Professional Scepticism of Auditors: A Cross-Cultural Experiment

 In light of the growth in multinational business operations and the greater use of international sources of finance, there has been a global trend to increased uniformity in accounting and auditing standards. The research suggests that uniformity in auditing also requires uniformity in the application of those standards. One study attempts to determine whether there are differences in the application of auditing standards due to the influence of cultural differences on decision-making by auditors. In this regard, the study examines the effect of culture, the risk of fraud and errors, and accountability on auditors’ professional scepticism, which is necessary to assess the risk of material misstatements.

Data from a sample of auditors from the Big 4 audit firms in Egypt and Australia were collected. The subjects evaluated the risk of fraud and error at the planning stage. The findings provide evidence as to whether auditors from different cultural backgrounds react differently to audit evidence. The results show that there are significant differences between the two countries with respect to some audit decisions.

This paper makes an original contribution to the literature by providing evidence about whether auditor judgments, decisions and professional scepticism are consistent across cultures. The findings indicate that the exercise of professional judgment differs between cultures. Therefore, the researchers recommend that international auditing standards should consider these differences.

For more information, read the research paper (and the related Doctoral Thesis), Professional Scepticism of Auditors: A Cross-Cultural Experiment by Medhat Endrawes, Department of Accounting and Corporate Governance, Macquarie University and Gary S. Monroe, School of Accounting, University of New South Wales.