Luc Quadacker - Prof Skepticism and Anlytical Rocedures

7/27/2019 Luc Quadacker - Prof Skepticism and Anlytical Rocedures

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What is Professional Skepticism?

Four Determinants of Auditors Skeptical Disposition and Their

Relationship to Analytical Procedures Planning Behavior

Luc Quadackers

Vrije Universiteit Amsterdam and Ernst & [email protected]

Tom GrootVrije Universiteit Amsterdam

Arnold WrightNortheastern University, Boston

August 25, 2007

Draft version, please do not refer to or quote without permission


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Abstract

The purpose of this study is to examine the relationships between four determinants of

auditors skeptical disposition and to look at what determinants are most closely related

to auditors skeptical behaviors.

Despite the importance of professional skepticism in the auditing literature, there

is a lack of consensus and empirical data on how skeptical disposition is measured and

the extent to which such measures map with auditor behaviors. Gaining insight into

factors that lead to desired skeptical behaviors forms the basis for auditor training,

guidance in audit tools, and can be used as a starting point for future research.

Four determinants of skeptical disposition are compared: (1) interpersonal trust;

(2) suspension of judgment; (3) locus of control; and (4) a comprehensive professional

skepticism scale. Moreover, the influence of strength of management control philosophy

on this relationship is studied.

An experimental study is conducted to address these issues involving a sample of

376 auditors from offices of the Big Four auditing firms in the Netherlands with

experience ranging from staff to partner level.

The results show that the strength of the effects of the determinants on skeptical

behaviors is different across the determinants. Overall, interpersonal trust appears to have

the highest explanatory power in predicting skeptical behaviors.

1. Introduction

Professional skepticism is considered to be an essential ingredient of the financial

statement audit, as reflected in the professional auditing standards (e.g., IFAC, 2007) andthe audit methodologies of international audit firms. Furthermore, the academic and

professional auditing literatures emphasize the importance of the use of professional

skepticism (see e.g., Hurtt et al., 2003a, p.2; Kadous, 2000; Nelson, 2007). In addition,


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Despite its importance, there exists no clear definition of what professional

skepticism is and how auditors skeptical characteristics are related to skeptical behaviors

(see e.g., Hurtt et al., 2003a; Nelson, 2007).1In a review of the philosophical literature,

Kurtz (1992, p. 21-22) summarizes:

... skeptikos means to consider, examine; skepsis means inquiry and doubt.

... Skeptics always bid those overwhelmed by Absolute Truth or Special Virtue to

pause. They ask, What do you mean?- seeking clarification and definition and

Why do you believe what you do?- demanding reasons, evidence, justification,

or proof. ... they say, Show me. ... Skeptics wish to examine all sides of a

question; and for every argument in favor of a thesis, they can usually find one or

more arguments opposed to it.

In a recent working paper, Nelson (2007) summarizes the existing literature on

professional skepticism in auditing and derives the following definition:

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.

ISA 200.15 (IFAC, 2006) states that an auditor should plan and perform an audit

with an attitude of professional skepticism, while ISA 200.16 (IFAC, 2006) states that

[a]n attitude of professional skepticism means the auditor makes a critical assessment,with a questioning mind, of the validity of audit evidence obtained and is alert to audit

evidence that contradicts or brings into question the reliability of documents and

responses to inquiries and other information obtained from management and those


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reliability of management assertions and to develop an audit program (Shaub and

Lawrence, 1999, p. 62).

Most of the auditing research literature that explicitly considers skeptical traits

(cf. Nelson, 2007) has equaled trust (or more specifically the complement of trust:

suspicion) as a measure for auditors skeptical disposition. Quadackers (2007)

summarizes the literature on the use of the complement of trust as a skeptical disposition

and recognizes the need for examining the Interpersonal Trust Scale (e.g., Rotter, 1967).

The Quadackers (2007) paper uses the same case materials that are used in this paper.

The interpersonal trust results of the Quadackers (2007) study are integrated in this paper

for reasons of comparison. In particular, this paper adds to the Quadackers (2007) study

in that it considers and compares three additional alternative measures of skeptical

disposition and in evaluating their power of explaining auditors skeptical behaviors.

Auditor skepticism will be studied based on the relationships between four

determinants of auditors skeptical disposition, a situational factor (management control

philosophy) and auditors skeptical behaviors (measured by planning judgments in an

analytical procedures task). Knowing what determinants constitute an auditors skeptical

disposition and how these determinants are related to skeptical behavior provides crucial

insights for the audit. Finding out the factors that make up an auditors skeptical

disposition can lead to a definition of the key attributes of skepticism in audit manuals

and training. Ultimately, audit firms may administer personality tests to their personnel in

order to assess the skepticism attributes of their auditors (e.g., Nelson, 2007).

Alternatively, Nelson (2007, p. 35) suggests that audit firms can stress the importance of

professional skepticism traits when hiring new auditors and when marketing the auditprofession in the hopes of discouraging people with low professional skepticism traits

from applying.

Furthermore, the insights gained from this study will also help in structuring


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efficiency (see e.g., Hirst & Koonce, 1996, p. 461, 464; Peecher, 1996, p. 125-126;

Koonce et al., 1995, p. 369). The experimental case, adapted from Peecher (1996),

contains an unexpected material increase in gross margin and a related management non-

error explanation concerning the fluctuation. 376 auditors read the case materials and

completed questions on how they would respond to the case situation in terms of audit

planning. In addition, they completed instruments measuring skeptical personality

dispositions.

In total, four different determinants are used to capture skeptical disposition: (1)

interpersonal trust (as measured by the Interpersonal Trust Scale, Rotter, 1967); (2)

suspension of judgment (as measured by the complement of the Need for Closure Scale,

Webster and Kruglanski, 1994); (3) locus of control (as measured by the Locus of

Control Scale, Rotter, 1966); and (4) a comprehensive professional skepticism scale (i.e.

the Hurtt Professional Skepticism Scale, Hurtt, 2003). These scales are widely recognized

and cited in the decision science and/or auditing literatures and will be described in depth

in the next section.

Six variables were used to examine skeptical judgments (i.e. skeptical behaviors):

(1) (the complement of) the likelihood that managements change in sales mix

explanation accounts for substantially all of the increase in gross margin; (2) the

likelihood of fraud; (3) the number of alternative explanations provided; (4) the number

of error explanations; (5) the likelihood that error explanations account for substantially

all of the increase in gross margin; and (6) the number of budgeted hours. Higher

assessments for each of these variables represent greater skeptical behavior by the

auditor.As mentioned, an important contribution of this paper is the empirical

examination of four determinants of skeptical disposition. This study enables a

comparison of the predictive validity of different determinants of skeptical disposition in


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negative correlation between interpersonal trust and locus of control. There appear to be

significant interaction effects of client risk on the relationships between determinants of

skeptical disposition and skeptical planning behaviors.

