Fraud risk assessments and auditors’ professional skepticism
Abstract
Purpose
To examine whether planning‐stage fraud risk assessments and audit experience affect the level of professional skepticism displayed by auditors during fieldwork.
Design/methodology/approach
The paper presents an experiment using professional auditors.
Findings
Overall, auditors predisposed to low fraud risk assessments were less skeptical than those with no knowledge of fraud risk (control group). Also, as expected, auditors in the control group were less skeptical than those predisposed to moderate/high fraud risk assessments. Staff auditors were more skeptical than seniors. Senior auditors showed no differences in skepticism between the control group and high fraud risk assessment group.
Research limitations/implications
Professional skepticism in this study is measured as the auditors’ assessment of client truthfulness. There is reasonable disagreement on the exact meaning of professional skepticism and some readers’ interpretation of the term may be different from the authors' own.
Practical implications
The results suggest a need for audit firms to use ongoing training with regard to professional skepticism and the requirements of SAS No. 99, especially since skepticism appears to decline with increasing audit experience.
Originality/value
The study contributes to auditing literature in the areas of professional skepticism and fraud risk assessment. The overall experience result supports previous studies, but additional insight is gained as to differences in the experience/skepticism relationship at different levels of planning‐stage fraud risk.
Keywords
Citation
Payne, E.A. and Ramsay, R.J. (2005), "Fraud risk assessments and auditors’ professional skepticism", Managerial Auditing Journal, Vol. 20 No. 3, pp. 321-330. https://doi.org/10.1108/02686900510585636
Publisher
:Emerald Group Publishing Limited
Copyright © 2005, Emerald Group Publishing Limited