Search results

This study aims to examine whether accountability and culture have an impact on auditors’ professional scepticism. It also examines whether culture moderates the effect of accountability on auditors’ professional scepticism.

Three of the Big 4 firms in Australia and Egypt participated in an audit judgement experiment, which required them to indicate their beliefs about the risk of fraud and error at the planning stage of a hypothetical audit and evaluate the truthfulness of explanations provided by the client management. The authors examined whether their professional scepticism was influenced by accountability.

The results indicate professional scepticism differs significantly between cultures in some situations. The fact that culture influences scepticism suggests that even when auditors use the same standards (such as ISA 240 and ISA 600), they are likely to be applied inconsistently, even within the same firm. The authors, therefore, recommend that international bodies issue additional guidance on cultural values and consider these cultural differences when designing or adopting auditing standards.

To the best of the authors’ knowledge, this is the first study that examines whether culture moderates the impact of accountability on auditors’ professional scepticism using Egyptian and Australian (Middle Eastern and Western) auditors. Prior literature suggests that individuals subject to accountability pressure increase their cognitive effort and vigilance to detect fraud and error. As the authors find evidence that culture moderates accountability pressure and as accountability affects scepticism, they add to the literature suggesting that culture can influence professional scepticism.

The purpose of this paper is to investigate whether accountability pressure and ignorance with regard to the preferences and views of the superior are necessary characteristics of the decision environment to effectively encourage pre-emptive self-criticism and elevate professional scepticism. Auditors continue to be called to account for a perceived lack of professional scepticism in the conduct of their audits. Pre-emptive self-criticism has been proposed as one means by which the level of professional scepticism exercised by auditors may be enhanced.

The role of accountability pressure and knowledge of the superior’s preferences in an experimental setting has been investigated, eliciting self-assessed measures of accountability pressure and manipulating whether the superior’s preferences were known or unknown. Judgements are made in the context of a preliminary analytical review setting.

It was found that greater application of pre-emptive self-criticism is associated with the presence of perceived accountability pressure, but only when the superior’s preferences are not known.

Prior research reports that the effectiveness of prompts to be self-critical is limited. Findings suggest that pre-emptive self-criticism may be more effective in elevating professional scepticism than the findings of these studies suggest, and that the absence of an effect may be the result of low levels of accountability pressure in previous research settings. The results of this study imply that future research investigating pre-emptive self-criticism as a means of elevating professional scepticism should incorporate, as is the case in actual audit environments, accountability pressure in the decision setting.

Qualified by the need for further research, our study guides audit firms in their efforts to meet the expectations of regulators, oversight bodies, standard setters and the public at large for an elevated level of professional scepticism. Our findings suggest that placing auditors under accountability pressure might assist audit firms in meeting these expectations. Our findings also encourage auditors to exercise caution when making their preferences known to subordinates.

Despite its potential to help auditors meet demands for an elevated level of professional scepticism, pre-emptive self-criticism has received very little attention in the audit literature. Moreover, the few studies that have examined pre-emptive self-criticism find that prompts to be self-critical elevate professional scepticism in only limited circumstances. We make an original contribution towards an explanation for these findings, and guide future research by showing that accountability pressure is an important characteristic of the decision environment that should be in place before attempting to elevate professional scepticism through the encouragement of pre-emptive self-criticism.

The purpose of this paper is to examine the direct linkage between professional scepticism and auditor independence.

The study reviews the extant literature on professional scepticism, auditor independence, conflict of interest and unconscious bias.

Auditor independence is a fundamental antecedent to professional scepticism. However, auditor independence is impossible due to the auditor–client structure and conscious and unconscious personal bias. The threats to auditor independence are powerful incentives that reduce professional scepticism, making it difficult to exercise professional scepticism while making professional judgement.

An understanding of the direct link between professional scepticism and auditor independence is necessary to appreciate the context and meaning of professional scepticism in relation to the greater body of literature and ongoing concerns of audit regulators. This paper, which conceptualises the linkage between professional scepticism and auditor independence, provides a platform for future research to be conducted to examine the validity of the discussions and how a discourse in a moral framework embedded within accounting education may assist in improving auditor independence and professional scepticism.

It is insufficient for audit regulators to assess professional scepticism by audit outputs. Threats to independence should be brought into the assessment. To ensure auditor independence is not compromised, auditors should be made aware of the ethical dimensions of their decisions and reminded constantly to monitor virtue ethics behaviours.

This paper brings into mainstream accounting and auditing literature and research a psychological perspective of auditor independence in the discussion of professional scepticism that is seldom examined.

Accounting education is re-inventing itself as technology impacts the practical aspects of accounting in the real world and education tries to keep up. Big Data and data analytics have begun to influence elements of accounting including audit, accounting preparation, forensic accounting and general accountancy consulting. The purpose of this paper is to qualitatively analyse the current skills provision in accounting Masters courses linked to data analytics compared to academic and professional expectations of the same.