The remainder of the paper is organized as follows. In Section 2 the theory,

literature and hypotheses are described. The research method will be discussed in Section

3 and the results are presented in Section 4. The final section provides a discussion of the

findings and their implications for future research.

2. Theory, literature and hypotheses

Determinants of auditors skeptical disposition

As mentioned in the introduction, there exists no universally accepted definition of

professional skepticism. Considering various determinants of auditors skeptical

disposition (and related measures) enables a careful identification of personality factors

that engender desired behaviors, how they are related and what determinants have highest

explanatory value. Some authors assume auditors personality traits to be stable when

they start audit training and practice (see e.g., Libby and Luft, 1993; Nelson, 2007).

However, others have found auditor traits to be alterable (e.g. Carpenter, 2004). Hence,

knowing the status quo of the determinants of auditors skeptical disposition may be

influential in staffing decisions and/or planning auditors training.

This study examines four determinants of skeptical disposition. These measures

are based on skeptical characteristics which are of particular importance for auditors.

These characteristics and the related measures are discussed in this section, as well as theassociated findings of empirical auditing literature.

Reserved interpersonal trust


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Interpersonal trust can be defined as a generalized expectancy held by an

individual or a group that the word, promise, verbal or written statement of another

individual or group can be relied upon (Rotter, 1967, p. 651; Rotter, 1980, p. 1).

ISA 200.16 states that [w]hen making inquiries and performing other audit

procedures, the auditor is not satisfied with less-than persuasive audit evidence based on

a belief that management and those charged with governance are honest and have

integrity.

The basic thought is that if an auditor has a lower level of interpersonal trust he is

assumed to be more skeptical (e.g., Shaub, 1996; Hurtt, 2003). To measure trust, Shaub

(1996) used the trustworthiness and independence parts of the Wrightsman Philosophies

of Human Nature scale (Wrightsman, 1964, 1974) and a self-developed Client Trust

scale. Choo and Tan (2000) used a modified version of the Rempel et al. Trust Scale

(1985), originally measuring trust in the relationship with a persons life partner. To a

limited extent these scales showed significant direct or interaction effects in explaining

skeptical behaviors. However, none of the scales yield strong results. The trustworthiness

and independence parts of the Wrightsman Philosophies of Human Nature Scale do not

lead to significant results. Shaubs Client Trust Scale only shows significant results in

two of the 18 regressions tested. The Rempel et al.Trust Scale showed some significant

results but Choo and Tan (2000, p. 81) state that the scale is not psychometrically valid.

With the exception of a study by Quadackers (2007), the Rotter Interpersonal Trust

Scale (1967) has not been used yet as a measure for skeptical disposition in prior auditing

research despite the fact that this scale is widely accepted in other fields (see e.g., Hoell,

2004; Johnson-George and Swap, 1982; Stack, 1978; Webb and Worchel, 1986). In non-auditing studies Rotters Interpersonal Trust Scale has been associated more strongly

with actual behaviors and other validating evidence than other interpersonal trust scales

(Stack, 1978, p. 569; Rotter, 1980, p.2).2 Therefore, the first measure for skeptical


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Suspension of judgment

Suspension of judgment is one of the main characteristics of skeptics (e.g., Bunge,

1991; Kurtz, 1992; Hurtt et al., 2003a). Kurtz states that suspension of judgments ... is a

necessary ingredient of skeptical inquiry (1992, p. 41). According to Bunge (1991, p.

131) [s]keptics do not accept naively the first things they perceive or think; they are not

gullible. Nor are they neophobic. They are just critical; they want to see evidence before

believing. Skeptics particularly suspend judgment concerning whatever has not been

checked (Bunge, 1991, p. 132). Skeptics keep on gathering evidence until no reasonable

person would doubt the claim stated (Kurtz, 1992, p. 132).

Also the auditing standards state that the auditor should gather sufficient and

appropriate audit evidence to the point that he is able to draw reasonable conclusions on

which to base the audit opinion (ISA 200.16).3 Particularly when there is a risk of

material misstatement due to fraud, this can affect the auditors professional skepticism in

two ways (ISA 240.64). Firstly, it may increase the auditors assessment of the risk of

material misstatement and sensitivity in the selection of the nature and extent of

documentation. Secondly, it may increase the auditors recognition of the need to

corroborate management explanations or representations concerning material matters.

This leads to suspension of judgment.

Suspension of judgment is assumed to be negatively correlated with the need for

cognitive closure. Need for cognitive closure is one of the important dispositional

constructs affecting the knowledge acquisition process (e.g., Kruglanski and Ajzen,

1983). If a person has a higher need for closure then it might hinder the persons

hypothesis-generation process because conflicting hypotheses would threaten an existingor inherited conclusion. Research evidence suggests that the need for quickly reaching a

decision leads to the tendency to seek cognitive closure and to refrain from critical

probing of a given seemingly adequate solution to a problem (Kruglanski and Freund,


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The Need for Cognitive Closure Scale measures the desire to possess some

knowledge on a given topic, any definite knowledge as opposed to confusion and

ambiguity (Webster and Kruglanski, 1994). The proposition is that a skeptical person will

suspend judgment until he or she knows more about an ambiguous situation and hence

will have a lower score on this scale.

This implies that an auditor with a higher need for closure has a lower ability to

suspend judgment when confronted with a management explanation (i.e. he will be more

eager to accept the explanation) and hence will behave a less skeptically. Or as Bailey et

al. (2006) state: [a] heightened need for closure would inhibit the hypothesis-generation

process because conflicting hypotheses would threaten an existing conclusion.

Consideration of initial hypotheses wrongly may cause problems since they may steer

auditors further evidence evaluation and judgment.

The only auditing study to examine need for closure was conducted by Bailey et

al. (2006). They report that the need for closure is significantly less for higher ranks than

for lower ranks. Furthermore, a series of experiments show that need for closure affects

judgment and decision making in professional settings. More specifically, auditors with a

higher need for cognitive closure show more stereotyping behavior and spend less time

on tasks.

Internal locus of control

Locus of control refers to assumed internal states that explain why some people

actively, tenaciously, and eagerly try to deal with difficult circumstances, while others get

passively stuck in negative emotions (Lefcourt, 1991, p. 413). An external locus ofcontrol indicates a pervasive belief that outcomes cannot be influenced by ones personal

efforts, while an internal locus of control implies the belief that outcomes are contingent

upon personal actions (Lefcourt, 1991, p. 414).4Persons with a more external locus of


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control are referred to as externals and persons with a more internal locus of control are

referred to as internals.

