Auditors Ability in Detecting Fraud: Evidence from External Auditor in Bali

Lack of professional skepticism by auditors can lead to fraudulent and inaccurate financial reporting, which can result in substantial loss and reputational damage to the company. Thus, the purpose of this study is to understand how professional skepticism affects auditors’ ability to detect fraud by identifying these factors (auditor's experience, independence, and competence). In this study, 16 Certified Public Accountant (CPA) firms in Bali province were analyzed by means of a questionnaire survey. The findings suggest that auditor experience (0.000 sig. <0.05), independence (0.011 sig. <0.05), and competence (0.001 sig. <0.05) have a considerable beneficial effect on their ability to detect such fraud. There is a strong beneficial effect in moderating the association between auditors’ independence and auditors’ capacity to detect fraud (t-value: –2.152), in addition to professional skepticism as a moderating variable. On the other hand, professional skepticism adversely affects the link between auditors’ experience and competence in their ability to detect fraud. These findings point to the importance of bridging audit expectation gaps. Therefore, leaders of accounting firms must realign the goals of the workplace organization with the organization's professional goals, paying particular attention to skepticism.