Encouraging Professional Skepticism in the Industry Specialization Era

Grenier, Jonathan H.

doi:10.1007/s10551-016-3155-1

Cited by 40 publications

(33 citation statements)

References 50 publications

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“…Consistent with Grenier (2016), but with reference to different skeptical judgements, we find that emphasizing an inward skeptical orientation instead of an outward orientation does not increase the level of professional skepticism in audit judgments.…”

Section: Discussionsupporting

confidence: 82%

“…Comparing auditors prompted to direct skepticism outward toward evidence versus inward toward judgment, he finds no difference in the number of self-generated fraud explanations potentially accounting for an unexpected fluctuation, the probability assigned to those fraud explanations, and the assessed risk of material misstatement. Grenier (2016) does, however, find that industry specialists prompted to be inwardly skeptical assigned a greater likelihood to the possibility that an as-yet-unidentified explanation might account for an unexpected fluctuation.…”

Section: Skeptical Orientationmentioning

confidence: 86%

“…Focusing on industry specialists, Grenier (2016) examines the relative effectiveness in elevating professional skepticism of prompts directing skepticism outward versus inward. Comparing auditors prompted to direct skepticism outward toward evidence versus inward toward judgment, he finds no difference in the number of self-generated fraud explanations potentially accounting for an unexpected fluctuation, the probability assigned to those fraud explanations, and the assessed risk of material misstatement.…”

Section: Skeptical Orientationmentioning

confidence: 99%

“…As the effect of encouraging an inward versus outward skeptical orientation is likely to be task dependent (Grenier 2016), we examine the relative merits of an inward compared to outward skeptical orientation across different judgment tasks. Our two judgments (i.e., fraud susceptibility and evidence reliability) vary in the breadth and nature of the target toward which a skeptical mindset is being directed.…”

Section: Skeptical Orientationmentioning

confidence: 99%

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The Effect of Partner Communications of Fraud Likelihood and Skeptical Orientation on Auditors' Professional Skepticism

Harding¹,

Trotman

2016

AUDITING: A Journal of Practice &Amp; Theory

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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.

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Section: Discussionsupporting

confidence: 82%

Section: Skeptical Orientationmentioning

confidence: 86%

Section: Skeptical Orientationmentioning

confidence: 99%

Section: Skeptical Orientationmentioning

confidence: 99%

See 2 more Smart Citations

The Effect of Partner Communications of Fraud Likelihood and Skeptical Orientation on Auditors' Professional Skepticism

Harding¹,

Trotman

2016

AUDITING: A Journal of Practice &Amp; Theory

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“…The audit client experience is a primary source of the level of scepticism exercised except for when no previous experience exists, in which case trait scepticism determines the level exercised (Popova ). However, extensive industry experience may curb the exercise of PS because it provides alternative explanations for misstatements (Grenier ). For instance, in the audit of fair values, an auditor's insufficient expertise in valuation methodology may lead to a lower level of PS than would be appropriate in evaluation of the management's estimates (Bratten et al.…”

Section: Review Of Relevant Literature and Hypothesis Developmentmentioning

confidence: 99%

Analyst Characteristics and the Level of Critical Perception of Goodwill Accounting

Saastamoinen

Ojala

Pajunen

et al. 2017

Australian Accounting Review

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While inputs used in analysts' valuation models have been documented (Brown et al. 2015), it has not been studied how analysts' personal characteristics are associated with their level of critical perception regarding agency conflict manifested in published financial statements. This is important because analysts are, to some extent, substitutes for industry-specialised auditors in monitoring financial reporting (e.g., Sun and Liu 2011). To address this shortcoming, we investigate analysts' level of critical perception concerning current goodwill accounting standards, which provide significant reporting latitude. We use data from a survey of Nordic financial analysts and examine this data with statistical methods, including factor analysis and structural equation modelling. We find two latent constructs, one which reflects a critical attitude to the current goodwill accounting standards and one which reflects an uncritical attitude to the current standards. Our structural equation model suggests that having a background in auditing, as well as general experience and exposure to different industries, is associated with a higher degree of critical perception of current standards. In contrast, having a basic (low) level of formal business (accounting) education is associated with a more uncritical perception than having a high level of education.

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Linking skeptical judgment with skeptical action: Consideration of client identification and professional commitment

Ortegren

Downen

Kim

2022

J Corp Accounting Finance

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We examine, in an experimental setting, how skeptical judgment translates into skeptical action, the influence of client identification on skeptical judgment, and of professional commitment on the link between judgment and action. We find that skeptical judgment decreases as client identification increases, and that higher professional commitment can improve the association between skeptical judgment and action. Our findings suggest that efforts to strengthen the commitment of auditors may prove beneficial, that different factors may affect judgment and action differently, and that it may be worthwhile to distinguish between skeptical judgment and skeptical action in academic research.

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Encouraging Professional Skepticism in the Industry Specialization Era

Cited by 40 publications

References 50 publications

The Effect of Partner Communications of Fraud Likelihood and Skeptical Orientation on Auditors' Professional Skepticism

The Effect of Partner Communications of Fraud Likelihood and Skeptical Orientation on Auditors' Professional Skepticism

Analyst Characteristics and the Level of Critical Perception of Goodwill Accounting

Linking skeptical judgment with skeptical action: Consideration of client identification and professional commitment

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