Essays on Auditors’ Judgments and Decisions in Negotiation and Communication

Paper III is excluded from the dissertation until it will be published.Auditors conduct various audit tasks during an audit in order to arrive at an audit opinion regarding whether the financial statements are fairly presented in accordance with the applicable financial reporting framework. To perform these audit tasks and arrive at a decision about the audit opinion, auditing standards require auditors to exercise their professional judgment. From this requirement, two important terms emerge, judgment and decision. Bonner (1999, p. 385) defines judgment as “forming an idea, opinion, or estimate about an object, an event, a state, or another type of phenomenon,” and a decision as “making up one’s mind about the issue at hand and taking a course of action.” In short, judgment involves subjective assessment established before taking actions, and decision refers to actions taken to perform tasks or solve problems (Solomon & Trotman, 2003). In a more formal term defined by the auditing standards, professional judgment refers to “the application of relevant training, knowledge, and experience, within the context provided by auditing, accounting, and ethical standards, in making informed decisions about the courses of action that are appropriate in the circumstances of the audit engagement” (IAASB, 2018, para. 13).publishedVersio

In auditor we trust: 44 years of research on the auditor-client relationship and future research directions

Author’s accepted manuscript.This author accepted manuscript is deposited under a Creative Commons Attribution Non-commercial 4.0 International (CC BY-NC) licence. This means that anyone may distribute, adapt, and build upon the work for non-commercial purposes, subject to full attribution. If you wish to use this manuscript for commercial purposes, please contact [email protected]—This study systematically reviews the auditor-client relationship (ACR) literature spanning 1976 to 2019 to provide future research directions. Design/Methodology/Approach—The study analysed 140 articles from the Web of Science database, authored by 259 scholars across 28 countries and published in 47 journals. It identified three major research streams to understand the ACR dynamics: auditor tenure, ACR attributes, and auditor-client negotiation. Findings—Three major findings emerged based on this review. First, few studies examine auditor-client negotiation relative to other streams; thus, it offers scope for further research. Second, given that various fields have employed diverse frameworks as theoretical underpinnings in prior studies, continuing this trend can better portray ACR from multiple perspectives. Finally, despite strong international regulations on ACR aspects, such as auditor independence, tenure, and rotation, implementation in several countries warrants special considerations, specifically on legal enforcement and investor protection, given diverse cultures and country-level institutional environments. Originality/value—This study contributes to the synthesis of existing and emerging research streams and provides future research suggestionsacceptedVersio

Do Auditor Professional Scepticism and Client Narcissism Affect Fraud Risk Assessment?

Abstract: This study investigates the effect of professional skepticism and client narcissism on auditors’ fraud risk assessment. Financial reporting fraud has become a concern for auditors as part of their responsibility. Auditors are expected to assess the risk of fraud as well as its impact on financial reporting. During fraud risk assessment, several factors can influence auditors, namely professional skepticism as an internal factor and client's narcissism as an external factor. Professional skepticism is related to the level of details and awareness to conduct assessment work. Narcissistic clients are more likely to demonstrate higher inherent and control risk. The purpose of this study is to investigate the effect of professional skepticism and client narcissism on auditors’ fraud risk assessment. This study employs a 2x2 between-subjects experimental design, where professional skepticism and client narcissism are manipulated into are high and low level. The participants in this study are 107 accounting students from undergraduate, master, and professional program in a major university in Indonesia. The results of this study suggest that auditors with a higher level of professional skepticism are more sensitive to the higher incident of fraud and client's narcissism positively affect auditors’ assessment of fraud risk. This study contributes to the current fraud risk assessment literature, particularly within Indonesian auditing profession. Abstrak: Penelitian ini menyelidiki efek skeptisisme profesional dan narsisme klien pada penilaian risiko penipuan auditor. Pelaporan keuangan penipuan telah menjadi perhatian bagi auditor sebagai bagian dari tanggung jawab mereka. Auditor diharapkan untuk menilai risiko penipuan serta dampaknya pada pelaporan keuangan. Selama penilaian risiko penipuan, beberapa faktor dapat mempengaruhi auditor, yaitu skeptisisme profesional sebagai faktor internal dan narsisisme klien sebagai faktor eksternal. Skeptisisme profesional terkait dengan tingkat rincian dan kesadaran untuk melakukan pekerjaan penilaian. Klien narsistik lebih mungkin untuk menunjukkan risiko yang melekat dan kontrol yang lebih tinggi. Tujuan dari penelitian ini adalah untuk menyelidiki efek skeptisisme profesional dan narsisisme klien pada penilaian risiko penipuan auditor. Penelitian ini menggunakan 2 x 2 desain eksperimental antar subyek, di mana skeptisisme profesional dan narsisisme klien dimanipulasi menjadi tinggi dan rendah. Para peserta dalam penelitian ini adalah 107 mahasiswa akuntansi dari program sarjana, master, dan profesional di universitas besar di Indonesia. Hasil penelitian ini menunjukkan bahwa auditor dengan tingkat skeptisisme profesional yang lebih tinggi lebih sensitif terhadap insiden penipuan yang lebih tinggi dan narsisisme klien secara positif memengaruhi penilaian auditor terhadap risiko penipuan. Studi ini berkontribusi pada literatur penilaian risiko penipuan saat ini khususnya dalam profesi audit Indonesia

