the failure of auditors to exercise an appropriate level of skepticism continues to be a global issue. We experimentally test a potential barrier to skepticism. We find that outcome knowledge biases supervisors' evaluations of skeptical behavior. Holding a staff member's skeptical judgments and acts constant, superiors on the engagement team evaluate the staff's skeptical behavior based on whether the staff's investigation of an issue ultimately identifies a misstatement. Our evidence suggests that evaluators penalize auditors who employ an appropriate level of skepticism, but do not identify a misstatement. Although consultation with their superior while exercising skepticism improved staff auditors' performance evaluations, consultation did not effectively mitigate the outcome effect on their evaluations. Last, we observe that auditors in the field anticipate that their superiors will be influenced by outcome knowledge when they evaluate their skeptical behavior. Collectively, our results depict an evaluation system that may inadvertently discourage skepticism amongst auditors in the field.