Auditor professional skepticism – a cross-cultural study in the global International Financial Reporting Standards environment: the case of Canada and Brazil

Abstract

The global financial reporting environment is undergoing significant change, with a global trend toward more countries adopting the International Financial Reporting Standards for public companies. Concerns exist as to potential barriers to harmonization, such as culture; therefore, it is important to draw on institutional mechanisms, such as auditing, to encourage compliance and harmonization. With this, there is a need to better understand the factors affecting the quality of such audits. Auditors’ professional skepticism is a key factor in ensuring audit quality. This exploratory quantitative study explores an area that is not well researched: specifically, the cross-cultural professional skepticism of auditors. Through a correlational design, the study provides insights as to whether auditors from different cultures make different skeptical judgments and decisions. This study also investigates whether prior research linking skeptical traits to increased professional skepticism in auditors is exportable from one culture to another. The major finding of this study is that there is no significant difference in the professionally skeptical judgments and decisions of entry-level auditors from Canada and Brazil. Culture is not associated with the professional skepticism of these auditors. The study also highlights that skepticism, as a trait does not correlate with professional skepticism of auditors across all cultures, specifically in Canada and Brazil. This study fills a major void in the literature concerning the study of cross-cultural professional skepticism and it extends prior research regarding the associations between skepticism as a trait and auditors’ professional skepticism by investigating auditors from two very different cultures. This study provides insights that are relevant to practitioners such as regulators, auditors and auditing firms, as well as academics in auditing, accounting, psychology and cultural studies.