Academic Dishonesty Among Accounting Students: Some Indonesian Evidence

Academic dishonesty among students has been recognised as a major concern in higher education in Indonesia. Accounting research arguably need to give more attention to this issue. This is partly because of the importance of integrity as part of accounting ethics and professionalism. However, little currently known about academic dishonesty among accounting students in Indonesia. We address this issue by surveying 342 accounting students about their perception of academic dishonesty and what motivates such behaviour. Our respondents were from all first, second or third year undergraduate students at one state university in Indonesia. Drawing from Theory of Planned Behaviour, we examine three individual variables - attitude, subjective norms, and perceived behavioural control. In addition, we also examine three situational variables - academic integrity culture, definitional ambiguity, and pressure. Six hypotheses were tested, using a Partial Least Squares-Structural Equation Modelling. The results reveal that 77.5% of respondents admitted committing academic dishonesty. While all individual factors studies have positive significant effect on the intention to commit academic dishonesty, of the three situational factors only pressure and definitional ambiguity have a positive significant effect. Surprisingly, it is found that academic integrity culture does not have a significant effect

Why do accounting students at higher learning institutions conduct an academic dishonesty?

Academic dishonesty is a serious educational problem.Moreover, the tendency to cheat at workplace appertain with the frequency of cheating in college.This study aims to empirically examine the influence of individual factors and situational factors to the intention of accounting students to conduct an academic dishonesty.This study uses survey as data collection technique by employing a set of a questionnaire.This result of this research finds that attitudes, subjective norms, and perceived behavioural control have positive and significant effects to the intention of the accounting students to commit an academic dishonesty.However, among three situational factors only pressure and definitional ambiguity that have a positive and significant effect to the intention of accounting students

Does accounting education affect professional skepticism and audit judgment?

This study examines the extent to which enrollment in accounting programs influences students’ skepticism levels. We compare the skepticism scores between final-year accounting students in undergraduate and professional programs. This study also investigates the impacts of trait skepticism and situational skepticism on the participants’ initial judgment of fraud or errors. Situational skepticism in this study is represented by audit experience from previous years. This study employs an experimental design of 2x3 between-subjects, where trait skepticism is divided into higher and lower levels, and the audit experience from previous years is manipulated into positive, negative and neutral. The participants in this study are 227 accounting students from both undergraduate and professional programs. The results of this study show that accounting students in the professional program are likely to exhibit higher levels of trait skepticism compared to their counterparts in the undergraduate program. The results also indicate that participants make an audit judgment based mainly on their prior experience with the client, not on their trait skepticism. This propensity is more salient particularly in the case of the less-skeptical participants. In sum, the higher that the formal education of a participant is, then the higher is his/her trait skepticism, and thus he/she is able to retain his/her skeptical judgments regardless of his/her prior experience with the client