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The Role of Professional Skepticism, Attitudes and Emotions on Auditors Judgments

Christine J. Nolder

A dissertation submitted in partial fulfillment of the requirements for the degree of Ph.D. in Accountancy 2012

Program Authorized to Offer Degree: Accountancy

Dissertation Abstract This dissertation consists of five chapters which include three primary papers along with an introduction and a conclusion. The first paper examines professional skepticism through the lens of attitude theory and concludes with essentially three recommendations for future professional skepticism research. First, the paper advocates for professional skepticism researchers to adopt an attitude conceptualization of professional skepticism. Second, the paper advocates for a paradigm shift from an individualistic focus to a more holistic focus when examining the conditions under which auditors professionally skeptical attitudes manifest themselves in their skeptical judgments and actions. Third, the paper offers a proposed revision to Nelsons (2009) model of professional skepticism research. The second paper holistically examines whether training in professional skepticism can moderate the effects of a well-known collective attitude (i.e., fair market ideology) on business students judgments. The results suggest that general training in professional skepticism does not mitigate auditors tendency to associate profitable companies with ethical companies. As such, the paper demonstrates how traditional training in professional skepticism may not be enough to penetrate the resistance and persistence of collective attitudes.

Chapter 1 Overview of Dissertation The overarching theme of this research is to examine the professional skepticism construct through the lens of attitude theory to better understand the presumed relationship between an auditors professionally skeptical attitude and his or her judgments and decisions regarding the nature and extent of audit procedures performed. An auditors lack of applied professional skepticism has been blamed for both audit failures (Carmichael &, Craig 1996; Beasley, Carcello, and Hermanson, 2001) and audit deficiencies (PCAOB 2008). Over the last decade, a growing number of studies have investigated the relationship between professional skepticism and auditors judgments and decision. However, the extant professional skepticism research includes inconsistent

conceptualization and operationalization of the professional skepticism construct. To the extent these inconsistent measures are being used to test theories and hypotheses regarding the variables that turn up or down the dial of an auditors professional skepticism, the results are difficult to generalize since the underlying measures of professional skepticism vary. By operationalizing professional skepticism as an attitude, future research can be more focused and consequently, assimilated in more meaningful ways. This topic is important for two reasons. First, if the attitude theory literature supports the PCAOBs attributional claim that auditors judgments and decisions can be traced back to an underlying, latent professionally skeptical attitude, then, the attitude change literature in social psychology may offer guidance on how to regulate professional skepticism to increase the likelihood auditors will perform the normatively correct auditing procedures to provide sufficient evidence to support the audit opinion. Second, in contrast, if the attitude literature suggests that attitudes rarely manifest themselves in systematic and predictable ways in auditors judgments and decisions, then regulators such as the PCAOB will need to dig

deeper to identify alternative root causes of auditing deficiencies beyond an auditors professionally skeptical attitude. Chapter 2 Literature Review In December 2008, the PCAOB summarized the most frequently occurring and/or significant audit4 deficiencies observed during their 2004-2007 inspections. To paraphrase the PCAOBs observed findings, the audit firms failed to perform auditing procedures to obtain, test, investigate, accumulate, evaluate, challenge, or examine the audit evidence in accordance with PCAOB standards and, consequently, did not have sufficient, competent evidence to support their opinion. The PCAOB report concludes that, in many cases, failures to apply appropriate professional skepticism were important factors that allowed the deficiencies to occur (PCAOB, 2008, p. 20). Attributing perceived compromises in audit quality (i.e., audit deficiencies) to a lack of applied professional skepticism is not new (see Carmichael &, Craig 1996; Beasley, Carcello, and Hermanson, 2001). However, an examination of recent professional skepticism literature suggests ambiguities around what professional skepticism is, and therefore, how it should be measured or operationalized. For example, Hurtt (2010) measures professional skepticism in terms of a general skepticism personality trait. Rixom, Plumlee and Rosman (2012) operationalizes professional skepticism as a cognitive process. Bowlin, Hobson, and Peircey (2012) measure professional skepticism in terms of a hypothesis frame. Without a general consensus about what the professional skepticism construct represents, it is difficult to develop generalizable theories that may explain how to regulate professional skepticism to lessen the occurrence of future auditing deficiencies. Theory construction experts agree that a minimum requirement for theoretical development is a general consensus with regard to the

