The Outcome Effect and Professional Skepticism: A Replication and an Attempt at Mitigation

19 Pages Posted: 19 Mar 2018 Last revised: 29 Dec 2019

See all articles by Joseph F. Brazel

Joseph F. Brazel

North Carolina State University - Poole College of Management - Department of Accounting

Christine Gimbar

DePaul University

Eldar Maksymov

Arizona State University (ASU) - School of Accountancy

Tammie Rech Schaefer

University of Missouri at Kansas City

Date Written: March 13, 2018

Abstract

IIn this research note, we replicate Brazel et al.’s (2016) study of how auditors evaluate skeptical behavior. Like the original study, we find that evaluators reward audit staff who exercise appropriate levels of skepticism and identify a misstatement (positive outcome). However, when no misstatement is identified (negative outcome), evaluators penalize staff who exercise appropriate levels of skepticism. One factor causing this outcome effect may be that exercising skepticism typically causes budget overages due to additional testing. As such, our replication features an intervention: formally attributing the budget overage to skeptical judgments and actions in the audit budget file. However, we do not find that evidencing skepticism in the budget effectively mitigates the outcome effect identified by Brazel et al. (2016).

Keywords: audit, budget, evaluation, outcome effect, professional skepticism, replication

JEL Classification: M40, M41, M42

Suggested Citation

Brazel, Joseph F. and Gimbar, Christine and Maksymov, Eldar M. and Schaefer, Tammie Rech, The Outcome Effect and Professional Skepticism: A Replication and an Attempt at Mitigation (March 13, 2018). Available at SSRN: https://ssrn.com/abstract=3140647 or http://dx.doi.org/10.2139/ssrn.3140647

Joseph F. Brazel (Contact Author)

North Carolina State University - Poole College of Management - Department of Accounting ( email )

Campus Box 8113
Nelson Hall
Raleigh, NC 27695
United States
919-513-1772 (Phone)

Christine Gimbar

DePaul University ( email )

1 East Jackson Blvd.
Chicago, IL 60604
United States

Eldar M. Maksymov

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

Tammie Rech Schaefer

University of Missouri at Kansas City ( email )

5100 Rockhill Road
Kansas City, MO 64110-2499
United States

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