The Effect of Audit Culture on Auditor Honesty and Skepticism

Abstract

Auditors’ honesty and skepticism are crucial to their effectiveness as enablers of trust in capital markets. Regulators have recently expressed concerns that audit culture does not sufficiently strengthen these attributes. We overcome significant obstacles to investigate the influence of audit culture on auditor honesty and skepticism. In our experiment, practicing auditors and non-auditor accountants take part in two economic tasks with economic incentives that allow us to unobtrusively measure honesty and skepticism. Drawing on prior research, we measure the influence of audit culture by manipulating the salience of participants’ occupational identity. We find evidence that audit culture increases skepticism but decreases honesty. We do not observe a similar effect for non-auditor accountants, suggesting our auditor findings are not driven by broader firm- or profession-wide influences.