definitions of the constructs involved (Stinchcombe, 1968; Hage, 1972; Jaccard & Jacoby, 2010; Shoemaker, Tankard, Lasorsa, 2004). In contrast to the auditing studies above, professional skepticism has often been referred to as an attitude5 in auditing standards both domestically (AICPA 1997, 1988, 2002a, 2002b, 2006a, 2006b) and abroad (IFAC 2007). One advantage of an attitude conceptualization is that attitude theorists have generously supplied us with almost 100 years of theory and empirics to assist in our understanding about the antecedents and consequences of attitudes, along with the factors that increase the likelihood of attitudes influencing judgments and behaviors. As such, the purpose of this chapter is to argue that professional skepticism be conceptualized and measured as an attitude, thereby providing a perspective that can be adopted by the auditing academic community and practitioners alike. By examining professional skepticism through an attitude theory lens, the current chapter includes three suggestions for moving the professional skepticism forward. First, the professionally skeptical attitude construct should include, at a minimum, beliefs and feelings about evidence sufficiency in response to perceived risks, and both cognitive and behavioral tendencies throughout the audit-evidence gathering process. Second, this research provides evidence to suggest that the main components of the professionally skeptical attitude referred to above are significantly influenced by the auditors referent groups, including the engagement team, the local office, the national or international firm and the auditing profession. As such, this research suggests a paradigm shift from an individualistic (e.g., personality trait) perspective, to a holistic (e.g. collective attitude) perspective. Third, this research builds on Nelsons model of the determinants of professional skepticism in audit performance (Nelson, 2009) by couching Nelsons model in attitude theory and by making minor modifications to the models overall design and content. Together these suggestions

contribute to the professional skepticism literature by offering a well-defined professional skepticism conceptualization couched in a theoretically supported and concise framework. Professional Skepticism and the Attitude Construct This research conceptualizes professional skepticism as noun based on the assumption that professional skepticism is an underlying latent construct (i.e., an attitude) that exerts itself on auditors judgments, decisions, actions and behaviors. The resulting judgment, decisions, actions and behaviors may be described using the adjective skeptical. Since the PCAOB inspectors attribute auditing deficiencies to auditors not applying their professional skepticism (i.e., the attitude), the next logical research questions are: What is an attitude? How can it be measured? Where does it come from? Under what circumstances do individuals act in accordance with their attitude? The following paragraphs provide answers to these questions to the extent possible given extant research. What is an attitude? In general, attitudes are latent, underlying dispositions that exert influence on individuals judgments and behaviors (Ajzen, 2005, p.6). Gordon Allport, arguably the father of attitude theory, suggests an attitude is an underlying, mental construct. An attitude is a mental and neural state of readiness, (Allport, 1935, p. 810). Ostensibly, Allports conceptualization of the attitude construct is separate from its manifestation in a pe rsons judgments and behaviors. Consistent with Allports view of an attitude, Hurtt (2010) defines professional skepticism as the propensity of an individual to defer concluding until the evidence provides sufficient support for one alternative/explanation over the other (p. 151). Hurtt posits that propensity stems from either an individuals trait or a state. A state, according to Hurtt, (2010) is a temporary condition aroused by situation variables (p. 150). Reflecting on Allports attitude definition, he refers to the attitude as a mental or neural state. As such, Hurtt (2010) seems to imply that the professional skepticism construct

stems from underlying traits or attitudes. This is consistent with Icek Ajzen, a leading attitude theorist, who categorizes both traits and attitudes as underlying dispositions influencing behaviors (Ajzen, 2005). In summary, Hurtt (2010) seems to conceptualize professional skepticism as an underlying disposition that is separate and apart from its manifestation in a particular judgment or decision. In stark contrast to Allports definition of attitudes, Crano and Prislin (2006) suggest that attitudes are merely evaluative judgments. This definition ignores the underlying disposition conceptualization and replaces it with the attitudes manifestation variable (i.e., the evaluative judgment). Crano and Prislins definition of attitude resembles Nelsons (2009) definition of professional skepticism. Nelson suggests that professional skepticism is indicated by auditor judgments and decisions that reflect a heightened assessment of the risk that an assertion is incorrect, conditional on the information available to the auditor (Nelson, 2009, p.4). Nelson (2009), like Crano and Prislin (2006), defines the attitude construct in terms of its manifestation (i.e., auditors judgments and decisions). Consequently, Nelsons model summarizing the professional skepticism literature to-date does not include an underlying professional skeptical attitude variable, but instead, only the response variables of skeptical judgments and actions (See Figure 2-1). [Insert Figure 2-1 about here] Conceptualizing the professionally skeptical attitude in terms of its manifestation precludes the separation of the latent professionally skeptical attitude variable from the skeptical judgment variable. Alice Eagly and Shelly Chaiken (2005), the authors of The Psychology of Attitudes warn about such conflating of an attitude construct, attitudinal judgments are not pure expressions of attitude but outputs that reflect both attitude and the information in the contemporaneous setting. This setting contains cues that elicit the attitude, information that provides new inputs to the attitude, and contextual stimuli

that provide standards against which to judge the current instantiation of the attitude object( p.747). Eagly and Chaiken (2005) suggest it is important to separate attitudes from other contextual factors in order to determine which contributed to the variation in judgments. Was it the attitude or factors in the contemporaneous setting that lead to the variation in judgment? Given the myriad of contextual factors that may influence the auditors ultimate judgment, it may be prudent to conceptualize the professionally skeptical attitude as distinct from its manifestation in auditors judgments and decisions. Therefore, this paper is premised on a conceptualization of the professionally skeptical attitude construct that is separate and apart from its manifestation in skeptical judgment and action. Applying this conceptualization to Nelsons (2009) model of professional skepticism necessitates only a slight modification to Nelsons model as seen in Figure 2-2.

