How can audit committee support improve auditors’ application of professional skepticism?

What?

The study has three main objectives: (1) assess the current state, best practices, and potential innovations that could occur in relation to audit committee support for the audit engagement team and its effects on the application of professional skepticism, (2) determine whether expressing greater audit committee support causes audit seniors to more appropriately apply skepticism, and (3) evaluate whether the application of skepticism can be enhanced if the message of support comes directly from the audit committee chair to the audit senior.

Why?

Professional skepticism is essential to audit quality, and enhancing auditor skepticism is of great concern to regulators, practitioners, and researchers. Highly skeptical auditors increase the likelihood that material misstatements are detected, which is important in promoting audit quality, investor confidence, and global financial stability. While skepticism is undoubtedly essential to audit quality, prior research has shown that it may come at a cost (e.g., budget overruns and potential conflicts with management), which forms a significant barrier to the appropriate application of skepticism. The study investigates how support of the audit committee (e.g., insulating the audit engagement when relations with client management are strained) may reduce this barrier, enhance the appropriate application of professional skepticism, and hence lead to higher audit quality.

Project Number
2018B04

Research Team
Prof. Anna Gold
Prof. Joseph Brazel
Dr. Tammie Schaefer

Involved University
VU Amsterdam

Timeline
09/18 – 08/20