FAR Working Paper 2022/09-10: Well-Calibrated Professional Skepticism: Its Benefits on Auditor Responsiveness to the Risk of Material Misstatement and Its Roots in Culture Controls and Auditor Values
Using a multi-method approach, we first introduce the construct of well-calibrated professional skepticism and identify how it facilitates auditors’ response to heightened risk of material misstatement without also raising costly false alarms. We then draw on the management and management accounting literatures to identify several audit firm “soft” culture controls and
auditor-specific characteristics that we predict, and find evidence consistent with being, antecedents of well-calibrated professional skepticism. We position well-calibrated professional skepticism as an internalized value and connect it to the psychology literature on calibration. We discuss how audit firms can improve the portion of their audit professionals who are wellcalibrated professional skeptics by improved selection during recruitment of human talent and by investment in culture controls that credibly reveal a commitment to “walking the talk” when it comes to audit quality
Authors
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Professor Jasmijn Bol teaches Accounting and Controls for Operational Risk, a master’s-level class about risk and control systems at Tulane University, Freeman School of Business, USA. Her classes go beyond lectures and textbooks, incorporating interactive pedagogy and lessons drawn from her own research.
Born and raised in the Netherlands, Professor Bol has studied at universities in The Netherlands, Spain and in the U.S., and she consistently presents her research to communities across the globe. Professor Bol’s research focuses on subjectivity in compensation contracting, and she has authored and co-authored several articles that have appeared in prestigious scholarly journals. She has also earned awards for her teaching and research.
Isabella Grabner is a Professer of Management Control and Strategy Implementation at WU (Vienna University of Economics and Business).
She holds a Master’s degree in International Business from the University of Vienna and a PhD in Business Administration from WU Vienna (Title of dissertation "Creativity and Control: Conflicting Objectives?"). Before joining WU Vienna, she was a tenured faculty member at the Department of Accounting and Information Management at Maastricht University School of Business and Economics. She has also worked as visiting researcher at Emory University Goizueta Business School and the University of Technology Sydney.
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Assistant Professor Accounting & Information Management, School of Business and Economics, Maastricht University
Mark E. Peecher , CPA, is a professor of accountancy and a Deloitte Teaching Fellow at the University of Illinois, specializing in behavioral auditing and accounting research. He holds a bachelor’s, master’s, and Ph.D. degrees in accountancy from Illinois. Prior to returning to his alma mater, he was a faculty member at the University of Washington. An active member in the AAA’s Audit Section, Mark currently serves as the Audit Section’s past president.
Professor Peecher’s business-press writings about auditing have appeared in The Wall Street Journal, and his scholarly writings have appeared in Accounting, Organizations & Society, Auditing: A Journal of Practice & Theory, Contemporary Accounting Research, International Journal of Auditing, Journal of Accounting Research, Organizational Behavior and Human Decision Processes, and The Accounting Review. He has presented his research at numerous conferences, consortia, and universities, and he has served on the editorial boards at Auditing: A Journal of Practice & Theory, The Accounting Review, and Issues in Accounting Education. Mark enjoys teaching both undergraduate courses and doctoral seminars related to auditing. He particularly likes helping to mentor doctoral students, three of whom have won outstanding doctoral dissertation awards.