The importance of locus of control has been widely recognized (Phares, 1978, p.

276). Previous research shows that externals are more readily persuasible, confirming,

and accepting of information from others (see e.g. Phares, 1978 for an overview).

Internals are associated with a more active pursuit of valued goals, information seeking

(e.g. they have better learning skills in identifying and searching for task relevant cues)

and autonomous decision making, and are better able to cope with stress (e.g., Lefcourt,

1991, p. 414; Phares, 1978). Internals generally appear to be more competent and

personally effective than externals (e.g., Phares, 1978, p. 278) and they approach

situations with a more directive and alert posture than externals (Phares, 1978, p. 276).

Although acceptance by an internal of the control of another does happen, it will most

certainly be thoughtful and analytic rather than blind und unthinking (Phares, 1978, p.

279).

The characteristics of internals mentioned above appear to be highly relevant for

auditors professional skepticism (cf. Hurtt, 2003). For example, in terms of accepting

management assertions, internals will be more critical than externals. Being critical of

management assertions is considered to be important by the auditing standards (e.g., ISA

240, par. 42).

Furthermore, in auditing surveys, several potential reasons for practicing a low

level of professional skepticism in auditing have been identified. Pasewark et al.(1992)

find that auditors may not take skeptical action because of intimidation or concerns about

clients reactions. In addition, Behn et al. (1997) found a negative relationship betweendemonstrated professional skepticism and client satisfaction (i.e. the more skeptical the

auditor was the unhappier the client became). These situations may result in pleasing the

client and reducing skepticism. Allegedly, skeptical behavior in such situations may


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examines the link between locus of control and auditors fraud detection. The detection

rate for fraud was not significantly higher for internal locus of control auditors (however

there was an interaction with experience). Tsui and Gul (1996) find a direct effect of

locus of control on auditors behavior in an audit conflict situation (but also report an

interaction effect with ethical reasoning). Externals were more likely to ignore

unrecorded liabilities as wanted by management. Donnelly et al. (2003) find that

externals are more accepting of dysfunctional audit behavior (e.g. premature sign-off,

gathering of insufficient evidence).

A comprehensive professional skepticism scale

The need for development of a specific professional skepticism scale for auditing

has been stressed by several authors (e.g., Choo and Tan, 2000; Hurtt, 2003). Hurtt

(2003) developed such an instrument to measure an individuals level of professional

skepticism based on skeptical characteristics. Hurtt et al. (2003a) derive three sets of

skeptical characteristics from philosophical literature, auditing standards and existing

literature on skepticism in auditing which together determine an individuals overall level

of professional skepticism: (1) examination of evidence; (2) understanding evidence-

providers; and (3) acting on the evidence.

The characteristics related to the examination of evidence consist of a

questioning mind, suspension of judgment and search for knowledge. A questioning

mind is demonstrated in a requirement for reasons, evidence, justification or proof.

Suspension of judgment is a characteristic indicating that a skeptic is slow to form

judgments, requiring deliberation and additional supporting information to reach thatjudgment. Search for knowledge is equated with curiosity.

The characteristics related to understanding evidence-providers consist of

interpersonal understanding of the motivation and integrity of evidence-providers.


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These three sets of characteristics determine the individuals overall level of

professional skepticism, which in turn drive skeptical behavior (Hurtt et al., 2003a).

There is some empirical evidence that the scores on the Hurtt Professional Skepticism

Scale are related to skeptical behavior (Hurtt et al., 2003b; and Popova, 2006). Hurtt et

al. (2003b) find that scores on this scale are significantly related to contradictions

detected in the working papers (one of two variables) and marginally related to one of

three variables measuring expanded information search. Popova (2006) studied the

relationship between the scores on the Hurtt Professional Skepticism Scale and the

determination of initial hypotheses regarding potential misstatements. Generally, the

findings show that the auditors who are less skeptical in terms of the Hurtt scale are

guided more by client specific experience when they assess initial hypothesis regarding

possible misstatements. Furthermore, more skeptical auditors are more evidence-prone

than less skeptical auditors (particularly in the positive client experience setting) and

more skeptical auditors judge fraud evidence to be of greater relevance.

All four determinants described are hypothesized to influence skeptical

disposition. Therefore it is of interest to study the extent to which these determinants are

related. Three of the determinants comprise characteristics of skeptical auditors. The

fourth determinant is a comprehensive measure of professional skepticism. It is not

theoretically clear whether and how the determinants are related. For example, Hurtt

(2003, p. 12) found empirical evidence for the fact that the trustworthiness and

independence parts of the Wrightsman Philosophies of Human Nature Scale are not

significantly correlated with the Hurtt Professional Skepticism Scale. However, she

postulates that interpersonal trust aspects are a component of professional skepticism.Therefore, the relationship between the four determinants is stated as a research

question.


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Prior research in psychology has found that personality dispositions influence

behavior (e.g., Eagly and Chaiken, 1993; 2005; Ajzen, 2005, pp 34-37).5In the setting of

professional skepticism, Hurtt et al. (2003a; 2003b) theorize that an auditors skeptical

characteristics (such as a questioning mind) determine level of professional skepticism,

which subsequently drives skeptical behavior. Hence, theory implies that auditors with a

more skeptical disposition behave more skeptically (e.g., suspend judgment and engage

in more substantive testing) than auditors with a less skeptical disposition. Of particular

importance is what determinant is most closely related to the auditors skeptical

behaviors.

The second research question is formulated as follows.

RQ2: How closely are the four determinants of skeptical disposition related to skeptical

behavior and which is most closely related?

The influence of situational factors: client risk

Although skeptical behavior is hypothesized to be related to skeptical disposition,

behavior is also expected to be related to situational characteristics (see e.g., Eagly and

Chaiken, 1993; 2005; Ajzen, 2005; Kee and Knox, 1970). Therefore, it is conceivable

that professional skepticism is situation specific (Bhattacharya et al., 1998, p. 461).

Auditor skeptical behavior is particularly necessary in high risk situations. For

instance, professional standards dictate that engagements with a higher risk of material

misstatement due to fraud should be audited with increased professional skepticism

(IFAC, 2006, ISA 240.63). Such situations also expose the individual auditor and thefirm to increased reputation and other risks (e.g., litigation). Furthermore, clients

explanations of unexpected fluctuations should be corroborated by the auditor more fully

if the risk related to the areas of explanation is high (cf. Hirst and Koonce, 1996, p. 473).


