How do Audit Committees Support Audit Engagement Teams and Encourage Professional Skepticism? A Survey and Experimental Evidence

55 Pages Posted: 10 Jan 2022 Last revised: 26 Mar 2024

See all articles by Joseph F. Brazel

Joseph F. Brazel

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

Anna Gold

Vrije Universiteit Amsterdam

Justin Leiby

University of Illinois at Urbana-Champaign

Tammie Rech Schaefer

University of Missouri at Kansas City

Date Written: March 22, 2024

Abstract

We explore how audit committees (ACs) support audit engagement teams and whether AC
support can increase auditors’ professional skepticism, specifically skeptical actions towards
fraud red flags. We first survey audit practitioners and find that AC support is multidimensional,
varies between engagements, and often is not communicated to the entire engagement team. We
then experimentally investigate whether the explicit communication of AC support to the entire
engagement team (by the audit partner or directly from the AC chair) increases skeptical action.
The conveyance of AC support increases skeptical actions, particularly when management has
poor attitudes toward the engagement team. Our findings related to direct communication by the
AC chair, as opposed to indirect communication by the partner, are mixed. While direct
communication does not increase skeptical action beyond the level observed when the partner
conveys the AC support, it does mitigate the degree to which anticipated management conflict
decreases skeptical action. Our study highlights the importance of AC support in relation to
skepticism and the crucial role audit partners can play in conveying AC support to their entire
engagement team.

Keywords: audit committee, social support, fraud red flag, management attitude, auditor professional skepticism

JEL Classification: G34, M40, M41, M42

Suggested Citation

Brazel, Joseph F. and Gold, Anna and Leiby, Justin and Schaefer, Tammie Rech, How do Audit Committees Support Audit Engagement Teams and Encourage Professional Skepticism? A Survey and Experimental Evidence (March 22, 2024). Available at SSRN: https://ssrn.com/abstract=4003607 or http://dx.doi.org/10.2139/ssrn.4003607

Joseph F. Brazel

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)

Anna Gold

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 598 25 92 (Phone)

Justin Leiby (Contact Author)

University of Illinois at Urbana-Champaign ( email )

1206 S 6th St
Champaign, IL 61822
United States
2173007825 (Phone)

Tammie Rech Schaefer

University of Missouri at Kansas City ( email )

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

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