That the professional scepticism of novice auditors

This preview shows page 46 - 48 out of 51 pages.

that the professional scepticism of novice auditors improves to a greater extent than that of more experienced auditors (audit seniors) under process accountability. Key words : Professional scepticism; Process accountability; Outcome accountability JEL classification : M41, M42 doi : 10.1111/acfi.12084 The financial support of the Australian Research Council Professorial Fellowship is gratefully acknowledged by Ken Trotman. We are grateful for the valuable assistance provided by Yichelle Zhang. We also thank Neil Fargher (editor), two anonymous reviewers, Noel Harding, Linda Chang, Mandy Cheng, Eldar Maksymov, Karla Johnstone, Shannon Anderson, Ed O’Donnell, Tom Downen, Marc Ortegren, Emily Gri th, seminar participants at the Southern Illinois University, participants at the 2013 AAA ABO research conference for their helpful comments. Received 30 May 2013; accepted 25 March 2014 by Neil Fargher (Editor). © 2014 AFAANZ Accounting and Finance 55 (2015) 1015–1040
1. Introduction Professional scepticism is essential to the performance of a high-quality audit (PCAOB, 2012; Hurtt et al. , 2013). However, internationally regulators have questioned the e ff ectiveness of professional scepticism in an audit (e.g. PCAOB, 2011, 2012; ASIC, 2012). While most of the existing research on professional scepticism has investigated how auditors’ cognitive limitations and/or circum- stances may compromise the depth of their professional scepticism (for reviews, see Nelson, 2009; and Hurtt et al. , 2013), few studies have identified e ff ective interventions through which a deeper level of professional scepticism can be engaged (Hurtt et al. , 2013). Associated with this concern is the di culty in enhancing the professional scepticism of less experienced auditors as simply instructing these auditors to employ greater professional scepticism is unlikely to be e ff ective (e.g. Peecher et al. , 2010). Peecher et al. (2013) consider what kind of accountability framework regulators could use to motivate improvements in audit quality. They note the dominance of outcome accountability and the absence of mechanisms that hold auditors accountable for their judgment processes. Based on a review of relevant accounting, economics, psychology and neuroscience literatures, Peecher et al. (2013) suggest the potential to improve audit quality through auditors being held accountable for their judgment processes. We compare process and outcome accountability as mechanisms through which auditors may be encouraged to employ greater levels of professional scepticism. Accountability is created when there is an ‘implicit or explicit expectation that one may be called to justify one’s beliefs, feelings and actions to others’ (Lerner and Tetlock, 1999, p. 255). When individuals anticipate being accountable, they feel pressure to provide more justifiable explanations, and this pressure leads them to exert greater e ff ort in their judgment. Lerner and Tetlock (1999) identify two types of accountability: process accountability and outcome accountability. Process accountability requires individuals to justify the judgment processes leading to their judgment. As the focus of the

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture