Do Auditors Expect to be Rewarded for Inaction?

35 Pages Posted: 15 May 2024

See all articles by Jonathan Gay

Jonathan Gay

University of Mississippi

Scott B. Jackson

University of South Carolina

Aaron F. Zimbelman

University of South Carolina - Department of Accounting

Date Written: April 1, 2024

Abstract

We examine whether audit staff expect to receive higher performance evaluations for inaction than skeptical action. Inaction is efficient in the absence of a material misstatement, and staff may expect to be rewarded for efficiency-enhancing decisions. However, inaction can degrade audit quality by leaving material misstatements undetected. We focus on expected evaluations because they reflect a lens through which audit staff view their professional incentives. When a misstatement is absent (the most common outcome of skeptical action), we find that (1) audit staff expect inaction to be rewarded, but supervisors do not reward inaction and (2) audit staff expect skeptical action to be penalized, but supervisors instead reward skeptical action. Taken together, these results suggest that audit staff evaluation expectancies are miscalibrated in ways that supervisors likely view as undesirable.

Keywords: skepticism; skeptical action; inaction; performance evaluations

Suggested Citation

Gay, Jonathan and Jackson, Scott B. and Zimbelman, Aaron F., Do Auditors Expect to be Rewarded for Inaction? (April 1, 2024). Available at SSRN: https://ssrn.com/abstract=4828141 or http://dx.doi.org/10.2139/ssrn.4828141

Jonathan Gay

University of Mississippi ( email )

Oxford, MS 38677
United States

Scott B. Jackson

University of South Carolina ( email )

School of Accounting
Moore School of Business
Columbia, SC 29208
United States
(803) 777-3100 (Phone)

Aaron F. Zimbelman (Contact Author)

University of South Carolina - Department of Accounting ( email )

Darla Moore School of Business
1014 Greene Street
Columbia, SC 29208
United States

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