SUMMARY:We investigate the effect of partner communication on the level of professional skepticism in auditor judgments and actions within the context of the fraud brainstorming discussion meeting where the partner is of the view that there is a low likelihood of fraud. Across two studies, we examine the effect on professional skepticism of the partner's communication on the likelihood of fraud (making their own view known, making management's view known, or not making any view known) and the skeptical orientation being encouraged (outward orientation toward the veracity of management representations and/or inward toward the fallibility of the auditor's judgment processes). We find that auditors exhibit higher levels of professional skepticism when the partner expresses management's view, rather than their own view or no view, that there is a low likelihood of fraud. We also consider what causes these differences. Emphasizing an inward skeptical orientation was not found to be more effective in encouraging professional skepticism in audit judgments than emphasizing an outward skeptical orientation. Importantly, emphasizing both an inward and outward skeptical orientation was more effective in encouraging professional skepticism in audit actions than emphasizing only an outward orientation.

This paper investigates the performance of senior and staff auditors in the identification of conceptual and mechanical errors during workpaper review. In this study, we begin to examine the potential for effectiveness and efficiency gains by involving staff (assistant) auditors in the review process. We find that senior auditors were more accurate than staff auditors in identifying conceptual errors contained in a hypothetical set of workpapers just reviewed. However, staff auditors were more accurate than senior auditors in identifying mechanical errors. Highlighting the benefits of a hierarchical review, composite groups consisting of a staff auditor and a senior outperformed composite groups consisting of two seniors or two staff auditors. The study finds that the differences in review performance between managers and seniors found in Ramsay 1994 generalize to lower levels of experience. Considering our results in conjunction with Ramsay 1994, we show a progression to a more conceptual review template as the rank of the reviewer moves from staff to senior to manager. The paper provides some guidance to audit firms that are presently introducing major changes to the way in which the review process is carried out, including the inclusion of reviews by staff auditors.

SUMMARY We examine the effect of the regulator's style (critical versus supportive) when enforcing negative inspection findings and the audit firm's response to those findings (increase or decrease audit process structure) on auditor professional and firm commitment and turnover intentions. We find no evidence that enforcement style impacts professional commitment, but that auditors are more inclined to leave the profession when the regulator adopts a critical enforcement style and when their firm increases audit process structure. We further find that firm commitment is lower when the firm increases audit process structure, and that this is most pronounced when the regulator adopts a supportive enforcement style. We find no evidence of firm turnover intentions being impacted by either enforcement style or firm response. Recognizing the importance of retaining competent and motivated auditors, our results highlight the care needed, and alternatives available, when regulators enforce, and firms respond to, negative inspection findings. Data Availability: Data are available from the authors upon request. JEL Classification: M42.

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We examine, in a controlled experimental setting, whether changes in investor mood cause changes in the determinants of stock prices. Our results show that a deterioration in mood, reflected in the negative dimensions of mood state, increases the level of risk aversion in male, but not female, investors. We find no evidence to suggest that a change in mood impacts on investors' forecasts of future earnings or future cash flows. By establishing the causal impact of a change in mood on risk aversion, our study provides support for archival research that relates various market anomalies to investor mood.