Audit Partner Trait Skepticism and Going-Concern Reporting Decisions

Hardies, Kris; Janssen, Sanne; Vanstraelen, Ann; Zehms, Karla M.

doi:10.2139/ssrn.3978879

Cited by 3 publications

(7 citation statements)

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“…Our interactive predictions align with concurrent, archival research by Hardies et al (2021). These authors find that under high workload (a depletion proxy), partners with lower trait skepticism are less likely to issue going‐concern opinions to financially distressed clients, but partners with higher trait skepticism are more likely to issue going‐concern opinions.…”

Section: Theory and Hypothesessupporting

confidence: 88%

“…We address this challenge with our controlled experiment that allows for making causal inferences. Our findings, combined with archival research showing similar findings based on partners' trait skepticism and their issuance of going‐concern opinions (Hardies et al, 2021), provide compelling evidence on the impact of depletion in the audit setting. Future research could examine other traits and how depleted skeptics and client service auditors behave differently on other audit tasks.…”

Section: Discussionsupporting

confidence: 76%

“…To understand the moderating role of auditors' skeptical dispositions, we turn to the literature on auditor trait skepticism, a relatively stable personality trait (Hurtt, 2010; Nolder & Kadous, 2018). We focus on trait skepticism because prior research shows that it varies across auditors and affects auditors' skeptical behaviors in areas that, like negotiations, involve subjectivity and balancing incentives (e.g., Hardies et al, 2021; Hurtt, 2010). Auditors with higher trait skepticism, hereafter “skeptics,” are defined as those who naturally have a questioning mind, suspension of judgment, and search for knowledge.…”

Section: Introductionmentioning

confidence: 99%

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How does depletion interact with auditors' skeptical dispositions to affect auditors' challenging of managers in negotiations?

Bhaskar,

Majors,

Vitalis

2023

Contemporary Accting Res

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We use multiple methods to examine how depletion and auditors’ skeptical dispositions interact to affect auditors’ challenging of managers in negotiations over financial statement amounts. We expect auditors are likely depleted from effortfully exercising self‐regulation during the busy times when these negotiations occur. Individuals in a depleted state tilt toward natural, less effortful behaviors. Thus, we posit that the effects of depletion will diverge depending on the auditor's skeptical disposition―a determinant of how natural or effortful they will find the skeptical behaviors (e.g., challenging) versus client service behaviors (e.g., maintaining the client relationship and audit efficiency) required for negotiations. We predict that client service auditors (i.e., low skeptics) will challenge managers less in negotiations when depleted versus non‐depleted, while high skeptic auditors will challenge more when depleted. We test this interactive prediction in an abstract experiment where we manipulate depletion and measure auditors’ skeptical dispositions using trait skepticism. Findings support our predictions. We also develop a new measure of auditors’ client service–skeptic disposition based on the skepticism literature that adds nuance to the traditional lower versus higher skeptic labels. In a second study, interviews with audit partners validate the realism of our depletion and client service–skeptic constructs and corroborate our experimental findings. Our study sheds light on depletion effects in auditors’ negotiations with their clients and how the effects differ based on auditor personalities.This article is protected by copyright. All rights reserved.

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Section: Theory and Hypothesessupporting

confidence: 88%

Section: Discussionsupporting

confidence: 76%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

How does depletion interact with auditors' skeptical dispositions to affect auditors' challenging of managers in negotiations?

Bhaskar,

Majors,

Vitalis

2023

Contemporary Accting Res

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“…Grabner et al (2020) extend this research with proprietary data from a Big 4 accounting firm, and a survey of its partners, to document that tacit knowledge of partners is positively associated with the firm’s own internal assessment of audit quality. In another study, Hardies et al (2020) use an instrument to measure individual partner personality traits for a partner sample from a large accounting firm and then link these traits to auditor skepticism and the auditor’s propensity for skeptical behaviors. Professional skepticism is emphasized in audit standards and is considered by regulators to be a driver of audit quality.…”

Section: Introductionmentioning

confidence: 99%

“…The Foundation was formed in 2015 by the largest Dutch accounting firms and has been active in facilitating researcher access to accounting firms’ proprietary archival data, as well as access to accounting professionals for surveys and experiments. To date, the Foundation has supported 19 research projects, including the above cited studies by Grabner et al (2020) and Hardies et al (2020).…”

mentioning

confidence: 99%

The Relative Importance of Auditor Characteristics Versus Client Factors in Explaining Audit Quality

Cameran

Campa

Francis

2020

Journal of Accounting, Auditing & Finance

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The U.K. listed firms are used to investigate whether auditor attributes (fixed effects for audit firms, audit offices, and audit partners) add incrementally to baseline models with client controls in explaining audit quality. We document that accounting firm fixed effects add significantly to baseline models. To the extent an accounting firm can standardize its audits, there should be no differences across engagements. However, we find significant interoffice differences, and also significant inter-partner differences within offices. R2 analyses, hierarchical linear models, LASSO (least absolute shrinkage and selection operator) regressions, and R2 decomposition analyses all show that partners are the most important auditor-related characteristic. To better understand the cause of partner variation, we test a set of partner demographic variables (in lieu of partner fixed effects), but we find that they explain little variation, once we control for firm and office differences. We conclude that partner variation is important in explaining audit quality, but understanding the causes requires going beyond existing publicly available demographic data.

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Comments of the AFAANZ Auditing and Assurance Standards Committee on Proposed International Standard on Auditing 570 (Revised) Going Concern

Harding,

Hay,

Dharmasiri

et al. 2024

Accounting & Finance

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The International Auditing and Assurance Standards Board (IAASB) issued for public comment Proposed International Standard on Auditing 570 (Revised) Going Concern. The Australian Auditing and Assurance Standards Board (AUASB) and New Zealand Auditing and Assurance Standards Board (NZAuASB) also called for comments. The Auditing and Assurance Standards Committee of AFAANZ prepared a submission, based on the findings reported in extant research, informing a number of the questions asked by the IAASB. This technical note presents the formal submission made to the IAASB.

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Audit Partner Trait Skepticism and Going-Concern Reporting Decisions

Cited by 3 publications

References 0 publications

How does depletion interact with auditors' skeptical dispositions to affect auditors' challenging of managers in negotiations?

How does depletion interact with auditors' skeptical dispositions to affect auditors' challenging of managers in negotiations?

The Relative Importance of Auditor Characteristics Versus Client Factors in Explaining Audit Quality

Comments of the AFAANZ Auditing and Assurance Standards Committee on Proposed International Standard on Auditing 570 (Revised) Going Concern

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