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with increased professional skepticism (IFAC, 2006). This may result in all auditors

exhibiting skeptical behavior in a high risk situation, regardless of their skeptical

disposition. However, it is unclear whether behavior will then differ according to

skeptical disposition in the low risk setting.

Alternatively, auditors may all show similar levels of low skeptical behavior in

the low risk setting (regardless of their skeptical disposition), since they may judge the

situation as non risky. However, then skeptical behavior might be dependent on skeptical

disposition in high risk settings.

One of the most pervasive client risks is the clients control environment (e.g.

Haskins, 1987; Bernardi, 1994). Management control philosophy is an important

constituent of the control environment. Financial reporting problems of companies are

often related to a weak management control philosophy (see e.g., COSO, 1992). Cohen

and Hanno (2000) found that audit planning judgments are responsive to management

control philosophy.

Since the nature of the potential interaction effect between skeptical disposition,

skeptical behavior, and client risk is unclear the final issue is addressed as a research

question.

RQ3: How is the relationship between auditors skeptical disposition and

skeptical behavior (as reflected in audit planning judgments) dependent on

the strength of management control philosophy?

3. Method

Research setting

The study utilizes an experimental case that is embedded in a planning stage


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1995, p. 369). For example, missing a material overstatement of earnings that could have

been identified by analytical procedures can result in misleading financial statements

with the associated misallocation of resources and litigation (see e.g., Asare and Wright,

2001).

The case contains an unexpected material increase in gross margin. Since the

audit client is the most common source of explanations concerning unexpected

fluctuations in planning-stage analytical procedures (see e.g., Hirst and Koonce, 1996, p.

463; Trompeter and Wright, 2007), in the case a client explanation is provided. The CFO

of the company gives a non-error explanation concerning the fluctuation stating that the

increase in gross margin is caused by a change in the sales-mix. In view of the fact that

management may lack independence, auditors should evaluate client explanations with

professional skepticism (cf. Bedard and Biggs, 1991, pp. 77-79; Glover et al., 2000, p.

29; ISA 240, par. 42).

In the experiment, strength of management control philosophy was manipulated

as strong or weak by using vignettes based on Cohen and Hanno (2000).

Research variables

Dependent variablesSix proxies for auditors skeptical behavior are used as dependent variables. They

are presented below.

An auditor should reflect on the information that is provided by a client.

Particularly for a skeptical auditor it is common to ponder over the incentives a client

might have in furnishing that information (e.g., Hurtt et al. 2003a). Auditors who assess alower probability of accepting managements explanation are assumed to show more

skeptical behavior. The variables studied in this respect are the likelihood that

managements explanation (a change in sales mix) accounts for substantially all of the


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examine (e.g., Hurtt et al. 2003a). Auditors are assumed to exhibit more skeptical

behavior when they: (1) are able to generate a greater number of plausible alternative

explanations; (2) provide more error-explanations (since these are opposite to the clients

non error explanation); and (3) assess higher probabilities of the accuracy of error

explanations. As a result, the variables studied are the number of alternative explanations

provided, the number of error explanations provided and the likelihood that the error

explanations account for substantially all of the increase in gross margin (>85%) (c.f.,

Peecher, 1996; McMillan and White, 1993).

Finally, an indication of skepticism is the extent to which auditors want to

perform further testing (e.g., Hurtt et al. 2003a). The main variable studied is number of

budgeted hours (cf., Shaub, 1996; Shaub and Lawrence, 1996; Hurtt et al., 2003b;

Popova, 2006). A reference point of 100 hours for last year is given.

Independent variables: four determinants of skeptical disposition

The measurement scales for the four determinants of auditors skeptical

disposition will now be discussed.7

Interpersonal trust

The first determinant of skeptical disposition, interpersonal trust, is measured by

(the complement of) the Interpersonal Trust Scale (Rotter, 1967). Rotters Interpersonal

Trust Scale consists of 25 items that are scored on a five point Likert Scale (varying from

strongly disagree to strongly agree).8Three typical scale-items are, for example: (1) in

7 The primary focus of this study is on the general affects of determinants of skeptical disposition on

auditor behaviors. Therefore, factor-analyses to examine individual factors within the determinants

are outside the scope of this paper.8 As noted by Quadackers (2007), there are four reasons for selecting this measure: (1) Rotters


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dealing with strangers one is better off to be cautious until they have provided evidence

that they are trustworthy (negatively scored); (2) it is safe to believe that in spite of

what people say most people are primarily interested in their own welfare (negatively

scored); and (3) most salesmen are honest in describing their products.

Suspension of judgment

Suspension of judgment is studied as the second determinant of skeptical

disposition and will be measured by the 42-item Need for Closure Scale (Webster and

Kruglanski, 1994). The responses to the 42 items are requested on a 6-point Likert scale

ranging from 1 (strongly disagree) to 6 (strongly agree). Webster and Kruglanski (1994)

rationalized that the need for closure will express itself in a variety of ways. This is in

accordance with the underlying theory of lay epistemics (Kruglanski, 1989, 1990a,

1990b). Therefore, they viewed it as a latent variable visible through different facets (cf.

Carver, 1989).9Webster and Kruglanski (1994) identified five major facets that represent

the construct: (1) preference for order; (2) preference for predictability; (3) decisiveness;

Webster and Kruglanski (1994) reasoned that persons with a high need for closure would

possess a desire to reach closure, revealed in a decisiveness of their judgments and

choices; (4) discomfort with ambiguity; and (5) closed-mindedness; Webster andKruglanski (1994) theorize that a person with a high need for closure possesses an

unwillingness to have one's knowledge confronted (hence, rendered insecure) by

alternative opinions or inconsistent evidence. They found that the Need for Closure

Scale is reliable in assessing a single coherent construct with five facets and has high test-

retest reliability. The Need for Closure Scale has been confirmed and has been validated

in numerous studies cross-culturally.

Three examples of scale items are: (1) when I am confused about an important

issue, I feel very upset; (2) I dislike questions which could be answered in many


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Locus of control

The third determinant of skeptical disposition studied is locus of control and is

measured by Rotters (1966) Locus of Control scale. This scale contains 23 question pairs

that have to be answered in a forced choice format (i.e. one of the two possibilities per

question). For example, one of the question pairs was: (a) without the right breaks one

cannot be an effective leader; and (b) capable people who fail to become leaders have

not taken advantage of their opportunities. The participants had to choose one of the two

options. In this case option b indicated an external locus of control. In this fashion the

number of hits on external locus of control statements constitutes the Locus of Control

Score.