How can attitude be measured? Cognitions, affections and conations6 are the measurable components or dimensions7 of attitudes (Allport, 1954; Rosenberg &Hovland, 1960; Brodwin, 1976; Hilgard, 1980). However, modern day attitude theorists generally refer to these tripartite attitude components as beliefs, feelings and actions tendencies (Ajzen, 2005). If the PCAOB attributes auditing deficiencies to a lack of applied professional skepticism, an open question is whether any one component (i.e., beliefs, feelings or action tendencies) of the professionally skeptical attitude construct is more or less responsible for the judgments and decisions leading to the auditing deficiencies. For example, since audit deficiencies often represent audit procedures not performed, was the omitted audit procedure caused by the auditors beliefs about its contribution to evidence sufficiency, his or her feelings about the shortfall, or his or her historical action tendencies on a particular engagement? To answer these questions, I draw

from the risk and information processing literature, which examines the factors that influence the nature and extent of information processing in a risk setting. Cognition or Beliefs Cognitions or beliefs reflect perceptions or thoughts about certain characteristics or attributes of the attitude object (Ajzen, 2005). In auditing research, there is an implicit assumption that the target object of the professionally skeptical attitude is the audit evidence (Kinney, 2000; AICPA, 2002b). Suppose for a moment, the beliefs most likely associated with the audit evidence include beliefs about risk and what constitutes sufficient evidence in responding to those risks. Using this example, was it really the auditors general attitude of professional skepticism that caused the auditing deficiencies, or, could the omitted audit procedures be attributed the auditors beliefs about risk or evidence sufficiency? Spencer, one of the first psychologists to use the term attitude wrote in First Principles, published in 1862: Arriving at correct judgments on disputed questions, much depends on the attitude of mind we preserve while listening to, or taking part in the controversy; and for the preservation of a right attitude it is needful that we should learn how true and yet how untrue, are average human beliefs (Allport, 1954, p.43). If audit deficiencies can be traced back to differing beliefs between auditors and inspectors, is it possible to identify the beliefs that account for most of the auditing deficiencies? While there may be an unlimited number of beliefs contributing to the auditors professionally skeptical attitude, the theory behind the standard of due care (AICPA 1997) offers guidance to suggest which beliefs may be the most relevant in terms of the auditors professionally skeptical attitude. In the auditing standards, an auditors requisite professionally skeptical attitude is subsumed under the concept of due care (AICPA, 1997). The concept of due care derives its roots in the theory of law and is benchmarked against the expected behaviors of the prudent man in response to risk.

The prudent man is considered to have average ability to perceive risks and their consequences. He is expected to be aware of his own ignorance and to perceive the risk of proceeding or acting in a state of ignorance of potential hazards. In appraising the reasonableness of the judgments and actions of a prudent man, the general test is whether a reasonable person possessed of the same amount of knowledge would have foreseen the risk and taken steps to avoid it (Mautz &Sharaf, 1961, p.133,bold added for emphasis). Clearly, according to the theory of law, the concept of due care is, by definition, in response to perceived risks. As such, the professionally skeptical attitude construct, at a minimum, must include beliefs about risk associated with the conduct of the audit. To further support the inclusion of risks beliefs as the first component of the professional skeptical attitude, the audit standards suggest that the nature and extent of audit procedures are to be planned, designed and/or selected based on the audit teams risk assessment (PCAOB, 2010). Therefore, it appears imperative to include measures reflecting an auditors beliefs about risk as one key component of a proposed professionally skeptical attitude construct. In some sense, the academic community has already associated the professional skepticism construct with an explicit inclusion of risk beliefs. For instance, Nelson (2009) proposes a new definition of professional skepticism that includes an overarching association with risk. Professional skepticism is indicated by auditor judgments and decision that reflect a heightened assessment of the risk that an assertion is incorrect, conditional on the information available to the auditor (Nelson, 2009, p. 4). Similarly, Brown-Liburd, Cohen and Trompeter (2011) operationalize professional skepticism with the auditors explicit acknowledgment or consideration of risk factors. Carpenter, Durtschi and Milici-Gaynor (2011) use risk assessments as a proxy for professional skepticism both before and after fraud training. All of these papers recognize the importance of risk beliefs as one indicator of an auditors professional skepticism.

