Situational Professional Skepticism and Non-Diagnostic Interpersonal Affect: Experimental Evidence

• In Event: Continental Breakfast and Research & Education Forum
  In Roundtable Session: Table 11: Personal Biases in Accounting

Abstract

This experimental study considers whether auditors use deliberate thinking as experts would be expected to do or whether they act as novice decision makers. I apply Kahneman’s Two-System model, a general psychological theory, in an expert setting. A two by three design experiment examines the effect of situational professional skepticism (low versus high risk) and non-diagnostic interpersonal affect (neutral versus positive versus negative affect) on auditors’ skeptical judgment. Evidence has been gathered from 190 auditors from Big 4 and other national audit firms in Norway. The findings indicate that auditors use intuitive processing because they use non-diagnostic affective information in their judgments but this only happens in the high situational professional skepticism condition and not in the low situational professional skepticism condition. The study’s main contribution is theoretical because the intuition of the professional decision maker is different than the intuition of the novice decision maker. This may confirm that expert’s knowledge is important in the predictions of the Two-system theory. Human resources in audit firms and educators might train auditors on how to respond to risk and affective reactions toward the clients through the lenses of Two-System theory.

Author

• Cardamine Carmen Olsen, Norwegian School of Economics