Professional skepticism is a critical component of audit practice and current auditing standards direct auditors to remain skeptical throughout the duration of each audit engagement. Despite the importance and prevalence of an emphasis on professional skepticism throughout auditing standards, evidence indicates that auditors often fail to exercise an appropriate degree of professional skepticism. Prior accounting research suggests that auditors’ professionally skeptical behavior is affected by individual personality traits as well as situational (state) influences, whereby both factors contribute to auditor professional skepticism. Yet, prior research has primarily focused on trait skepticism; and little research to date has investigated the concept of state skepticism. The purpose if this research study is to experimentally investigate the impact of time pressure and trait skepticism on state skepticism, and to test a potential debiasing procedure on the impact of time pressure on state skepticism. In addition, this study examines the influence of both skepticism types on skeptical behavior.This research offers several contributions to accounting literature and practice. First, I contribute to the existing debate regarding the influences of professional skepticism by providing evidence that professional skepticism may be categorized as a temporary state, induced by situational aspects, in addition to being classified as an enduring trait. Second, I identify certain situational conditions which create differences in the level of state professional skepticism exhibited within an auditing context. Lastly, my findings may also be important to audit firms as they consider tools within their training arsenal equipped to promote an appropriate level of professional skepticism among employees. If auditor skepticism can be influenced by the frames they are provided, then audit firms may create an environment that promotes consistency in auditors’ application of professional skepticism, simply by engaging in goal framing.

The performance evaluation process is both an important tool for accounting firms to assess the performance of employees and provides supervisors an opportunity to provide feedback to their subordinates. Supervisions, such as managers, will provide feedback to subordinates (senior auditors) numerous times throughout a fiscal year. Prior research has shown that performance evaluations are largely based on results of the subordinate based on task completion and budgeted hours. These types of performance evaluations have been linked to employee dissatisfaction and a decrease in overall job performance. Utilizing psychology based theories, an experimental task was conducted to investigate whether the manager’s feedback orientation (positive/negative and tasks/goals) within a senior auditor’s performance evaluation will increase an auditor’s self-esteem and professional skepticism. Results show that positive and goal-oriented performance evaluations do increase an auditor’s self-esteem and supportive performance evaluations increase an auditor’s professional skepticism. These results provide valuable information to accounting firms to assist with their current restructuring of the performance evaluation process.

The third general standard of fieldwork requires auditors to maintain a skeptical mindset with regards to the collection and critical assessment of audit evidence. While professional skepticism is frequently referenced by professional standards, a lack of precision in defining the concept presumably leads to variation in how skepticism is exercised in practice. Drawing on theories from the fields of psychology, economics and organizational justice, this dissertation considers different perspectives of what constitutes sufficient professional skepticism and examines how those perspectives differ between audit practitioners and regulators. First, I consider competing perspectives of professional skepticism – neutral versus presumptive doubt – and whether asking auditors to adopt alternative perspectives of skepticism may have implications for audit efficiency and effectiveness. While, too little skepticism may endanger audit effectiveness and lead to audit failure or enforcement action, too much skepticism may arguably lead to unnecessary costs and inefficiency. Second, I consider whether the nature of the auditor-client relationship threatens an auditor’s ability to maintain an attitude of professional skepticism. For example, theoretical perspectives from the fields of psychology and economics suggest that auditors may, consciously or unconsciously, be less skeptical of clients with whom they have developed close, positive working relationships or financial dependencies. More specifically, I consider whether skeptical behavior is impeded by management who display low-risk attitudes towards fraud or by client’s who are considered to be highly important to the profitability of the local office. Finally, I examine how professional skepticism is defined from a regulator’s perspective. When a public company is accused of fraudulent financial reporting, regulators may determine iii that the audit performed on the fraudulent financial statements was deficient. Prior research has suggested that in such cases, insufficient skepticism is often a leading cause of alleged audit failure. Within a fairness theory framework, this study examines enforcement actions against auditors between 1999 and 2009, and identifies certain factors that are associated with a citation for a lack of professional skepticism. Overall, results suggest that regulators approach the issue by determining whether auditors should have been more skeptical. Factors found to affect this determination include whether the auditor was perceived as having been aware of an elevated risk of fraud or whether the client was accused of having provided the auditor with false or misleading information during the course of their investigation.