In summary, given the professionally skeptical attitudes target is the evidence (Kinney, 2000; AICPA, 2002b), the most obvious beliefs to include as the first component of the professionally skeptical attitude construct are beliefs about what constitutes sufficient evidence given the auditors beliefs about risks. As such, before measuring beliefs about evidence sufficiency, there must be a measure incorporating risk assessments or perceptions. Together, these beliefs compose the first component of the professionally skeptical attitude construct. Affection or feelings The second component of the attitude construct and, more importantly, the professionally skeptical attitude, is an affective component that captures the auditors feelings or emotional response in a risk setting8. Findings in neuropsychology suggest that judgments and decisions in a risk setting are often driven by emotions (Damasio, 1994; Bechara, Tranel, Damasio, and Damasio, 1996). Since these two publications, the importance of affective reactions as a determinant of judgments and decisions in a risk setting has been gaining much attention. For example, the risk-as-feelings hypothesis posits that feelings often drive actions to a larger extent than rational beliefs (Loewenstein, Weber, Hsee, and Welch, 2001). Similarly, the affect heuristic explains that individuals base their behaviors on the way the risks make them feel (Slovic, Finucane, Peters, and MacGregor, 2002; Slovic, Finucane, Peters, and MacGregor, 2004). Furthermore, this effect is magnified in settings involving time pressure (Maule & Svenson, 1993; Finucane, Alhakami, Slovic and Johnson, 2000) and thus, is extremely relevant in an audit setting where time pressure is inherent. The risk research referred to above provides strong evidence to suggest that an auditors affective response to risks may account for some of the variation in judgment leading to the PCAOB inspectors observed audit deficiencies.

Audit deficiencies often represent instances where auditors did not perform the most appropriate audit procedure (e.g., they observed when they should have tested) or they just did not perform enough audit work. Either way, the auditors stopped short of producing sufficient evidence to support the audit opinion given the risks. Information processing researchers suggest the nature (e.g., heuristic vs. systematic) of information processing is often influenced by a persons affective state (Batra & Stayman, 1990; Kuykendall &Keating, 1990; Bohner &Apostolidou, 1994; Bohner, Chaiken, Hundyadi, 1994). In contrast, the extent of information processing (i.e., effort) is thought by some to be driven by the cognitive beliefs regarding what is sufficient evidence (Chaiken, Liberman and Eagly, 1989). In other words, some attitude researchers argue that perceived insufficiency of information motivates the information processor to continue processing until his or her sufficiency threshold is met (Chaiken et al., 1989). Others argue that it is not the cognitively perceived insufficiency of information, but rather the persons emotional reaction to the perceived insufficiency that is behind the tendency to continue processing (Huurne &Gutteling, 2008). Two people may perceive the same level of information insufficiency, yet have very different feelings toward the shortfall (Huurne & Gutteling, 2008). Eagly and Chaiken (1993) concede that the individuals feelings about evidence insufficiency may be driving the need for additional information processing. In summary, research in neuropsychology (Damasio, 1994; Bechara et al., 1996), risk settings (Loewenstein et al., 2001; Slovic et al., 2002; Slovic et al., 2004), and information processing (Batra & Stayman, 1990; Kuykendall & Keating, 1990; Bohner & Apostolidou, 1994; Bohner et al., 1994; Huurne & Gutteling 2008; Eagly & Chaiken, 1993) provide strong support for the significant influence of feelings, affect or emotions on auditors judgments and decisions regarding the nature and extent of auditing procedures to be performed in a risk setting. While there are an endless number of affective reactions that auditors experience

throughout the audit (see Shaub, 2004; Robertson, 2010; Moreno, Kida and Smith, 2002; Chung et. al., 2008; and Cianci & Bierstaker, 2009 for examples), the affective reactions most relevant to the professional skepticism attitude construct include feelings in response to risks and evidence sufficiency. As such, the second component of the professionally skeptical attitude construct includes auditors affective response to evidence sufficiency (or insufficiency) given the risks. Summary All attitudes are comprised of beliefs, feelings and action tendencies (Ajzen 2005). Based on the genesis of professional skepticism as a component of due-care in the auditing standards and its implied target of audit evidence, the most relevant (or obvious) auditor beliefs in terms of his or her professionally skeptical attitude include beliefs about evidence sufficiency in response to risks. Based on the risk and information processing literature, the most relevant feelings that drive information processing decisions include feelings about evidence sufficiency given certain risks. Based on anecdotal evidence, such as the SALY mentality and well-documented cognitive and behavioral tendencies, the third component of the professionally skeptical attitude is a measure of the behavioral and cognitive tendencies that contribute to the nature and extent of auditing procedures performed on an engagement. Together, these components capture the primary measures of the proposed professional skepticism construct. From where does an attitude arise? Today, most attitude researchers agree that we are not born with attitudes (Olson & Kendrick, 2008). Instead, attitudes are the product of experiences in society and, more specifically, experiences within referent groups (Smith & Hogg, 2008). Individuals who identify with a group are more likely to regard the thoughts, feelings and action tendencies of fellow group members as valid (Parkinson, Fischer, and Manstead, 2005). Consequently,

