http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2512329

Thinking Fast versus Thinking Slow: The Effect on Auditor Skepticism

Christopher J. Wolfe Texas A&M University – Department of Accounting

Brant E. Christensen Texas A&M University – Department of Accounting

Scott D. Vandervelde University of South Carolina – Darla Moore School of Business
October 20, 2014

Abstract: 
Based on psychology theory, we propose that intuition can be a key element stimulating auditor skepticism, whereas overreliance on analytical processing can overwhelm auditors’ intuition thereby reducing skepticism. We test our expectations with an experiment containing responses from 85 senior auditors. Our results support our theory. We find that auditors are more likely to judge an asset as potentially impaired if they use their intuition as opposed to analytical processing. When we categorize auditors on their innate use of intuition, our results become more pronounced. We find that auditors using analytical processing, who rarely use their intuition, seldom judge the asset as potentially impaired. Our research suggests that intuition can be of use to auditors, and when ignored, auditors can become less skeptical. These findings should help inform regulators, standard setters, and audit firms as they seek to enhance professional skepticism.