Rotters Locus of Control scale has been proven reliable and valid in numerous

samples (see e.g. Lefcourt, 1991).

Comprehensive professional skepticism

The fourth comprehensive determinant of skeptical disposition is the Hurtt

Professional Skepticism Scale (2003). This is a relatively new scale which has only been

examined in a few unpublished papers (e.g. Hurtt et al. 2003b; Popova, 2006; Fullerton

and Durtschi, 2005). The scale consists of 30 items to be scored on a 6-point scale,ranging from 1 (strongly disagree) to 6 (strongly agree). The scale is designed to provide

a single score of professional skepticism, although the items are organized along six

theoretically derived facets: (1) search for knowledge; (2) suspension of judgment; (3)

self-determining; (4) interpersonal understanding; (5) self-confidence; and (6)

questioning mind (see Hurtt, 2003). Three illustrative items are, for example: (1) I often

accept other peoples explanations without further thought (negatively scored); (2) I

dont like to decide until Ive looked at all of the readily available information; and (3)

It is easy for other people to convince me (negatively scored).


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Independent variables: manipulated and control variables

Strength of the management control philosophy is manipulated as being strong

(coded as 0) or weak (coded as 1).10In the strong management control philosophy setting,

management is conservative in doing business, has modest disagreements with the

external auditors, has strict guidelines for following internal control procedures, and

obtains reward based on several financial and non-financial performance measures. In the

weak management control philosophy setting, management is aggressive in doing

business, has frequent disagreements with the external auditors, has less strictly applied

internal control procedures if advancement of work suffers from them, and has

compensation plans that are mainly based on reaching short-term accounting-based

performance measures. Strength of management control philosophy is manipulated in a

between subjects design.

To examine the effects of the determinants of skeptical disposition and strength of

management control philosophy on skeptical behavior, it is necessary to control for the

auditors prior task experience by measuring the participants years of experience in

conducting analytical procedures and adding that variable to the models.

Research instrument validation and manipulation checksThe majority of the participants in the experiment (i.e. 86%) was living in the

Netherlands and their mother tongue was Dutch.11 Therefore the case-materials were

translated into Dutch. Concerning the measurement scales, Dutch translations were

readily available for the Need for Closure scale (Cratylus, 1995) and for the Locus of

Control Scale (see e.g. Boone and De Brabander, 1993). Translations were developed for

the Interpersonal Trust Scale and for the Hurtt Professional Skepticism Scale. For that

purpose a combination of the Parallel Blind Technique and Translation/Back-Translation

methods was used (Behling and Law, 2000).


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with 19 staff level auditors and minor modifications were made to the instrument on the

basis of the comments received.

The research instrument contains two parts. The first part includes the case

description and the tasks (i.e. the dependent variables).12The second part contained the

scales to measure skeptical disposition, demographic information and debriefing

questions about the case.

Two questions were asked as manipulation checks concerning the strength of

management control philosophy variable (cf. Cohen and Hanno, 2000). The questions

pertaining to the effectiveness of the control environment and overall control risk were

assessed on a 9-point scale.13The scale regarding control environment effectiveness was

ranging form very ineffective to very effective. The scale concerning overall control risk

was ranging from very low risk to very high risk. The means score on the control

environment effectiveness was 3.49 in the weak management control philosophy setting

and 6.21 in the strong management control philosophy setting. The mean score on the

overall control risk was 6.63 in the weak management control philosophy setting and

4.76 in the strong management control philosophy setting. These results are in the

expected direction and are highly significant (One-way ANOVAs show a p-value of

0.000).In order to assess case realism and understandability two questions were scored

on a 9-point scale. The scale for case realism ranged from highly unrealistic to highly

realistic and the scale for case understandability ranged from very unclear to very clear.

The mean score for case realism was 6.08 and the mean score for case understandability

was 6.73. One-sample t-tests show that the mean scores are significantly above the

middle points (i.e. a value of 5) of the scales (p-values are 0.000).


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Sample

All of the Big Four firms cooperated in this study. The participating firms are

randomly coded as Firm A, B, C and D.14Descriptive information on the sample can be

found in Table 1.

*** INSERT TABLE 1 ABOUT HERE ***

There were 376 participants in total of which 86 were female (i.e. 23%) and 286

were male (i.e. 77%). All staff levels contained a number of participants that was

sufficient for our statistical analyses. However, the number of partners (73) and staff (56)

participating was less than managers (116) and seniors (124) taking part. The spread of

the auditors across staff levels varied per firm as a result of availability.

On average the auditors had about 10 years of general experience and 10 years of

experience with conducting analytical procedures. Both general experience and task

specific experience suggest that the participants possess the requisite task knowledge.

The number of participants was relatively balanced across the two cells of the strength of

management control philosophy manipulation.

All participants completed only two of the measurement scales. This was donedue to limited time availability as well as to avoid information overload and/or fatigue.

One-way ANOVAs show that there are no order effects in the administration of scales for

skeptical disposition. However, since the scales were offered to the participants in

different combinations, order-effects cannot be assessed for the sample as a whole. Table

2 provides information on the sample sizes for the four measures of skeptical disposition

studied across firms.



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As can be seen in Table 2 there are three possibilities for mutual comparison of

the scales (1) the Hurtt Professional Skepticism Scale and the Need for Closure Scale; (2)

the Hurtt Professional Skepticism Scale and the Interpersonal Trust Scale; and (3) the

Interpersonal Trust Scale and the Locus of Control Scale.

Administration of the experiment

The experiment was conducted during 12 sessions of which 9 sessions were part of

the yearly summer courses, two sessions were held during monthly partner meetings and

one session was an audit methodology training course for instructors.

The first author attended all sessions and provided a brief introduction before the

start of the experiment. The single remark concerning the content of the study was that it

comprised a case on conducting preliminary analytical procedures. After the introduction

the participants received an envelope containing the research materials. A printed

instruction regarding completion of the instrument was stuck on the envelope. The

different versions of the questionnaire were spread across participants in a fully

randomized fashion. After a starting-signal from the instructor the participants opened the

envelope. The envelope included two smaller envelopes with parts one and two of the

research instrument. The two envelopes containing the parts of the instruments wereidentified with identical numbers in order to enable ex post matching. The participants

were asked to write down their name on the envelope in order to induce a feeling of

accountability.

Upon completion of part one (risk assessment and audit planning tasks), the

participants were instructed to put the first part of the questionnaire into the first envelope

and seal it. Then they proceeded with part two (skeptical dispositions and debriefing

questions) which had to be put in the second envelope and sealed after completion.