group members tend to regulate their thoughts, feelings and action tendencies toward generally accepted group attitudes (Parkinson et al., 2005). In a slightly different interpretation of attitude origins, Durkheim (1964) portrays the decision to conform to group attitudes as less conscious and more automatic. Rather than social factors merely contributing to individual attitude formation, Durkheim (1964) argues that our beliefs, feelings and action tendencies are imposed upon us by the social. Durkheim believes there is an external social phenomenon that imposes a coercive power over a group members thoughts, feelings, and actions. Here, then, is a category of facts 21 with very distinctive characteristics: it consists of ways of acting, thinking, and feeling, external to the individual, and endowed with a power of coercion, by reason of which they control him (Durkheim, 1964, p.4). Durkheims reference to ways of acting, thinking, and feeling mirrors the tripartite theory of attitude structure. Durkheims philosophy emphasizing the significant role of the social environment in controlling the beliefs, feelings, and actions of individuals offers general guidance for audit researchers to approach professional skepticism research from a holistic, rather than an individualistic, perspective. Based on Durkheims philosophy, we could infer that an auditors professionally skeptical attitude is merely the manifestation of a socially constructed, referent-group attitude. But which group? Auditors are members of many groups such as their engagement team, the local office of the firm, the larger national or international firm, and finally, the auditing profession. Social identity theory (Tajfel & Turner, 1979, 1986) suggests that the auditors will be significantly influenced by the referent group to which they identify with the most. Role theory suggests auditors will likely internalize their larger role in society and thus, compliance with professional standards will quiet the interference from competing group attitudes provided the fear of punishment is salient (Parsons, 1951, pg 47). Elster (1989) echoes this qualification by suggesting that group members adherence to group attitudes is driven by the

group members emotional response to the perceived consequences of rejecting the groups attitude. Below, I describe specific examples linking the auditors social environment to the professionally skeptical attitude components previously identified (i.e., risk beliefs, feelings in response to risk and action tendencies surrounding sufficient auditing procedures). Social Beliefs As discussed earlier, an auditors professionally skeptical attitude presumably includes beliefs about risk. Beliefs about risk are derived, at least in part, from the social environment and referent groups (Slovic, 1999; Leiss, 1996), so it is not surprising that different firms have different collective beliefs about risk (Kirkham, 1992). Risk judgments reflect an individuals understanding of referent social systems and the role he or she plays within them (Cvetkovich & Lofstedt, 1999). Furthermore, social systems or environmental cues can act as mechanisms to amplify or attenuate risk perceptions and alter behaviors (Kasperson & Kasperson, 2005; Pidgeon, Kasperson and Slovic, 2003). For example, research has suggested that media attention to risk related behaviors significantly affects risk perceptions. The popularity of the movie Jaws in the mid-1970s presumably altered risk perceptions and behaviors related to swimming in the ocean (McComas, 2006). Similarly, media attention surrounding audit failures, such as Worldcom, affected auditors, inspectors and investors risk perceptions to varying degrees (Conroy & Emerson, 2006). This research suggests that auditors and inspectors beliefs about risks are presumably fostered within their social contexts. Social Feelings Emotions-in-the-workplace researchers suggest that different groups or organizations possess different emotional cultures (Parkinson et al., 2005). These emotional cultures influence the ways in which emotions are expressed and the ways in which they manifest themselves in judgments and decisions (Hatfield, Cacioppo and Rapson, 1992). During the

socialization process for new employees and throughout their careers, employees of organizations gain a sense of the governing norms with regard to emotional expression. Employees are either explicitly or implicitly taught the lower as well as upper limits on the intensity of emotional expression and experience (Parkinson et al., 20 05). These display rules regarding appropriate emotional expression provide assurance that new hires will both reflect and maintain the collective emotional culture. As such, this research suggests the emotional cultures of Big-4 audit firms and the PCAOB shape auditors and inspectors normative emotional responses to risks. Social Action Tendencies Each firm has unique organizational and managerial nuances that preside over the auditors action tendencies throughout the audit. Action tendencies as portrayed previously, are not always mechanically based on an individuals past behaviors. In other words, an auditor may not determine the nature and extent of audit procedures performed solely based on prior years working papers (i.e., SALY mentality). Instead, the auditors decision about the nature and extent of audit testing is often prescribed by dynamic firm policies and procedures associated with predefined levels of assessed risks. Firm policies and procedures reflect the firms generally accepted adaptive responses to firm level beliefs and feelings about risk. These beliefs and feelings impound knowledge regarding the perceived costs and benefits of each additional audit procedure performed. For instance, if a clients internal control risk is assessed as moderate, the action tendencies socially sanctioned by the firm may prescribe a predetermined set of auditing procedures to be performed given the risk assessment. If too many procedures are performed, the resulting over-auditing negatively affects profits. If too few procedures are performed, the resulting under auditing exposes the firm to litigation or inspection risk. Overall, the literature discussed above suggests that 24

