A Model and Literature Review of Professional Skepticism in Auditing

Auditing: A Journal of Practice and Theory, Vol. 28, No. 2, pp. 1-34, November 2009

Johnson School Research Paper Series No. 02-2011

2 Pages Posted: 9 Jan 2011 Last revised: 11 Jan 2011

Mark W. Nelson

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: November 1, 2009

Abstract

This paper reviews research that examines professional skepticism (hereafter, PS) in auditing. Consistent with much research and with recent regulatory concerns, the paper defines PS as ‘‘indicated by auditor judgments and decisions that reflect a heightened assessment of the risk that an assertion is incorrect, conditional on the information available to the auditor.’’ In many circumstances the assertion in question will be a client’s assertion that the financial statements are free of material misstatement, but the definition could apply to other assertions as well (e.g., attesting to the effectiveness of a client’s internal controls). This definition reflects more of a ‘‘presumptive doubt’’ than a ‘‘neutral’’ view of PS, implying that auditors who exhibit high PS are auditors who need relatively more persuasive evidence (in terms of quality and or quantity) to be convinced that an assertion is correct. Depending on how an auditor’s decisions are evaluated, it is possible under this definition for an auditor to exhibit too much PS, in that they could design overly inefficient and expensive audits.

Suggested Citation

Nelson, Mark W., A Model and Literature Review of Professional Skepticism in Auditing (November 1, 2009). Auditing: A Journal of Practice and Theory, Vol. 28, No. 2, pp. 1-34, November 2009 ; Johnson School Research Paper Series No. 02-2011. Available at SSRN: https://ssrn.com/abstract=1735435

Mark W. Nelson (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

448 Sage Hall
Ithaca, NY 14853
United States
607-255-6323 (Phone)
607-254-4590 (Fax)

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