The academic expectations and requirements of the profession, related to the impact of Big Data and data analytics on accounting education were reviewed and compared to the current provisions of this accounting education in the form of Masters programmes. The research uses an exploratory, qualitative approach with thematic analysis.

Four themes were identified of the skills required for the effective use of Big Data and data analytics. These were: questioning and scepticism; critical thinking skills; understanding and ability to analyse and communicating results. Questioning and scepticism, as well as understanding and ability to analyse, were frequently cited explicitly as elements for assessment in various forms of accounting education in the Masters courses. However, critical thinking and communication skills were less explicitly cited in these accounting education programmes.

The research reviewed and compared current academic literature and the requirements of the professional accounting bodies with Masters programmes in accounting and data analytics. The research identified key themes relevant to the accounting profession that should be explicitly developed and assessed within accounting education for Big Data and data analytics at both university and professional levels. Further analysis of the in-depth curricula, as opposed to the explicitly stated topic coverage, could add to this body of research.

This paper considers the potential combined role of professional qualification examinations and master’s degrees in skills provision for future practitioners in accounting and data analysis. This can be used to identify the areas in which accounting education can be further enhanced by focus or explicit mention of skills that are both developed and assessed within these programmes.

The paper considers the interaction between academic and professional practice in the areas of accounting education, highlighting skills and areas for development for students currently considering accounting education and data analytics.

While current literature focusses on integrating data analysis into existing accounting and finance curricula, this paper considers the role of professional qualification examinations with Masters degrees as skills provision for future practitioners in accounting and data analysis.

Following recent high-profile audit failures, concern has been expressed that auditors are not demonstrating sufficient skepticism when exercising professional judgment. In particular, client assumptions and estimations relating to hypothetical valuations in financial reporting are not being challenged. This paper seeks to address the issue by advancing a decision-making framework aimed at guiding auditors beyond regulatory reductionist thinking towards an enhanced understanding of the cognitive processes which shape professional judgment in forming a reliable audit opinion.

Drawing on the normative philosophical and theological teachings of Bernard Lonergan, the authors' decision-making framework embodies reflective thinking and the data of consciousness to highlight the central role played by enquiry in the dynamics of understanding, judgment and decision-making. Such enquiry elicits challenge of the management bias inherent in hypothetical valuations.

Auditing through a Lonerganian lens allows auditors to reflect on their approach to objective decision-making by offering a set of cognitive tools to enhance the enquiry essential for nurturing professional skepticism.

This paper contributes to the literature by developing the somewhat neglected discourse on the cognitive processes essential for professional skepticism and audit judgment. The authors demonstrate how Lonerganian self-appropriation intensifies an awareness of the recursive cognitive activities pertinent to objective judgment and decision-making. This awakened consciousness has the potential not only to change how auditors question evidence to make informed judgments and decisions, but also to normalize the practice of challenge.

The protection of public assets, fighting corruption and providing accountability for government agencies is necessary for public welfare, and it is possible to achieve this by quality auditing of the public sector. Since audit quality depends on the competencies of the auditor, this chapter focusses on the competencies of the public auditor and how these competencies are expected to evolve in the future with the development of technology. The chapter concentrates on the most sought-after skills for today’s public auditors by analysing the employment criteria in the Supreme Audit Institutions (SAIs) of the European Union, the United States, the United Kingdom and Turkey. Even though the SAIs of these countries/regions are quite different, it is possible to find common ground. The SAIs of these countries, in general, require public auditors to have an undergraduate degree and require the candidates to pass extensive tests on reasoning abilities.

Moreover, the author investigates the requirements for public auditor competency in the public auditing standards followed by these countries. In addition to this, the author discusses the future expectations from public auditors and the new skills these will need. Past skills include technical knowledge, prior experience, hierarchical order in audit teams, professional scepticism, reasoning abilities and reporting skills. Advancements in technology such as Artificial Intelligence and Industry 4.0 will require auditors to have technological knowledge, emotional intelligence, interpersonal skills, project management skills, critical thinking and strong communication skills. Furthermore, understanding the business and related risks will overshadow prior experience.

This paper explores how technical constructions of audit practice are influenced by mandatory audit firm rotation (MAFR) regulations. The paper responds to calls for additional research on how external regulation influences audit quality and supplements the predominately quantitative research dealing specifically with firm rotation and its relevance for audit quality.

Data are collected from South Africa which is the latest jurisdiction to adopt MAFR (from 2017). Detailed interviews with 49 participants comprising 24 audit partners and 25 non-auditors are conducted to explore how MAFR can impact audit quality. For this purpose, audit quality is defined according to a schematic developed interpretively and based on professional auditing standards and the prior research on audit quality.