the auditors choice of audit procedures performed may stem from firm sanctioned auditing procedures given perceived risks. Summary Attitudes and their components (i.e., beliefs, feelings and action tendencies) are thought by many to come from the social (Durkheim 1964; Olson & Kendrick, 2008; Smith &, Hogg, 2008). In the case of the professionally skeptical auditor and his or her beliefs about risk, research supports that these risk perceptions are, at least partially, derived from the social environment (Slovic, 1999; Leiss, 1996). The auditors emotional response to risk may depend on the socially sanctioned organizations emotional culture (Parkinson et al., 2005). The auditors action tendencies with regard to audit procedures performed may simply be traced to the policies and procedures of the organization in response to risk. Any one of these attitude components alone or in combination may account for the variation in auditors decisions regarding the auditing procedures necessary for the accumulation of sufficient evidence. Overall, our knowledge and understanding of a firms holistic modes of function and their consequences on audit quality are widely understudied (Hopwood 1996, p. 217; Kirkham, 1992). Under what circumstances will an auditors professionally skeptical attitude correlate with behavior? An attitude of professional skepticism is a requisite attitude for auditorsone that is expected to guide their judgments and decisions when planning and performing audits. An auditors professionally skeptical attitude should manifest itself in his or her choice of audit procedures performed to provide sufficient, competent evidence to support the audit opinion, in light of relevant perceived risks. The underlying assumption in the auditing standards is that attitudes can drive behavior. The following discussion summarizes the attitude/behavior literature and the likelihood the professionally skeptical attitude will correlate with behavior.

Gordon Allport summarized extant attitude research in the Handbook of Social Psychology (Allport 1935). After synthesizing the attitude definitions proposed by colleagues, Allport concludes attitudes serve as the precondition of behaviors (Allport, 1935, p. 805). At the time, each attitude definition included some reference to attitudes featuring a preparation or readiness to behave in a certain way (Allport, 1935). Allports attitude literature review, with its convincing argument linking attitudes and behaviors, sparked a flurry of subsequent attitude/behavior research. Over the next 30 years, numerous studies tested the presumed link between attitudes and related behaviors. Despite Allports optimism, the results of the attitude/behavior studies were dismal. The research findings suggested that attitudes rarely predicted behavior (Wicker, 1969). In 1969, Wicker summarized the attitude/behavior empirical studies published since Allport (1935) and concluded that overall, the results demonstrated inconsistent correlations between attitudes and behaviors. The present review provides little evidence to support the postulated existence of stable, underlying attitudes within the individual which influence both his verbal expressions and his actions (Wicker, 1969, p. 75). Not long after Wickers casting of doubt regarding the attitude/behavior relationship, breakthroughs in the 1970s offered a moderating approach12 to improve the attitude/behavior correlation. Moderating Approach to improving the attitude/behavior relationship Moderating variables interact with an individuals attitude and consequently, facilitate or impede the influence of the attitude on a persons judgments, decisions and behavior. Ajzen (2005) summarizes the moderating variables in three categories; individual differences (i.e., person variables), situational variables (i.e., task and/or environmental variables) and secondary characteristics of the attitude itself (i.e., attitude strength and the internal consistency of the attitude components). Nelsons model depicting the determinants of skeptical judgment and action reflects a similar approach in that ability, traits, knowledge,

experience, and incentives are presented as variables that moderate the auditors skeptical judgments and actions (Nelson, 2009). The following discussion highlights a few examples of the most widely studied moderators in attitude theory. It is particularly helpful to review this prior literature because it informs both audit researchers and practitioners about the most influential variables that may be interfering with the application of professional skepticism to auditors judgments and decisions. Individual differences In attitude research, frequently studied individual variables include knowledge, experience, ability, gender, and personality traits (Ajzen 2005). Because personality traits have received much attention in the professional skepticism literature (Hurtt, 2010; Quadackers, Groot, and Wright, 2009; Shaub, 1996; Shaub & Lawrence, 1996), I will focus much of the discussion in this section on personality traits. Like attitudes, personality traits are also considered underlying dispositions that exert influence on judgments and behaviors (Ajzen, 2005). However, attitudes differ from personality traits since an attitude has a target object or target behavior, whereas, a trait does not (Ajzen, 2005). For example, an auditors attitude toward audit evidence differs depending on the client and the risk context. In contrast, an auditors conscientiousness trait can manifest itself in an unlimited number of attitude targets. Precisely which personality traits yield the greatest impact on the attitude/behavior relationship differs depending on the context. For example, attitude theorists provide evidence that traits such as self-consciousness, self-monitoring and need for cognition significantly affect the attitude/behavior relationship (Ajzen, 2005). In the organizational behavioral literature, traits significantly moderating employees performance include conscientiousness, extraversion, agreeableness, openness to experience, emotional stability, self-monitoring, authoritarianism, locus of control, achievement motivation, approval motivation, and intelligence (Hitt, Miller and Colella, 2009).

