Linking skeptical judgment with skeptical action: Consideration of client identification and professional commitment

• Published date: 01 October 2022
• Author: Marc Ortegren,Tom Downen,Sarah Kim
• Date: 01 October 2022
• DOI: http://doi.org/10.1002/jcaf.22564

Received:  March  Accepted:  May 

DOI: ./jcaf.

RESEARCH ARTICLE

Linking skeptical judgment with skeptical action:

Consideration of client identification and professional

commitment

Marc Ortegren1Tom Downen2Sarah Kim3

Southern Illinois University

Edwardsville, Edwardsville, Illinois, USA

University of North Carolina

Wilmington, Wilmington, North Carolina,

USA

National Cheng Kung University, Tainan

City, Taiwan

Correspondence

Marc Ortegren, Southern Illinois

University Edwardsville, Accounting

Department, Campus Box ,

Edwardsville, IL , IL, USA.

Email: mortegr@siue.edu

Abstract

We examine, in an experimental setting, how skepticaljudgment translates into

skeptical action, the influence of client identification on skeptical judgment,

and of professional commitment on the link between judgment and action. We

find that skeptical judgment decreases as client identification increases, and that

higher professional commitment can improve the association between skeptical

judgment and action. Our findings suggest that efforts to strengthen the commit-

ment of auditors may prove beneficial, that different factors may affect judgment

and action differently, and that it may be worthwhile to distinguish between

skeptical judgment and skeptical action in academic research.

KEYWORDS

client identification, professional commitment, professional skepticism, skeptical action,

skeptical judgment

1 INTRODUCTION

Professional skepticism (PS) has been the subject of exten-

sive research in recent years (for reviews, see Hurtt

et al., ; Khan & Oczkowski, ). Widely publicized

accounting scandals of the past  years have increased the

scrutiny placed on the audit process in the United States

and have called into question whether auditors are being

adequately skeptical in their professional judgment and

action throughout the audit process. In particular,the Pub-

lic Company Accounting Oversight Board (PCAOB) has

expressed continuing concerns about the insufficiency of

PS exhibited by auditors (PCAOB, , ,, ,

). However, important questions related to PS, the

role(s) of skeptical judgment and skeptical action, and

the circumstances that may improve auditors’ skeptical

judgment(s) and action(s) remain unanswered. Consistent

with the PCAOB’s concern, a deeper understanding of

auditors’ PS and how it can be improved remains a central

theme to both practitioners and researchers alike.

The auditing standards for PS indicate that both skepti-

cal judgment and skeptical action are important (Franzel

). However, many studies have focused on the judg-

ment aspect of PS. As Shaub and Lawrence ()and

Nelson () note, skeptical judgments can only be

effective when they are followed by skepticalactions. Skep-

tical judgment and skeptical action are each affected by

various circumstances, incentives, auditor traits, and audi-

tor knowledge that may prevent, or discourage, auditors

from acting on their skeptical judgment (Nelson, ).

For example, Bamber and Iyer ()examinedhow

client identification influences (increases) an auditor’s ten-

dency to acquiesce to the client position. Similarly, Bauer

() finds that stronger client identification encourages

auditor-client agreement. Other prior literature finds that

accountants who are committed to their profession are

willing to accept the goals that the profession desires

(Aranya & Ferris, ;Aranyaetal.,), which include

greater PS. The empirical connection between skeptical

intention and skeptical action has received relatively less

74 ©  Wiley Periodicals LLC. J Corp Account Finance. ;:–.wileyonlinelibrary.com/journal/jcaf

ORTEGREN  . 75

attention within the auditing literature (Hurtt et al., ;

Nolder & Kadous, ), but understanding under what

conditions skeptical judgment might be more or less likely

to lead to skeptical action is likelyimportant to the auditing

profession. We aim to contribute to the current liter-

ature by examining the relationship between skeptical

judgment and action. Additionally, we evaluate auditors’

identification with a client and its potential for reducing

auditors’ skeptical judgment as well as auditors’ commit-

ment to their profession and its potential for increasing the

likelihood that auditors’ act on their skeptical judgment.

