The Effects of Self-Esteem and Perspective-Taking on Judgment and Decision-Making in Group Audits

• In Event: Auditor Characteristics

Abstract

We examine the effects of a skeptical trait (self-esteem) and a state (perspective-taking) – both jointly and separately – on group auditors’ review actions. These are important mechanisms to enhance audit quality in multinational group audits given the concerns raised by regulators of a lack of sufficient skepticism by group auditors. We hypothesize that group auditors who have a high level of self-esteem and are prompted to take the regulator’s perspective are more skeptical in reviewing the work performed by component auditors. In an experiment with 103 audit managers and partners, we measured self-esteem and manipulated a perspective-taking prompt. As hypothesized, we find an increase in skeptical actions for group auditors who have a high level of self-esteem or those who are prompted to take the regulator’s perspective. Initially, we did not find support for an interaction effect between self-esteem and perspective-taking, but supplemental analyses show an ordinal interaction, such that the highest level of skeptical action is achieved when self-esteem is high and regulator’s perspective-taking is present. Audit firms might use the insights from our study in composing group audit teams and providing firm policies to enhance audit quality in multinational group audits.

Authors

• Ayla Borkus, KroeseWevers

• Hielke De Boer, De Nederlandsche Bank

• Herman Van Brenk, Nyenrode Business University

• Niels Van Nieuw Amerongen, Nyenrode Business University