As the workplace has evolved over the past few years, several studies have documented perceived differences in personalities, values, and preferences between generations in the workplace, including in public accounting. In this study, I examine whether exposure to a negative preconceived belief about a staff auditor's generation (generational stereotype) influences the affective state of staff auditors and ultimately causes them to reduce the extent to which they communicate with a client manager to gather the necessary information to perform an audit adequately. I also investigate whether attribute affirmation from a work buddy helps elicit positive affect to mitigate the effects that exposure to negative generational stereotypes may have on audit evidence collection. I conducted a 2 x 2 experiment using graduate auditing students as a proxy for staff auditors. I find that general affect (i.e., mood) rather than interpersonal affect (i.e., likability), drives the negative effect of exposure to generational stereotypes on willingness to collect more audit evidence. I also find that high levels of negative mood can negatively impact participants' self-efficacy. I, however, failed to find evidence of a moderated mediation. The presence of an attribute affirmation results in an insignificant increase in positive affect. When staff auditors are exposed to a negative generational stereotype, attribute affirmation does not evoke enough positive affect to help auditors overcome the generational stereotype threat.

During an audit, management frequently serves as an information source for auditors gathering evidence. Reliance on management's expertise requires auditors to exercise an adequate level of professional skepticism, because management is not an objective information source. In this respect, professional guidance urges auditors to maintain a skeptical mind-set since management's financial reporting incentives may lead to instances when it attempts to persuade the auditor into accepting a preferred accounting treatment. This study investigates how auditors' behavior when providing input on planning decisions common to an audit can influence an auditor's mind-set, and how this mind-set then influences the persuasiveness of subsequently encountered management information. My predictions are motivated by psychology theory on behavioral mind-sets, which indicates that in the course of completing a task, a mind-set can be activated that carries over and influences an individual's behavior in a subsequent, unrelated situation. In a 2x2 experiment, 83 experienced auditors participated in an update meeting with the engagement partner and then made preliminary internal control evaluations. I manipulated the activation of different mind-sets (bolstering or counter-arguing) during the audit update meeting; I also manipulated the severity of the control deficiency (high or low) during the subsequent internal control evaluation task. I hypothesized that the behavior of providing arguments either supporting or opposing common scheduling arrangements during a planning meeting with the engagement partner can activate a mind-set that then influences the persuasiveness of information subsequently received from the client. The increased severity of the deficiency was expected to mitigate the role of mind-sets in the audit environment. The results support my expectations. Auditors who developed a bolstering mind-set during a planning meeting rated the adequacy of management's internal control explanation higher and made internal control assessments indicative of lower risk than auditors who developed a counter-arguing mind-set. I also find that the impact of an auditor's mind-set is attenuated when auditors evaluate a control problem potentially indicative of a material weakness (i.e., higher severity). These results indicate that routine audit planning tasks altered an auditors' skeptical mind-set, which impacted the persuasiveness of management information, even though the update meeting was unrelated to the internal control assessment. However, as the severity of the identified deficiency increased, risk sensitivity mitigated the auditors' mind-set effects, as their professional skepticism was naturally heightened. These results have important audit implications given the importance of maintaining appropriate levels of professional skepticism throughout an audit, especially amid recent concerns that auditors, at times, fail to do so. The findings also inform the psychology and behavioral mind-set literatures by extending the generalizability of prior studies while also establishing the boundaries of this stream of research by examining different levels of severity. / Ph. D.