We examine these judgment and action relationships,

as well as the influence of client identification and the

influence of professional commitment on the association

between skeptical judgment and action, using an experi-

ment with  Big- senior auditors. We use a composite,

standardized -point scale for each, with skeptical judg-

ment comprised of a measure of the timing of participants’

judgments and their assessments of misstatement like-

lihood, risk of material misstatement, and reliability of

client explanations (Kim & Trotman, ), whereas skep-

tical action is comprised of the likelihood and magnitude

of any proposed adjustment (e.g., Nelson, ; Shaub &

Lawrence, ). We predict and find that auditors’ level

of skeptical action is lower than their level of skeptical

judgment, and that the association between skeptical judg-

ment and action increases as auditors’ level of professional

commitment increases. We further predict and find that

auditors’ level of skeptical judgment decreases as their

level of client identification increases.

It is important for auditing research and practice to not

only understand how skeptical judgment links with skep-

tical action but also what other factors might influence

them individually, or the relationship between them (Nel-

son, ). This is especially true given psychology and

management literature consistently finds that, while indi-

viduals may know what is “right,” they can compromise

their judgment when taking the relevant action (e.g., Ajzen

& Fishbein, ; Fishbein & Ajzen, ;Jones&Ryan,

; Treviño et al., ). Our results are in line with the

findings of psychology and management literature in that

skeptical judgment by auditors may not necessarily result

in their skeptical actions. Our results also indicate that cer-

tain factors may affect skeptical judgment and skeptical

action differently. Psychologyliterature finds that attitudi-

nal entities, such as identification with another individual

or group, may affect individuals’ judgment but not nec-

essarily their actions. One reason for this is that other

factors such as general social pressure and/or perceived

behavioral control may have opposite effects on individ-

uals’ intention to act on their judgments and thus can

overwhelm the influence of attitudinal entities on the

individuals’ actions (Ajzen, ; Ajzen & Fishbein, ;

Fishbein & Ajzen, ). Together with the psychology

theory, our results indicate that, when investigating PS

and its antecedent factors, it may be worthwhile to distin-

guish between skeptical judgment and skepticalaction and

investigate differential effects on each of them.

Our results also suggest that professional commitment

has a positive influence on the connection between skep-

tical judgment and skeptical action. Given this finding,

public accounting firms may consider focusing on cer-

tain job characteristics that they control and have positive

implications for the overall professional commitment of

their auditors. For instance, firms can continue to pro-

vide strong socializations processes that result from the

interactive nature of the work because this can strengthen

professional commitment of their auditors (Aranya et al.,

). Also, firms can continue to foster a working environ-

ment in which their accountants can invest their time and

effort into the accounting profession. For example, firms

can continue to encourage their accountants to remain

current with authoritative guidance, because this also has

positive implications for the professional commitment by

auditors (Aranya et al., ). Additionally, firms can focus

their attention on helping their accountants cope with the

job’s inherent competition and workload pressure because

intense work competition and job pressure can damage

professional commitment of their employees (Hall et al.,

).

This paper proceeds as follows. In the next section, we

develop hypotheses based on the relevant literature. We

then introduce the data collection methods, followed by

the results. The final section considers implications of the

findings and future research opportunities.

2HYPOTHESES DEVELOPMENT

2.1 Professional skepticism

Standards governing the performance of external audits

dictate that auditors exercise professional skepticism

(AICPA ). The auditing standards define PS as “an

attitude that includes a questioning mind and a critical

assessment of evidence” (AICPA , para. ). Despite

auditing standards requiring it, the PCAOB has expressed

continuing concerns about insufficient PS and its poten-

tial role in audit deficiencies or audit failures, as far back

as the auditing of Enron by Arthur Andersen (PCAOB

, ,). More recently,the PCAOB cited a lack of

skepticism as part of the motivation for sanctions and dis-

ciplinary orders levied against several auditors and audit

firms (e.g. PCAOB, , ). A lack of sufficient skepti-

cism has also been suggested by contemporary accounting

research (Nelson, ). Various attributes of the auditor