Please use this identifier to cite or link to this item: http://hdl.handle.net/10125/70450

Data Analytics and Skeptical Actions: The Countervailing Effects of False Positives and Consistent Rewards for Skepticism

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Title:Data Analytics and Skeptical Actions: The Countervailing Effects of False Positives and Consistent Rewards for Skepticism
Authors:Dereck Barr-Pulliam
Joseph Brazel
Jennifer McCallen
Kimberly Walker
Keywords:Audit
Data Analytics
False Positives
Professional Skepticism
Rewards
Date Issued:22 May 2020
Abstract:We investigate if varying rates of false positives impact auditor skepticism toward red flags identified by data analytic tools. We also examine the extent to which consistent rewards for skepticism can improve the application of skepticism on audits employing data analytics. Using an experiment with practicing auditors we observe that when false positive rates are higher, skepticism levels are low. We also find that consistent rewards for skepticism significantly improve the skepticism of our auditors. However, the positive effect of rewards is limited in that we do not see improvements in skepticism when the false positive rate is higher and additional investigation is less likely to identify a misstatement. Our findings highlight the importance of calibrating analytic tools to reduce false positives and the need for a culture change where appropriate skepticism is consistently rewarded in order for audit firms to effectively use analytic tools to enhance audit quality.
URI:http://hdl.handle.net/10125/70450
Appears in Collections: 01 Auditing


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