There is no guarantee that MAFR will bolster auditors' independence or contribute to a more thorough audit approach. On the contrary, the effort required by incoming audit firms to gain an understanding of new clients coupled with material tendering costs is expected to decrease the profitability of audit engagements with adverse implications for audit quality. A loss of client experience and staff retention challenges may contribute further to a decline in audit quality. There may be some improvements to audit practice when an incumbent firm's work is going to be scrutinised by a new auditor but audit methodologies, including the nature and extent of testing performed, are not expected to change significantly because of MAFR. In this way, the regulation may be a symbolic response to a perceived decline in audit quality and auditor independence rather than part of an effective strategy to encourage more rigorous audit practice for the benefit of the users of financial statements.

The current paper provides one of the first exploratory accountants of how MAFR is expected to impact audit practice and, in turn, audit quality. The research responds to the call for more field-work studies on the mechanics of the audit process by engaging directly with practitioners instead of relying on inferential testing of broad audit quality surrogates. The study also makes an important empirical contribution by providing primary evidence on how external regulation influences audit practice from a seldom studied African perspective.

Motivated by ongoing calls for auditors to exercise an elevated level of professional skepticism, this paper aims to examine the relationship between basic human values (values) and an underlying skeptical disposition (trait skepticism). Understanding the values that are associated with levels of trait skepticism will help in the design of audit environments that make the application of an underlying skeptical disposition more likely.

A survey was administered in which 140 postgraduate auditing students responded to the Schwartz value survey to measure the relative importance of different values, and the Hurtt trait skepticism scale to measure trait skepticism. The relative importance of the ten values was regressed against trait skepticism.

This study finds that the importance placed in the values of tradition and power, relative to other values, is negatively associated with levels of trait skepticism.

The use of postgraduate auditing students as participants may limit the generalizability of the study’s findings.

Qualified by the need for future research to test the generalizability of the findings to an audit practitioner sample, the results of this study suggest that auditors with higher levels of trait skepticism may experience negative affect in environments that emphasize values of power and tradition. To the extent that current audit environments emphasize tradition and power, the results may help explain why trait skepticism is not consistently reflected in audit judgments and actions.

The affective implications of the environment within which auditors exercise professional skepticism is emerging as an important area by which to understand and improve audit quality. By identifying the values that those with a high skeptical disposition place relatively less importance in, this study informs an understanding of the circumstances where an underlying skeptical disposition is more or less likely to be reflected in auditor judgments and actions.

To highlight the pressures that the auditors would face in the era of globalisation and the challenges they should be willing to accept in order to maintain trust and integrity.

A wide range of articles and journals published in international journals as well as local journals has been reviewed. The areas covered include audit fraud, true and fair view interpretation, auditor independence and role of internal auditors. Further, ideas have also been obtained from critical write‐ups in the business magazines on the fall of multinationals.

A wide range of interpretation has been given by various groups of people on their understanding of the phrase “true and fair”. This has created great confusion as to the interpretation of the audit reports. This has been proven by the fall of many multinationals and the audit pioneers, Andersens. This is one of the causes of audit fraud and it is also seen that as the auditors face an enormous challenge as they enter the twenty‐first century, they should be willing to change their attitudes towards their clients. Professionalism should be in the forefront, and an overhaul in the concept of “true and fair” could probably be the solution to harmonisation of the economy.

This paper lacks statistical data on the views of the authors. It is based purely on secondary data.

Provides awareness to the auditors, corporations and general public on the necessity to revamp the existing auditing practices. This can help the auditors not only to be professionals, but also to be seen as professionals.

This paper provides scope for research in this area to identify whether the overhaul concept is acceptable. If yes, what should the new concept be? If no, what is the solution to the existing public outcry?

The purpose of this paper is to explore the role and implications of storytelling and narrative as a means of making sense of, and giving sense to, the ambiguous concept of materiality.

The use of stories was “discovered” through the authors' attempts to “make sense” of data from 16 interviews with participants from the financial and nonfinancial reporting and assurance contexts. The authors analyse the participants' use of stories through a sensemaking/sensegiving lens.

While participants struggle to define what materiality is, they are able to tell “stories” about materiality in action. The authors find stories are a key vehicle through which participants make sense of and give sense to materiality, for themselves and (an)other. Participants tell three types of stories in sensemaking/sensegiving processes: the lived, the adopted and the hypothetical. The authors further identify “rehearsed” and “ongoing” narratives, which take any of the three story types. The use of stories to make and give sense to materiality reveals a disconnect between the static, technical definitions of materiality currently favoured by standard setters and guidance providers, and the creative authoring processes the participants employ.

The authors argue for a move towards the use of stories and narratives about materiality in standard setting, specifically “materiality in action”, which the findings suggest may assist in creating shared understandings of the ambiguous concept.

While previous research considers what materiality means within financial and nonfinancial reporting and assurance contexts, the authors empirically analyse how people understand and make sense/give sense to materiality. The authors also contribute to the use of sensemaking/sensegiving processes within the accounting literature.