Affect-Based Professional Skepticism: Exploring How Social Interaction in the Client Interview Impacts a Different Dimension of Professional Skepticism

• In Event: Audit Committees, Professional Skepticism, and Auditor Judgment

Abstract

Regulators have faulted auditors for failing to be sufficiently skeptical. Due to the regulatory emphasis on professional skepticism, there has been increased academic researcher activity investigating professional skepticism. Much have this research has focused on cognitive-based aspects of professional skepticism— those aspects based on auditor knowledge and cognitive reasoning. However, in doing so, important threats to professional skepticism related to the interpersonal relationship between auditors and management, have largely been unstudied. These interpersonal relations impact affect-based aspects of professional skepticism, specifically involving social interactions between auditors and clients. To address this, we use live simulation, involving professional actors, to create a realistic audit setting to investigate how social factors and auditor characteristics impact professional skepticism. Each participant conducted an audit interview with a professional actor trained to play the role of client controller. Depending on the experimental condition, the actor took on the role of either a charismatic (i.e., extroverted and agreeable) or anti-charismatic (i.e., introverted and disagreeable) controller. In addition, trait skepticism was measured for each of 49 participants. Findings indicate that participants who interviewed the charismatic controller, as well as less inherently skeptical participants were less likely to determine questionable cash disbursements to be control exceptions and less likely to recommend intensive follow-up to gather additional evidence. While previous literature has suggested that cognitive-based aspects of professional skepticism impact audit judgments, we contribute to the literature on professional skepticism suggesting an affect-based dimension of professional skepticism which is affected by social interactions inherent in the audit context. The results of this study corroborate concerns that the social relationships between management and the auditor, including the potential to fall under the spell of charismatic clients (Nogler 2015), can threaten affect-based professional skepticism.

Authors

• Jared A Eutsler, University of Central Florida

• Anne E Norris, University of Miami

• Gregory M Trompeter, University of Central Florida