The study examines how an individual's level of fraud detection proficiency (an individual possessing formal fraud education or training, informal fraud training, fraud task-specific experience, and /or fraud-related certifications) impacts their performance on fraud risk assessments and modification of audit plans. Further, it explores which of the fraud detection proficiency dimensions are valuable for auditors in situations of high and low levels of fraud risk and how these characteristics interact with professional skepticism. This, as well as the effectiveness and efficiency of the procedures selected, are addressed using a survey-based scenario where one case is embedded with a financial statement fraud and the other is not. Tobit and ordered logit regression models are used to evaluate a sample of 40 auditors and 10 forensic professionals with varying levels of fraud-related experiences, education, training, and certifications against a benchmark panel. Results demonstrate fraud certifications are effective in fraud risk assessments, are not effective in audit plan modifications, and on average those individuals tend to over-audit. In addition, fraud-related task-specific experience improves audit plan modification effectiveness. Third, including professional skepticism as an interaction is more reflective of the variable's nature, with results supporting interactions with fraud certifications and informal fraud training in the fraud risk assessment model and formal fraud training in the audit plan modifications model. Finally, individuals of higher rank, in addition to those with fraud certifications, are more likely to over-audit, while individuals in the no fraud scenario are more likely to under-audit. This study contributes to the academic literature with regard to a subset of the FJDM proposed by Hammersley (2011) validating professional skepticism as an integral variable in the model, particularly as an interaction variable and with regard to the impacts of fraud certifications and fraud-related task-specific experience. The study also contributes by providing evidence, which indicate lower fraud risk situations are prone to assessing fraud risk less effectively and under-auditing. Finally, this study also contributes a new measure for direct fraud-related experience, which captures more details regarding applicable task-specific experiences. / Ph. D.

The AICPA recently released new authoritative audit guidance related to group audits of nonpublic organizations which requires group engagement teams to be involved in the work of a component auditor, including certain minimum baseline requirements and the option for more extensive involvement at the group auditor's discretion. Accordingly, group audits create a scenario where auditors are under the direct oversight of a component audit supervisor, yet their work product is monitored and used by the group engagement team when expressing an opinion on the group financial statements. To my knowledge, prior accounting research has not explored the complexity of auditor decision making in a group audit scenario. Drawing on theory from motivated reasoning, this study investigates how the level of group engagement team involvement in component audit work may influence auditor decision making when a component audit supervisor has expressed preferences for more or less professional skepticism during the component audit process. Prior research in non-group audit settings finds the preferences of audit supervisors can influence the skepticism exhibited by their subordinates. However, in a group audit setting I find that the effects of component supervisor preferences interact with the level of group engagement team involvement in component auditors' work to influence component auditors' budgeted audit hours and planned substantive audit procedures. Results showed that during an accounts receivable audit planning task, auditors who faced an optimistic component supervisor recommended the use of more audit hours and suggested confirming a greater percentage of the accounts receivable balance when a group engagement team chose to be more actively involved in the component audit process than when the group engagement team chose only to review component audit work. However, there were no differences in budgeted audit hours or planned audit procedures when auditors faced a skeptical component supervisor, regardless of the level of group engagement team involvement. Thus, increased involvement of the group engagement team mitigated the influence of an optimistic component supervisor on auditor decision making, but did not significantly influence component auditor judgments when auditors faced a more conservative component supervisor. Path analyses indicated this phenomenon was caused by auditors' sense of pressure to reach appropriate audit conclusions induced by the increased involvement of the group engagement team. These results suggest that the effects of supervisor preferences are complex within a group audit environment, such that the nature of instructions received from a group engagement team may mitigate the effects of supervisor preferences on component auditor decision making. This research has implications for audit practice as it relates to the implementation of the new group audit standard as well as for regulators who establish future auditing guidance. / Ph. D.