Finally, envelopes 1 and 2 had to be put into the large envelope.


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Coding

In the case description, the CFO provided a non-error explanation for the increase

in the gross margin percentage. The participants were requested to think about possible

alternative explanations for the increase in the gross margin percentage. Those alternative

explanations were coded by the author and an experienced audit manager. The coding

encompassed an assessment of the type of explanation and of the plausibility of the

explanation (i.e. is the explanation logical and in the right direction). In order to

appropriately study error explanations, which are of the highest importance to the study,

the following types of explanations were distinguished: non-error explanations,

unintentional error explanations, intentional error explanations and ambiguous

unintentional/intentional explanations. Cohens Kappa Coefficient regarding the coding

of the plausibility of the explanation was 0.795 (p = 0.000) and Cohens Kappa

Coefficient for coding the type of explanation was 0.864 (p = 0.000). These levels of the

Kappa are strong (e.g., Landis and Koch, 1977). Differences were discussed by the two

coders and mutually resolved. Explanations were also coded as a repeated explanation or

not (i.e. does the respondent repeat an earlier explanation). Although the Kappa

Coefficient was significant (p = 0.000) its value was low (0.193). In the total of 1290

explanations there were disagreements in only 54 cases (4.2%). In most cases one coderconsidered the explanations to be repeated while the second coder did not. A closer

examination of the explanations revealed that there were new additional elements present

in explaining what was going on in those cases. For this reason, after discussion the

repeated explanations were coded as not repeated explanations.

4. Results

Descriptive statistics regarding the measurements scales used for skeptical

disposition in the study are shown in Table 3. As can be derived from the table, all mean


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The Cronbach alpha values for the scales are all adequate (see e.g. Nunnally,

1978). One-sample Kolmogorov Smirnov tests and an examination of the histograms

indicate that the measurement scales studied show normally distributed scores.

Results for Research Question 1

The quintessence of RQ1 is whether there is a relationship between the four

measures for skeptical disposition. Table 4 shows Pearson correlations between the

measures.


Table 4 shows a significant negative correlation between interpersonal trust and

locus of control. This implies that an auditor who is more trusting (i.e. a higher score on

interpersonal trust) has a more internal locus of control (i.e. a lower score on locus of

control) and vice versa. If the theoretical assumption is correct that more skepticism

means lower trust and more internal locus of control, this finding is contrary to

expectations. None of the correlations between the other combinations are significant.

This could be an indication that the measures capture different aspects of skepticism.Alternatively, this may be a first indication that some of the factors studied are not strong

determinants of skeptical disposition. However, it has to be bore in mind that for reasons

of brevity of the research instruments the study did not collect samples which enable

comparison between interpersonal trust and need for closure, need for closure and locus

of control, and locus of control and the Hurtt Professional Skepticism Scale.


MANOVAs were conducted to assess the impact of the independent variables on


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determinant of skeptical disposition. The dependent variables were: the likelihood that

managements change in sales mix explanation accounts for substantially all of the

increase in gross margin (>85%), the likelihood of fraud, the number of alternative

explanations provided, the number of error explanations provided, the likelihood that the

error explanations account for substantially all of the increase in gross margin (>85%),

and the number of budgeted hours. As independent variables the models included the

respective determinant of skeptical disposition, the management control philosophy

manipulation, years of experience with conducting analytical procedures (i.e. task

specific experience) and an interaction term between the determinant of skeptical

disposition and the management control philosophy manipulation.

Results of Levenes tests of equality of error variances lead to rejection of the

hypothesis that error variances are equal for: 3 (out of 6) dependent variables for the

Interpersonal Trust scale; 2 dependent variables for the Need for Closure scale; 4

dependent variables for the Locus of Control scale; and 1 dependent variable for the Hurtt

Professional Skepticism Scale. However, the MANOVA technique is quite robust for

violations of the equality of variances assumption when the sample sizes in the cells are

roughly equal (see e.g., Hair et al., 2006, 409-410; Finch, 2005). The cells of the

manipulated variable for the four professional skepticism measure samples are aboutequal (i.e., 149 and 142 for the Interpersonal Trust measure, 43 and 42 for the Need for

Closure measure, 100 and 95 for the Locus of Control measure, and 92 and 89 for the

Hurtt Professional Skepticism Scale measure). Hence, the MANOVA results will be

interpreted.

An assumption for MANOVA is that a significant correlation exists between the

dependent variables. This can be tested by Bartletts test for sphericity, which is

significant (p = 0.000) for all four professional skepticism measure samples.


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The multivariate effects are examined (untabulated). For the Interpersonal Trust

measure sample, the tests show statistical significance for all independent variables in the

model. Hence, all independent variables appear to have a significant influence on the

collective set of dependent variables. For the Need for Closure measure sample, the tests

show statistical significance for management control philosophy strength and for the

interaction of the Need for Closure measure and management control philosophy

strength. For the Locus of Control measure sample, the tests show statistical significance

for management control philosophy strength and for task specific experience (and

marginal significance for the interaction of the Locus of Control measure and

management control philosophy strength). For the Hurtt Professional Skepticism Scale

sample, none of the tests show statistical significance. However, the level of skepticism is

marginally significant.

Linear regressions were conducted in order to understand the nature of the impact

of the independent variables on the skeptical behaviors. A summary of the regressions is

provided in Table 5.


Interpersonal trust is significant in two of the six regression models (i.e. the

likelihood that management explanation is right16 and the likelihood of fraud). These

effects are in the expected direction.

Need for closure is significant in one of the models (i.e. the number of error

explanations). However, the effect is opposite to the expected direction. This effect will

be examined further when Research Question 3 is discussed.

Locus of control is not significant in any of the models. The Hurtt Professional

Skepticism Scale is significant for the model regarding the number of error explanations


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impact of different behaviors. Locus of control appears to have no direct influence on

skeptical behavior, which suggests that locus of control does not directly determine

skeptical behavior. Need for closure showed one effect that was opposite to the expected

direction. That effect will be addressed when discussing the interaction effects.


RQ3 aims at assessing the interaction effects between determinants of auditors

skeptical disposition and strength of management control philosophy in explaining

auditors skeptical behavior.

First, the direct impact of management control philosophy strength is examined.

For interpersonal trust, strength of management control philosophy is significant in four

of the six significant models (i.e. the likelihood of fraud, the number of alternative

explanations, the number of error explanations and the weight of the error explanations).

