Cognitive biases and audit professional skepticism

: a sample from Portugal

Abstract

Auditors must possess characteristics that allow them to achieve the level of professional skepticism required for the profession. Despite previous literature’s main emphasis on auditors’ traits and experience as the main factors influencing auditor’s level of professional skepticism, the relevance of cognitive biases effect on skepticism has grown increasingly in importance over the last decades with the emergence of behavioral finance. This dissertation aims to understand to what extent certain cognitive biases – outcome, confirmation, overconfidence and availability biases affect Portuguese auditors and whether these also have an effect on auditors’ level of professional skepticism. All the data collected refers to the year of 2022 and was obtained through a survey distributed to Portuguese auditors working in Big 4 audit firms (i.e., Deloitte, PWC, EY and KPMG). This dissertation confirms previous studies suggesting that auditors in higher hierarchical positions tend to have higher levels of professional skepticism and be less susceptible to cognitive biases. Furthermore, it concludes that cognitive biases, namely outcome, confirmation and overconfidence biases have an effect on the professional skepticism level of Portuguese auditors. Availability bias did not produce an effect on professional skepticism. Therefore, it is pivotal that these biases are taken into consideration by audit firms to address audit quality issues and keep up with increasingly higher standards.

Date of Award	25 Jan 2023
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Cristina Mendonça (Supervisor)