Auditors have a big role in society. The question of auditor independence has been debated frequently after the financial crisis. Long auditor tenure with clients has both advantages and disadvantages so the question is hard to solve. One of the traits that are encouraged with auditors is professional skepticism. An important part of professional skepticism is the personal skepticism of the auditor. The purpose of this dissertation is to investigate if a high professional skepticism can increase auditor independence by increasing profession identification and decreasing client identification. Earlier research in Social Identity Theory has shown that client identification is negatively related to auditor independence and that profession identification is positively related to auditor independence. A quantitative method is used in this dissertation. A survey was sent to 1000 qualified Swedish auditor. 273 of those replied. The material was statistically analyzed to test the different hypothesis in the dissertation. Our survey showed that professional skepticism has no relation to client- and profession identification. There is however a weak positive relation between professional skepticism and auditor independence. The conclusion is that more research is needed to investigate if auditor independence really is affected by the auditor ’s professional skepticism. / Revisorer har en stor roll i dagens samhälle. Efter finanskrisen har frågan om revisorns oberoende diskuterats flitigt. Det finns både för- och nackdelar med att en revisor varit länge på ett företag och därför är frågan svårlöst. En av egenskaperna som uppmuntras hos en revisor är professionell skepticism. En viktig del av den professionella skepticismen är revisorns personliga skepticism. Syftet med den här uppsatsen är att påvisa att en hög professionell skepticism hos revisorer kan motverka vissa oberoenderelaterade problem. Mer specifikt undersöks den professionella skepticismens påverkan på revisorns identifikation med klienten och med den egna professionen. Tidigare forskning inom Social Identity Theory har visat att identifikation med klienten är negativt relaterat till oberoende och att identifikation med den egna professionen är positivt relaterat till oberoende. I uppsatsen används en kvantitativ metod. En enkät skickades till 1000 kvalificerade svenska revisorer varav 273 svarade. Detta material analyserades statistiskt för att pröva hypoteserna i uppsatsen. Undersökning visar att professionell skepticism inte har någon påverkan på klient- och professionsidentifikation hos revisorn. Det finns däremot en svag positiv relation mellan professionell skepticism och revisorns oberoende. Slutsatsen blir därför att mer forskning behövs för att undersöka om revisorns oberoende faktiskt påverkas av revisorns professionella skepticism.

SAMMANFATTNING   Titel: Tidspressens påverkan på revisionen: En studie om hur svenska revisorer motiverar sina tidsbesparande handlingar under tidspress. Nivå: C-uppsats i ämnet företagsekonomi. Författare: Elizabeth Puhls och Linnea Svedin. Handledare: Jan Svanberg. Datum: 2016- januari.   Syfte: Tidigare forskning har lagt lite fokus på revisorns egna uppfattningar kring revisorers agerande på grund av tidspress. Studiens syfte är att få en förståelse för hur svenska revisorer på små och medelstora revisionsbyråer motiverar åtgärderna som de brukar vidta för att få fram ett bra revisionsarbete inom snäva tidsbudgetar.   Metod: Insamlingen av det empiriska materialet sker med hjälp av kvalitativa semistrukturerade intervjuer. Analysen genomförs genom att jämföra egna empiriska data med redan existerande teori. Våra slutsatser dras från egna iakttagelser och insikter.   Resultat och slutsats: Revisor rättfärdigar sitt agerande genom att stödja sig på begreppen väsentlighet och risk vilket de kopplar till klientkännedom och helhetsbedömningar. Revisorns förmåga att förhålla sig professionellt skeptisk har visat sig ha en inverkan på förekomsten av RAQ-acts (Reduced audit quality acts).   Förslag till fortsatt forskning: Återkommande i studien var begreppen väsentlighet och risk. Vi ser potential för att utforska dess betydelse för tidspressen och revisorernas agerande ännu mer. Vi ser möjligheter till att utveckla intervjuguiden och lägga mer fokus på dessa begrepp i den fortsatta forskningen.   Uppsatsens bidrag: Studien lämnar bidrag till redovisningslitteraturen, personer som utövar revisionsyrket samt klienter genom förståelse för hur revisorerna själva ställer sig till de genvägar som de ibland tar för att spara in på tiden.   Nyckelord: revision, pressfaktorer, tidsbudget, tidspress, revisionskvalitet, underrapportering av tid, professionell skepticism. / ABSTRACT   Title: Time pressure's impact on auditing. A study of how Swedish auditors justify their timesaving actions when they work under time pressure. Level: Final assignment for Bachelor Degree in Business Administration. Authors: Elizabeth Puhls and Linnea Svedin. Supervisor: Jan Svanberg. Date: 2016 - January.   Aim: Little focus has been put on auditors’ own perceptions about their reaction to time pressure. Our aim, therefore, is an understanding of how Swedish auditors, working in small and medium sized firms, justify the solutions they take to obtain credible accounting work within a tight time budget.   Method: The collection of empirical material is done using qualitative semi-structured interviews. The analysis is carried out by comparing the empirical data with existing theory. Our conclusions are drawn from own observations and insights.   Result and conclusions: Auditors justify their actions by relying on the concepts essentiality and risk, which they relate to client awareness and overall assessments. It’s been shown that auditors’ ability to maintain their professional skepticism has an effect on the existence of RAQ-acts (Reduced audit quality acts).   Suggestions for future research: The concepts essentiality and risk were consistently repeated by the auditors in the study. We see the potential to explore further their significance related to time pressure. We see opportunities to develop the interview guide in order to place more focus on these concepts in future research.   Contribution of the thesis: This study contributes to accounting literature, people who practice auditing and clients by presenting an understanding of how auditors themselves justify the shortcuts they take in order to meet their time budgets.   Key words: Audit, pressure factors, time budget, time pressure, audit quality, underreporting of time, professional skepticism.

