Professional Skepticism, Identification-Based Trust and Auditor Competence in the Relationship between Auditors and Clients: An Analysis Over Time

• In Event: Auditing Opinions and Specialized Auditors

Abstract

One of the most controversial issues noted by both auditing researchers and regulators is whether an increasing duration of the relationship between auditors and clients (audit partner tenure) leads to an erosion of independence. The primary focus of this study is, how over time auditor’s identification-based trust in the client, auditor competence and auditor professional skepticism evolves. To our knowledge we believe this study, based on a dataset of 217 auditor-client dyads, is the first study, to examine real auditor client relationships and the perception of the relevant actors in regard of trust, competence and professional skepticism. We find that the level of identification-based trust rises and then stabilizes for auditor-client relationships longer than three years, auditor competence is found to be lowest in the first year and increases over time, and the level of professional skepticism increases until the fifth year of the relationship and then settles at an average level. These results question common assumptions and shed new light on the discussion of auditor rotation regulations.


Keywords: Audit tenure, audit quality, trust, professional skepticism, auditor competence auditor-client relationship period

Authors

• Ewald Aschauer, Johannes Kepler University Linz

• Lori S Kopp, University of Lethbridge