One drawback of studying personality traits is that there are hundreds from which to choose. Any number of personality traits may affect the likelihood that an auditors professionally skeptical attitude manifests in his or her judgments and decisions. For example, if a professionally skeptical auditor scores extremely high on the conscientiousness trait, his or her professionally skeptical attitude and audit procedure choices may be correlated more highly than someone who scored low on the conscientiousness trait. Personality traits might also interact with one another, causing the predictability of the traits effect on the attitude/behavior relationship to be more challenging. For example, if an auditor scores high on the conscientiousness trait but also scores high on self-monitoring13 tendencies, he or she may abandon his or her conscientious tendencies and professionally skeptical attitude in order to perform the audit procedures preferred by referent others (i.e., the client or immediate supervisor). In spite of challenges associated with the interactive effects of personality traits, auditing researchers have successfully identified the traits of skepticism (Hurtt, 2010) and trustworthiness (Shaub, 1996; Shaub & Lawrence, 1996; Quadackers et al., 2009) as significantly contributing to variation in auditors skeptical judgments. Hurtt (2010) includes a psychometric instrument to measure an auditors underlying skepticism trait presu med to fuel the auditors propensity to defer concluding until the evidence provides sufficient support (Hurtt, 2010, p. 151). Hurtts scale measures general beliefs, feelings and action tendencies using a number of attitude targets. For instance, the Hurtt scale measures a persons beliefs about themselves, their capabilities and learning in general (Hurtt, 2010). There are also questions that tap into the persons feelings about learning and being rushed (Hurtt, 2010). Lastly, the Hurtt scale14 includes questions about a persons action tendencies with regard to truth seeking, making decisions, weighting of information, relying on others, believing others, agreeing with others and finding inconsistencies in information (Hurtt,

2010). The Hurtt scale presumes that by identifying skeptical trait-like beliefs, feelings and action tendencies across a variety of targets, researchers may be able to generalize the findings to the auditors beliefs, feelings and action tendencies when evidence is the target. Situational Variables Situational variables include task and environmental variables that might increase or decrease the correlation between an auditors professionally skeptical attitude and his or her audit procedures performed. For example, if a professionally skeptical auditor intended to perform requisite audit procedures, but time and/or budget constraints precluded him or her from doing so, these constraints can negatively impact the attitude /behavior correlation. According to Ajzen (2005), the most widely studied situational factors in the attitude literature are; situational constraints, the degree to which the environment fosters selfawareness and the match between task complexity and an individuals competencies. In an audit setting, auditors have situational incentives that increase the likelihood of their professionally skeptical attitude influencing behavior (e.g. reputation preservation, SEC or PCAOB enforcement action, and firm policies). In contrast, auditors face competing pressures that would lead to decreasing the likelihood of their professionally skeptical attitudes influencing behavior (e.g., client pressure, profitability concerns, and client preferences). Secondary characteristics of the attitude Secondary characteristics of the attitude include; reflection and accessibility, vested interest, confidence and the internal consistency of the attitude dimensions (Ajzen, 2005). All of these variables, except internal consistency, are thought to moderate the attitude behavior relationship through a mediating variable of attitude strength. Stronger attitudes are more stable and predictive of behaviors (Holland, Verplanken and Knippenberg, 2002). A brief summary of each secondary attitude characteristic appears below.

Accessibility and Reflection The correlation between an individuals attitude and behavior is moderated by the accessibility of the attitude and the information processors ability to reflect on his or her attitude (Ajzen, 2005). Additionally, reflecting on ones attitude is thought to increase the likelihood that attitudes will correlate with behavior (Snyder & Swann, 1976). If both attitude accessibility and reflection are present, the attitude has a greater chance of correlating with the behavior (Ajzen, 2005). Grenier (2012) manipulated the extent to which audit specialists reflect on their skeptical judgments. Based on an assumption that specialists engage in automatic processing while non-specialists engage in more controlled (i.e. systematic) processing of evidence, Grenier posited and found that by priming specialists to reflect on their skeptical judgments, their performance would reflect heightened skepticism (Grenier, 2012). Confidence The confidence or strength with which the attitude is held greatly affects the likelihood of the attitude manifests itself in the auditors judgment and decisions. The concept of attitude strength is important to the current research because it provides additional support for a more holistic examination of the influence of the social context of the audit on an auditors professionally skeptical attitude. Attitude strength originates, at least in part, from the social context in which attitudes are held (Crano & Prislin, 2006, p. 351). Attitudes are more accessible and deemed more important when they are socially shared (Bassili, 2008). As a consequence, socially shared attitudes are more resistant to persuasion (Visser & Mirabile, 2004). In the professional skepticism literature, there is much written about attitude strength, albeit not explicitly. An auditors professionally skeptical attitude is often described in terms of being neutral in its weaker form and presumptive doubt in its stronger form. The

