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 well-calibrated 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.