Auditors’ Professional Skepticism: Neutrality Versus Presumptive Doubt

Posted: 18 Oct 2012 Last revised: 2 Oct 2013

See all articles by Luc Quadackers

Luc Quadackers

VU University Amsterdam - Amsterdam Research Center in Accounting (ARCA)

Tom Groot

VU University Amsterdam - Amsterdam Research Center in Accounting

Arnold Wright

Northeastern University - Accounting Group

Date Written: August 7, 2013

Abstract

Although skepticism is widely viewed as essential to audit quality, there is a debate about what form is optimal. The two prevailing perspectives that have surfaced are ‘neutrality’ and ‘presumptive doubt’. With neutrality, auditors neither believe nor disbelieve client management. With presumptive doubt, auditors assume some level of dishonesty by management, unless evidence indicates otherwise. The purpose of this study is to examine which of these perspectives is most descriptive of auditors’ skeptical judgments and decisions, in higher and lower control environment risk settings. This issue is important, since there is a lack of empirical evidence as to which perspective is optimal in addressing client risks. An experimental study is conducted involving a sample of 96 auditors from one of the Big 4 auditing firms in the Netherlands, with experience ranging from senior to partner. One of the skepticism measures is reflective of neutrality (the Hurtt Professional Skepticism Scale - HPSS) whereas the other reflects presumptive doubt (the inverse of the Rotter Interpersonal Trust scale - RIT). The findings suggest that the presumptive doubt perspective of professional skepticism is more predictive of auditor skeptical judgments and decisions than neutrality, particularly in higher risk settings. Since auditing standards prescribe greater skepticism in higher risk settings, the findings support the appropriateness of a presumptive doubt perspective and have important implications for auditor recruitment and training, guidance in audit tools, and future research.

Keywords: Professional skepticism, Analytical procedures, Presumptive doubt, Interpersonal trust, Control risk

JEL Classification: M4, M42

Suggested Citation

Quadackers, Luc and Groot, Tom and Wright, Arnold, Auditors’ Professional Skepticism: Neutrality Versus Presumptive Doubt (August 7, 2013). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2162947 or http://dx.doi.org/10.2139/ssrn.2162947

Luc Quadackers (Contact Author)

VU University Amsterdam - Amsterdam Research Center in Accounting (ARCA) ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Tom Groot

VU University Amsterdam - Amsterdam Research Center in Accounting ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

Arnold Wright

Northeastern University - Accounting Group ( email )

406 Hayden Hall
United States

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