The Role of Behavioral Mindsets on Auditors’ Professional Skepticism

Posted: 17 Dec 2013 Last revised: 19 Sep 2015

See all articles by J. Owen Brown

J. Owen Brown

Baylor University

Sudip Bhattacharjee

Virginia Polytechnic Institute & State University - Department of Accounting and Information Systems

Date Written: December 16, 2013

Abstract

Auditing standards require auditors to maintain a skeptical mindset throughout an audit. However, research indicates that mindsets are flexible such that cognitive procedures (e.g., bolstering or providing counterarguments) activated when performing a particular task can carryover and influence subsequent task performance. We examine whether natural features within the audit environment, such as routine planning tasks, can create a mindset that influences evidence evaluation and skeptical judgments in a second, unrelated audit task. In an experiment, auditors who developed a counterarguing mindset during a planning meeting and subsequently evaluated internal control evidence potentially indicative of a significant deficiency (moderate severity) were more skeptical of management’s explanation for the control deficiency and rated the deficiency more severe than auditors who initially developed a bolstering mindset. This effect diminished when the severity rose to potentially indicate a material weakness (high severity), as there were no differences in ICFR assessments between auditors who developed a counterarguing or a bolstering mindset. Path analyses confirm that the moderate severity condition processed client persuasive communications by utilizing a strategy consistent with previously developed mindsets which, in turn, influenced ICFR assessments. The high severity condition, instead, followed a content-focused processing strategy that focused on items indicative of increased risk which was invariant to the mindset condition. Thus, the flexibility of auditor mindsets can impact professional skepticism and have efficiency and effectiveness consequences under certain conditions. These results have implications for audit training and for improving regulators’ understanding of why auditors do not always exhibit adequate skepticism.

Keywords: Behavioral Mindsets, Professional Skepticism, Audit Planning, Internal Control Evaluations, Internal Control Severity

JEL Classification: M40, M41

Suggested Citation

Brown, Owen and Bhattacharjee, Sudip, The Role of Behavioral Mindsets on Auditors’ Professional Skepticism (December 16, 2013). Available at SSRN: https://ssrn.com/abstract=2368664

Owen Brown

Baylor University ( email )

Waco, TX 76798
United States

Sudip Bhattacharjee (Contact Author)

Virginia Polytechnic Institute & State University - Department of Accounting and Information Systems ( email )

Pamplin College of Business
Blacksburg, VA 24061
United States

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