Professional Skepticism And Internal Control Weaknesses

2015-10-01 14:24:43

Dear students, faculty and staff,

Nazarbayev University Graduate School of Business invites you to Public Lecture


by Ping-Sheng Koh† The Hong Kong University of Science and Technology, Kirill Novoselov Nazarbayev University Graduate School of Business, Wei Shi Norwegian School of Economics

WHEN: Thursday, October 15th, 16.15 – 17.45

WHERE: Block C-3/new GSB/GSPP Building, 3rd floor, Room 3.037

Seminar Announcement-Kirill (2)

Abstract: In this paper, we examine whether auditor professional skepticism is associated with greater probability of reporting material internal control weakness (ICW). Auditors who exercise professional skepticism are alert to the possibility that unexpected problems may crop up during their audit process and thus are ready to search for, and investigate, any additional evidence that may indicate a material problem. Because it was difficult or impossible to anticipate exerting this additional effort at the audit planning stage, auditors have to change their audit plans and, consequently, are likely to revise their audit fees to reflect additional effort. Using audit fee revision as a proxy for professional skepticism, we find that audit fee revisions are associated with higher incurrence of material ICW and find no evidence supporting the competing prediction. We also find evidence consistent with auditor professional skepticism being a characteristic that manifests itself at the audit office level. Further evidence suggests audit fee revision is an economically significant proxy for unexpected audit effort incremental to existing measures.

Kirill Novoselov is Associate Professor of Accounting at NU GSB. Kirill earned his PhD in Accounting from the University of Texas at Austin and worked for seven years as Assistant Professor at the Hong Kong University of Science and Technology, where he taught graduate and undergraduate courses in financial and managerial accounting. After graduating from Moscow Institute of Electronics and Mathematics in 1993 (specialty: metrology and standardization), he worked in the insurance industry and received his MBA at the University of North Dakota. In his research, Kirill uses the insights from economics and decision analysis to solve practical problems in financial reporting, managerial accounting, and auditing. His principal areas of interest are: the interaction between financial reporting and real economic decisions in the face of uncertainty (e.g., capital investment) and the implications of the internal organization of firms for decision making and financial reporting.


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