The effects are all in the expected direction. For need for closure, strength of

management control philosophy is significant in three of the four significant models (i.e.

the likelihood of fraud, the number of error explanations and the weight of the error

explanations). The effects are all in the expected direction. For locus of control, strength

of management control philosophy is significant in one of the four significant models (i.e.the number of error explanations) and marginally significant in one of the four significant

models (i.e. the weight of the error explanations). Both effects are in the expected

direction. For the Hurtt Professional Skepticism Scale, strength of management control

philosophy is not significant in any of the significant models.

All significant direct effects of strength of management control philosophy are in

the expected direction. In the models with the number of error explanations and the

weight of error explanations as dependents, strength of management control philosophy

has the strongest direct effect.


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(2007). The interaction effects are about equal concerning the effects for the need for

closure construct. To be exact, there is a significant interaction effect between need for

closure and the strength of management control philosophy concerning the number of

error explanations and there are two marginally significant interaction effects for the

likelihood of fraud and the weight of the error explanations. The plot of the interaction

effect pertaining to the number of error explanations is presented in Figure 1. The figure

shows that the number of generated error explanations is about equal for the low and high

need for closure groups in the weak management control philosophy setting.17

*** INSERT FIGURE 1 ABOUT HERE ***

Hence, when there is a management control philosophy problem obviously all

auditors seem to adequately respond to this, regardless of the skeptical disposition.

However, in the strong management control philosophy setting there is a significant

difference (post hoc Scheffe test) between the mean number of total error explanations

for the low and high need for closure groups. Contrary to intuition, the line is upward

sloping which indicates that auditors with a lower need for closure (i.e. they are supposed

to possess a higher degree of skeptical disposition) generate less alternative errorexplanations than auditors with a higher need for closure (i.e. auditors with a supposedly

lower degree of skeptical disposition). This seems to be related to the already presented

finding that the direct effect of need for closure is opposite to the expected direction for

the number of error explanations.

This pattern is also suggested by the plot of the interaction effect of the weight of

the error explanations (untabulated). However, post hoc Scheffe tests and independent

sample t-tests do not show significant differences between the means of the low and high

need for closure groups in the weak and the strong management control philosophy


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concerning the interpersonal trust interaction in the Quadackers (2007) paper, the

counterintuitive slope of the line may be explained by the fact that skeptical auditors

focus more (i.e. put more weight) on fewer errors which would result in a higher average

weight per error. This would result in a different slope if the interaction effect is

calculated for the variable weight of the error explanations divided by the number of

error explanations. A plot of this variable is presented in Figure 2.


As can be seen from Figure 2, the slope for the strong control philosophy setting

has reversed, as expected. An independent samples t-test shows marginal significance of

the difference between the low and high need for closure groups (one-sided p = 0.07).19

This implies that more skeptical auditors focus more (i.e. put more weight) on fewer

errors which would result in a higher average weight per error. Apparently, this

conception both holds for interpersonal trust and need for closure.

The interaction effect concerning the likelihood of fraud is presented in Figure 3.


The plot of the interaction effect looks similar to the plot of the interpersonal trust

variable presented by Quadackers (2007). However, post hoc tests showed a significant

difference for the low and high interpersonal trust groups in the weak management

control philosophy setting but post hoc tests and independent sample t-tests do not show a

significant difference for the need for closure measure (this might be due to the relatively

small sample size of the need for closure sample).

There is a marginally significant interaction effect between locus of control and


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An independent sample t-test shows a marginal significance (two-tailed p = 0.07)

of the difference between the low and high locus of control groups in the weak

management control philosophy setting. However, the slope of the line is opposite to the

slopes for the interpersonal trust and need for closure constructs. This implies that

auditors with a more internal locus of control (i.e., a lower score on the locus of control

construct), which allegedly means a higher skeptical disposition, assess lower likelihoods

of fraud. This seems to suggest locus of control is not capturing behaviors that depict the

notion of skepticism as outlined in professional standards.

There are no interaction effects for the Hurtt Professional Skepticism Scale.

In sum, the results suggest that the effect of skeptical disposition on the audit

planning variables depends on the strength of management control philosophy. This in

particular holds for the interpersonal trust and need for closure measures, which basicallyshow similar interaction effects.20

5. Discussion

Summary

A summary of the findings concerning the effects of the determinants of skeptical

disposition and strength of management control philosophy on skeptical behavior (as well

as their interaction effects) are presented in Table 6. The findings show that interpersonal

trust, need for closure and the Hurtt Professional Skepticism Scale are directly of

influence on skeptical behaviors. Furthermore, there are significant interaction effects for

the models concerning interpersonal trust, need for closure and locus of control.

Predominantly, these interaction effects are present for the likelihood of fraud, the

number of error explanations and the weight of the error explanations.

In particular, the number of error explanations seems to be directly explained by


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More skeptical behaviors are associated with interpersonal trust than any of the

other determinants, suggesting it most closely depicts the skeptical behaviors prescribed

in the auditing literature and professional standards. This also confirms the use of trust

variables in earlier research on professional skepticism.

An examination of the correlations between the determinants of skeptical

disposition only revealed a significant negative correlation between interpersonal trust

and locus of control. From a skeptical viewpoint this appears to be contrary to

expectations. Interestingly, interpersonal trust has the strongest influence on skeptical

behaviors while locus of control only has a weak impact. This suggests that although

interpersonal trust and locus of control are related, locus of control does not seem to

capture skeptical disposition. The importance of skepticism may overpower locus of

control such that both internals and externals show skeptical behavior (cf. Phares, 1978,p. 282).

Furthermore, none of the correlations between the other combinations of the

determinants were found significant.21 This could be an indication that the measures

capture different uncorrelated aspects of skepticism. This indication is supported by the

fact that need for closure and the Hurtt Professional Skepticism Scale also do have

significant (in)direct effects on skeptical behaviors.

Implications and suggestions for further research

The fact that interpersonal trust is most closely related to skeptical behaviors

confirms the use of trust variables in earlier research on professional skepticism. It

warrants a further study of the components of the trust variable (see Quadackers, 2007) in

order to more specifically find the factors comprising skeptical disposition.

Moreover, the study shows that determinants of skeptical disposition appear to be


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e.g., Libby and Luft, 1993; Nelson, 2007; Carpenter, 2004). Further research can address

this issue.

Additionally, alternative measures of auditors skeptical disposition should be

examined.

Another avenue of research may focus on developing more specific measures of

skeptical attitude (see e.g. Ajzen, Lefcourt, 1991, pp. 414-), instead of the so-called

global measures.