assumption is that the presumptive doubt professionally skeptical attitude will lead to increased rigor and potentially better assurance. Increasing the strength of the professionally skeptical attitude from neutral to presumptive doubt will also likely increase the minimum amount of evidence necessary to support the audit opinion (Bell, Peecher and Solomon, 2005). Nelson suggests PCAOB inspectors exhibit the stronger presumptive doubt attitude since PCAOB identified auditing deficiencies often represent omitted auditing procedures (Nelson, 2009). Internal consistency of attitude components The last moderator in the secondary characteristics of the attitude category affecting the attitude/behavior correlation is the internal consistency of the attitude. Specifically, the degree to which the internal components (i.e., beliefs, feelings and action tendencies) of the attitude are congruent. For example, an auditor may believe that risks are high; however, the auditors emotional reactions to those risks are overshadowed by the positive feelings for the client. Professional judgment and behaviors in this case should be guided by beliefs and not feelings. Unfortunately, attitude research suggests when beliefs and feelings include opposite valences, feelings have been shown to guide behavior (Lavine, Thomsen, Zanna and Borgida, 1998). Similarly, the auditing literature includes evidence that suggests auditors feelings toward the client do bias their judgments, however, only when managements incentives to manipulate earnings are low as opposed to high (Robertson, 2010). Nelsons model of the determinants of skeptical judgment and skeptical action

Nelsons (2009) model of the determinants of auditors skeptical judgment and skeptical action essentially depicts the moderating variables that influence how an auditors professionally skeptical attitude manifests itself in the auditors judgments and actions (see Figure 2-1). To frame Nelsons model in attitude theory, only minor modifications are needed (see Figure 2-3). First, a latent variable denoting the auditors professionally skeptical attitude is added above the skeptical judgment and action variables to distinguish the underlying latent variable from its manifestation as suggested by Eagly and Chaiken (1993). The remaining changes only broaden the moderating variables to reflect categories of moderators rather than specific variables within those categories. All of the moderators affecting the attitude/behavior relationship can be summarized in three categories; (1) Person variables, (2) Situational variables, and (3) Secondary characteristics of the attitude. The original Nelson (2009) model included the variables of traits, ability, knowledge, experience and incentives. The first four variables are all person variables and thus, are replaced in the model with a general person variable category. Since research shows predictable differences in risk perceptions between women and men (Byrnes, Miller and Schafer, 1999), including gender as a variable to consider in future professional skepticism research may be warranted. Nelsons remaining variable, incentives, is replaced with the general category of situational variables. This category may also include task complexity, standards, regulatory pressure, group norms and many others situational variables as suggested by Bonner (2008). Two examples provided by Ajzen (2005) include social constraints (e.g., a demanding supervisor), and competency requirements (i.e., situations where the competencies of the individual are matched vs. unmatched with the competencies necessary for the task). The last moderator category identified by Ajzen (2005) is secondary characteristics of the attitude. This category includes any moderators that turn up (or down) the persistence and resistance of the attitude and therefore, its likelihood to manifest itself in skeptical

judgments and actions. Most of these moderators affect the attitude/behavior relationship through the mediating variable of attitude strength. For example, reflecting on the attitude or the extent to which a person thinks before they act strengthens the attitude/behavior correlation (Snyder, 1982). The accessibility of the attitude positively affects the attitude/behavior correlation (Brown, 1974). The individuals vested interest, importance, or personal involvement in making sure his or her attitude is reflected in the judgments and behavior increases the strength of the attitude and consequently its manifestation (Sivacek & Crano, 1982). Last, the degree to which the three components of the attitude construct are congruent affects the attitude/behavior relations.

Conclusions This paper examines the professional skepticism construct through the lens of attitude theory. Examining professional skepticism through an attitude theory provides several insights. First, this paper argues for a conceptualization of professional skepticism to include beliefs and feelings about evidence sufficiency in response to risks, and action tendencies regarding the nature and extent of audit procedures performed. Second, since attitudes are socially derived, future professional skepticism research would benefit from a paradigm shift from an individualistic focus (i.e., personality traits) to a more holistic focus (i.e. engagement team, firm, or professional level collective attitudes). Third, this paper builds on Nelsons (2009) model by distinguishing between the professionally skeptical attitude and its manifestation in skeptical judgments and actions, and by expanding the potential moderator set to include categories of moderators rather than discrete variables. This research is important because it argues for academics and practitioners to converge toward a common definition and interpretation of the professional skepticism construct that is separate and distinct from its manifestation. Conceptualizing professional skepticism this way

is compatible with both domestic and foreign auditing standards. Additionally, adopting an attitude definition of professional skepticism allows us to draw from almost 100 years of attitude theory to better understand the conditions under which auditors professionally skeptical attitudes are likely to manifest themselves in auditors skeptical judgments and consequently, audit quality.