A Study of Professional Skepticism

The International Standard on Auditing (IFAC, International Federation of Accountants (2009) in International Standard on Auditing 200 (ISA 200) Overall objectives of the independent auditor and the conduct of an audit in accordance with international standards on auditing. International Federation of Accountant (IFAC), NY, 2009, ISA No. 200) defines professional skepticism as a multifaceted mindset reflected in auditors’ attitude. The professional skepticism multifaceted mindset is reflected in auditors’ attitude and includes a questioning mind, alertness to circumstances that may imply misstatements due to error or fraud, and a critical evaluation of audit evidence (IFAC, International Federation of Accountants (2009) in International Standard on Auditing 200 (ISA 200) Overall objectives of the independent auditor and the conduct of an audit in accordance with international standards on auditing. International Federation of Accountant (IFAC), NY, 2009, ISA No. 200). In this chapter explains what professional skepticism is more in depth, why it is important to study professional skepticism and then discusses the challenges encountered by accounting researchers, professionals and regulators with respect to professional skepticism in accounting. Because an experimental study of professional skepticism is conducted in Norway, the chapter also presents the institutional settings in Norway. Finally, the chapter describes Two-System theory and affect which are used in the experimental study in the Chap. 2.

In this chapter provides a description of the experimental instrument (or questionnaire) used in the study in Chap. 2 with auditors as respondents. This chapter describes briefly the different parts in the experimental instrument as they appear in the questionnaire provided to the auditors to enable the reader to reconstruct the questionnaire if he or she wish to do so. The design in the experimental instrument manipulates the risk of material misstatement at two levels (low and high) and to manipulate affect at two levels (positive and negative). The manipulations are randomly assigned to the auditors. The experimental instrument consists of the experimental audit case that describes an ABC company, a hypothetical audit client that sells designer maternity clothing to small specialty clothing shops. The questionnaire asks the participating auditors to audit the ABC company inventory account according to the international accounting standards (IAS). The audit case in the questionnaire is based on an inventory valuation issue in ABC.