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Table 1. Descriptive sample information

Firm A Firm B Firm C Firm D Total

Number of

participants 85 96 140 55 376

Number of sessions 1 3 6 2 12

Staff level Partners 1 25 0 47 73

Managers 50 41 19 6 116

Seniors 32 27 65 0 124Staff 2 0 54 0 56

Gender Male 59 84 92 51 286

Female 26 11 47 2 86

General experience Mean years 10.11 15.36 2.99 22.16 10.48

St.dev. 6.40 8.95 2.00 8.52 9.37

Experience with

analytical review

Mean years

9.67 14.75 2.75 20.07 9.85St.dev. 6.11 9.36 1.93 6.86 8.86

Strength of

management control

philosophy

Weak

42 47 68 27 184

Strong 43 49 72 28 192

Language Dutch 85 96 101 41 323

English 0 0 39 14 53

Table 2. Participants responding to measures of skeptical disposition across firms

Firm A Firm B Firm C Firm D Total

Interpersonal Trust Scale 0 96 140 55 291

Need for Closure Scale 85 0 0 0 85

Locus of Control Scale 0 0 140 55 195

Hurtt Professional Skepticism Scale 85 96 0 0 181


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Table 3. Descriptive statistics concerning the measurement scales

Measurement

Scale

Mean

score

Standard

deviation

Theoretical

range

Actual

range

Theoretical

mid point

Cronbach

alpha

Interpersonal

Trust scale 72.98 8.76 25-125 45-105 75 0.760

Need for Closure

scale 154.85 15.03 42-252 121-193 147 0.822

Locus of Control

scale 10.06 3.76 0-23 0-19 11.5 0.713

Hurtt Professional

Skepticism Scale 131.66 10.71 30-180 103-158 105 0.821


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Table 4. Correlations between the professional skepticism determinants

Interpersonaltrust

Need for

cognitiveclosure

Locus ofControl

Hurtt

Professional

SkepticismScale

Interpersonaltrust

PearsonCorrelation 1 .(a) -,367(**) -,084

Sig. (2-tailed) . ,000 ,417

N 291 0 195 96

Need forcognitive

closure

PearsonCorrelation

(a) 1 (a) ,089

Sig. (2-tailed) . . ,416

N 0 85 0 85

Locus of

Control

Pearson

Correlation -,367(**) (a) 1 .(a)

Sig. (2-tailed) ,000 . .

N 195 0 195 0

Hurtt

ProfessionalSkepticism

Scale

Pearson

Correlation

-,084 ,089 (a) 1

Sig. (2-tailed) ,417 ,416 .

N 96 85 0 181

** Correlation is significant at the 0.01 level (2-tailed).

(a) Cannot be computed because at least one of the variables is constant.

Table 5. Regression coefficients for the determinants of auditors skeptical

di iti d th d l dj t d R


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disposition and the models adjusted R-squares

Interpersonal

Trust

Need for

Closure

Locus of

Control

Hurtt PS Scale

Regression of the likelihood that

management explanation is rightConstant 13.446 45.362 36.168 42.931

Management control philosophy (MCPH) -.331 -67.239 .594 41.454

Determinant of disposition (DOD) .359** -.051 .262 -.031

Task-specific experience (TSE) -.153 .226 -.144 .066

MCPH*DOD -.045 .391 -.279 -.370

Adj. R-square (N) .015* (N=277) .001 (N=85) -.015 (N=188) .019 (N=175)

Regression of the likelihood of fraud

Constant 40.747*** 3.688 19.745*** -5.032

Management control philosophy (MCPH) 71.549*** 128.778*** 10.289 26.875

Determinant of disposition (DOD) -.304** .122 -.120 .210

Task-specific experience (TSE) .164 -.174 .214 -.179

MCPH*DOD -.666** -.667* 1.404* -.027

Adj. R-square (N) .310*** (N=277) .267*** (N=84) .277*** (N=186) .236*** (N=176)

Regression of the number of

alternative explanations

Constant 1.885 -2.242 3.677*** 1.069

Management control philosophy (MCPH) 4.235*** 9.064 .123 4.384Determinant of disposition (DOD) .018 .037 -.049 .018

Task-specific experience (TSE) .023** .002 .056*** -.019

MCPH*DOD -.056** -.057 -.005 -.031

Adj. R-square (N) .019* (N=283) .028 (N=85) .071*** (N=191) .005 (N=178)

Regression of the number of error

explanations

Constant -.796 -5.729*** .901** -2.027

Management control philosophy (MCPH) 4.852*** 9.388*** 1.534** 3.326

Determinant of disposition (DOD) .021 .044*** -.041 .027**Task-specific experience (TSE) .045*** .015 .078*** -.010

MCPH*DOD -.057*** -.054** -.057 -.021


Regression of the weight of the error

explanations

Constant 10.275 -37.837 10.702 -7.215

Management control philosophy (MCPH) 65.566*** 143.429** 17.664* -21.735

Determinant of disposition (DOD) .030 .354 -.385 .254

Task-specific experience (TSE) .593*** .229 .903*** -.186MCPH*DOD -.667* -.765* .461 .283


Regression of the number of budgeted

hoursConstant 147.380*** 113.601*** 124.131 70.269


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Figure 1. A plot of the interaction effect between need for closure and the strength

of management control philosophy for the number of total error

explanations


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of management control philosophy for the average weight per error.


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of management control philosophy for the likelihood of fraud.


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Figure 4. A plot of the interaction effect between locus of control and the strength of

management control philosophy for the likelihood of fraud.


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Table 6. Summary of significant and marginally significant effects.

Significant effects determinantsskeptical disposition

1-tailed

p-value

sign Significant effects managementcontrol philosophy strength

1-tailed

p-value

sign Significant interactions 2-tailed

p-value

Interpersonaltrust

Likelihood mngt expl. is right

Likelihood of fraud

0.032

0.042

+

-

Likelihood of fraud

Number of alternative expl.Number of error explanationsWeight of error explanations

0.000

0.0090.0020.008

+

+++

Likelihood of fraud

Number of alternative expl.Number of error explanationsWeight of error explanations

0.013

0.0220.0090.073

Need for closure Number of error explanations 0.002 +* Likelihood of fraudNumber of error explanations

Weight of error explanations

0.0100.005

0.017

++

+

Likelihood of fraudNumber of error explanations

Weight of error explanations

0.0590.021

0.077

Locus of control - Number of error explanationsWeight of error explanations

0.0130.055

++

Likelihood of fraud 0.092

Hurtt

Professional

Skepticism Scale

Number of error explanationsNumber of budgeted hours

0.0230.085

++

-

* This sign is not in the expected direction.

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Luc Quadacker - Prof Skepticism and Anlytical Rocedures

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