The Effects of Satisfaction with a Client’s Management During a Prior Audit Engagement, Trust, and Moral Reasoning on Auditors’ Perceived Risk of Management Fraud

Kerler, William A.; Killough, Larry N.

doi:10.1007/s10551-008-9752-x

Cited by 60 publications

(39 citation statements)

References 43 publications

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“…Previous studies have also shown that auditors are less likely to detect the signs of fraud when they have had positive experiences with the client and/or when they believe that the management is honest. Specifically, Kerler and Killough (2009) find that auditors who have previous positive experiences with clients will trust them more, and thus they become less skeptical in their fraud risk assessment compared to those whose previous experience with the client was a negative one. In a similar vein, a study by Popova (2012) shows that previous experience with clients (she refers it to as client-specific experiences) is influential in determining the initial expectations of the risks of a material misstatement.…”

Section: Situational Skepticism and Initial Fraud/error Expectationmentioning

confidence: 93%

Does Accounting Education Affect Professional Skepticism and Audit Judgment?

Fatmawati

Mustikarini

Fransiska

2018

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This study examines the extent to which enrollment in accounting programs influences students' skepticism levels. We compare the skepticism scores between final-year accounting students in undergraduate and professional programs. This study also investigates the impacts of trait skepticism and situational skepticism on the participants' initial judgment of fraud or errors. Situational skepticism in this study is represented by audit experience from previous years. This study employs an experimental design of 2x3 between-subjects, where trait skepticism is divided into higher and lower levels, and the audit experience from previous years is manipulated into positive, negative and neutral. The participants in this study are 227 accounting students from both undergraduate and professional programs. The results of this study show that accounting students in the professional program are likely to exhibit higher levels of trait skepticism compared to their counterparts in the undergraduate program. The results also indicate that participants make an audit judgment based mainly on their prior experience with the client, not on their trait skepticism. This propensity is more salient particularly in the case of the less-skeptical participants. In sum, the higher that the formal education of a participant is, then the higher is his/her trait skepticism, and thus he/she is able to retain his/her skeptical judgments regardless of his/her prior experience with the client. ABSTRAK Makalah ini mengkaji tahap sejauh mana pendaftaran dalam program perakaunan mempengaruhi tahap skeptisisme pelajar. Kami membandingkan skor skeptisisme di antara pelajar perakaunan akhir tahun dalam program sarjana dan profesional. Kajian ini juga menyelidik kesan skeptisisme bawaan dan skeptisisme keadaan terhadap penilaian awal peserta terhadap penipuan atau ralat. Skeptisisme keadaan dalam kajian ini diwakili oleh pengalaman audit dari tahuntahun sebelumnya. Kajian ini menggunakan reka bentuk eksperimen 2x3 antara subjek, di mana skeptisisme bawaan dibahagikan kepada tahap yang tinggi dan rendah, dan pengalaman audit dari tahun-tahun sebelumnya dimanipulasi menjadi positif, negatif dan neutral. Peserta dalam kajian ini adalah terdiri daripada 227 pelajar perakaunan dari program sarjana dan profesional. Hasil kajian ini menunjukkan bahawa pelajar perakaunan dalam program profesional cenderung menunjukkan tahap skeptisisme bawaan yang lebih tinggi berbanding rakan sejawat mereka dalam program sarjana. Hasil kajian juga menunjukkan bahawa para peserta membuat penilaian audit berdasarkan pengalaman terdahulu mereka dengan klien, dan bukan berdasarkan skeptisisme bawaan mereka. Kecenderungan ini lebih menonjol, terutamanya untuk kes peserta yang kurang skeptikal. Kesimpulannya, semakin tinggi tahap pendidikan formal peserta, semakin tinggi skeptisisme bawaannya, dan dengan itu dapat mempertahankan penilaiannya skeptikalnya tanpa menghiraukan pengalaman terdahulunya dengan klien.Kata kunci: Pendidikan dan latihan; program profesion perakaunan; skeptisis...

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Section: Situational Skepticism and Initial Fraud/error Expectationmentioning

confidence: 93%

Does Accounting Education Affect Professional Skepticism and Audit Judgment?

Fatmawati

Mustikarini

Fransiska

2018

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“…Pincus (1990) and Bernardi (1994) found that auditors' prior beliefs about the existence of fraud were a significant factor in the detection of fraud. Finally, Kerler and Killough (2009) found that the level of an auditors' trust in the client increased (decreased) as an auditor became more (less) satisfied with the actions of the client. As the level of trust decreased for the auditors who were less satisfied with their clients, the level of the auditors' fraud-risk assessments increased.…”

Section: Trust and Auditors' Judgmentsmentioning

confidence: 97%

The Propensity to Trust Others: Gender and Country Differences

Shrestha

Bernardi

Bosco

2013

AFR

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Our research examines the level of individual trust in others, which is an important issue because it essentially determines the level of additional work that must be done by auditors to make their audit decision. This study includes the responses of 315 accounting students from Afghanistan, Australia, Nepal, and the United States. It then examines whether levels of trust vary by country. Our data indicate that students from both Australia and Nepal had significantly different levels of trust than the students from the United States (our control group). While the students from Nepal had a significantly lower level of trust than the students from the United States, the students from Australia had a significantly higher level of trust than the students from the United States. Additionally, male (female) students indicated a lower (higher) level of trust. Our finding of differences among countries in the level of individual trust has implications in the field of international auditing. While the countries of the world are working at harmonizing their accounting and auditing standards, differences in the amount of work actually done on an audit could be determined by the level of trust in a client. The sample includes Afghanistan and Nepal that are not presently included in auditing-related research.

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“…Where ongoing interaction with key management personnel leads to identification with their goals and objectives, situational trust is elevated and, as a consequence, professional scepticism is negatively impacted. Kerler and Killough () find that an auditor's satisfaction with the client is positively associated with the trust they express towards that client. Importantly, this increased trust led to fraud risk assessments that were less sceptical.…”

Section: Insights For Professional Scepticism In Auditingmentioning

confidence: 99%

A Consideration of Literature on Trust and Distrust as they Relate to Auditor Professional Scepticism

Harding

Azim

Jidin

et al. 2016

Australian Accounting Review

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With a view to expanding the discussion on professional scepticism, and motivating a broader perspective in research undertaken with the aim of helping auditors meet ongoing demands for an elevated level of professional scepticism, we consider the literature on trust and distrust as it relates to auditor professional scepticism. We draw on literature from a range of disciplines, and highlight new opportunities and previously unidentified challenges in helping auditors exercise an elevated level of professional scepticism. We distinguish between trust and distrust and note that the issue of professional scepticism is likely to be as much about auditors being insufficiently distrusting as it is about auditors being overly trusting. A number of potentially fruitful means by which professional scepticism might be enhanced are highlighted but we also encourage caution in that lower levels of trust in management, and increased distrust in management, may have unintended negative consequences.

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The Effects of Satisfaction with a Client’s Management During a Prior Audit Engagement, Trust, and Moral Reasoning on Auditors’ Perceived Risk of Management Fraud

Abstract: auditor trust, fraud risk, moral reasoning, professional skepticism,

Cited by 60 publications

References 43 publications

Does Accounting Education Affect Professional Skepticism and Audit Judgment?

Does Accounting Education Affect Professional Skepticism and Audit Judgment?

The Propensity to Trust Others: Gender and Country Differences

A Consideration of Literature on Trust and Distrust as they Relate to Auditor Professional Scepticism

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