Att kunna tillämpa professionell skepticism i det dagliga arbetet är en viktig egenskap för dagens revisorer. Vad som påverkar den professionella skepticismen är emellertid inte utrett inom tidigare forskning. Frågan om personlighetsdrag har en påverkan på professionell skepticism med hänsyn till kön som en betingande faktor har vi inte funnit någon forskning om. För att uppfylla syftet har en kvantitativ ansats applicerats och data har samlats in genom en enkätundersökning som ekonomistudenter på Högskolan Kristianstad och Jönköping International Business School har deltagit i. Studien har tillämpat befintliga mätinstrument för att mäta de oberoende variablerna personlighetsdrag och den beroende variabeln professionell skepticism. Enkäten undersökte även ett antal kontrollvariabler hos respondenterna. Resultatet från studien indikerar att två av de i studien undersökta personlighetsdragen (samvetsgrannhet och öppenhet för erfarenhet) har ett positivt samband med professionell skepticism. Vidare konstaterades att en del av personlighetsdraget neuroticism, aspekten stress, har ett negativt samband med professionell skepticism. Studien kunde emellertid inte påvisa om kön har en modererande effekt på sambandet mellan personlighetsdrag och professionell skepticism. Kontrollvariabeln modersmål visade sig ha ett mycket signifikant samband med professionell skepticism. Detta är något som framtida forskning inom området bör undersöka ytterligare. / To be able to apply professional skepticism in day-to-day work is an important attribute for today’s auditors. However, factors that affect the professional skepticism is not investigated in previous research. The question if personality traits affect the professional skepticism in consideration of gender as a moderating factor is an area where we have not found any previous research. To be able to fulfil the purpose a quantitative approach has been applied and the data has been collected through a survey distributed to economy students attending Högskolan Kristianstad and Jönköping International Business School. The study has applied existing measuring instruments to measure the independent variable personality traits and the dependent variable professional skepticism. The survey also explored a few control variables among the respondents. The results from the study indicate that two of the personality traits in the study (conscientiousness and openness) have a positive correlation with professional skepticism. Furthermore, the study found that a part of the personality trait neuroticism, the stress aspect, has a negative correlation with professional skepticism. The study has found no proof that support the belief that gender has a moderating effect on the correlation between personality traits and professional skepticism. The study showed that the control variable mother tongue has a significant correlation with professional skepticism. This is something that future research in the field should examine further.