EconPapers    
Economics at your fingertips  
 

The Joint Effect of Ethical Idealism and Trait Skepticism on Auditors’ Fraud Detection

Inez G. F. Verwey () and Stephen K. Asare
Additional contact information
Inez G. F. Verwey: Nyenrode Business Universiteit
Stephen K. Asare: University of Florida

Journal of Business Ethics, 2022, vol. 176, issue 2, No 11, 395 pages

Abstract: Abstract Although regulators have identified ethical lapses as a key factor contributing to auditors’ failure to detect their clients’ fraudulent financial reporting (fraud), research using ethical theory to examine auditors’ fraud detection remains limited. We provide evidence on the joint effect of ethical idealism and trait skepticism on auditors’ fraud judgments. Ethical idealism reflects an individual’s concern for the welfare of others while trait skepticism reflects an individual’s disposition to validating a proposition. Forsyth (J Pers Soc Psychol 39:175–184, 1980) theorizes that there is an association between ethical idealism and tolerance for deception. Drawing on that insight, we posit that ethical idealism and trait skepticism have a complementary effect on auditors’ fraud planning performance. This is because the former determines an auditor’s tolerance for allowing a client to get away with an ethically questionable act while the latter is important in determining how evidence is generally sought and evaluated. We used the Forsyth (1980) ethical position questionnaire to measure ethical idealism and the Hurtt (Auditing: A J Pract Theory 29(1):149–171, 2010) scale to measure trait skepticism. Our results indicate that there is a significant positive association between trait skepticism and the number of effective audit procedures but only for auditors who have high ethical idealism. The results highlight the importance of measuring and controlling for the effects of these traits when evaluating fraud detection performance. The paper also contributes by showing that an ethics theory can generate additional understanding of and insights into an important accounting phenomenon.

Keywords: Audit planning; Fraud detection; Trait skepticism; Ethical position (search for similar items in EconPapers)
JEL-codes: C91 D91 M42 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s10551-020-04718-8 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jbuset:v:176:y:2022:i:2:d:10.1007_s10551-020-04718-8

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10551/PS2

DOI: 10.1007/s10551-020-04718-8

Access Statistics for this article

Journal of Business Ethics is currently edited by Michelle Greenwood and R. Edward Freeman

More articles in Journal of Business Ethics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2025-03-19
Handle: RePEc:kap:jbuset:v:176:y:2022:i:2:d:10.1007_s10551-020-04718-8