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The effects of prevalence induced concept change on audit scepticism judgements

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  • Greg Richins
  • Ken T. Trotman
  • Di Yang

Abstract

Public oversight bodies have continued to issue a high proportion of negative inspection findings year after year despite the actions taken by audit firms to address deficiencies and empirical evidence suggesting audit quality is improving. We conducted an experiment where we manipulated the level of audit scepticism to explain the continued puzzling poor inspection results. Based on theory from psychology research on prevalence induced concept change we show that when audit quality improves our participants making inspection judgements are likely to subconsciously redefine what constitutes an acceptable audit thus leading to static judgements. Given these results, our theory suggests this is an alternative explanation for consistently high rates of negative inspection findings, and we provide suggestions for future research.

Suggested Citation

  • Greg Richins & Ken T. Trotman & Di Yang, 2024. "The effects of prevalence induced concept change on audit scepticism judgements," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(4), pages 4429-4446, December.
    • Handle: RePEc:bla:acctfi:v:64:y:2024:i:4:p:4429-4446
    DOI: 10.1111/acfi.13312
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    References listed on IDEAS

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