Sayed Alwee Hussnie Sayed Hussin,

National Audit Department of Malaysia, 

Putrajaya, Kuala Lumpur, Malaysia,

E-mail: sayedalwee2010@gmail.com

Professional Skepticism and Auditors’ Assessment of Misstatement Risks: The Moderating Effect of Experience and Time Budget Pressure

Takiah Mohd Iskandar,

Universiti Kebangsaan Malaysia, 

Bangi, Selangor, Malaysia,

E-mail: takiah.iskandar@gmail.com

Norman Mohd Saleh,

Universiti Kebangsaan Malaysia, 

Bangi, Selangor, Malaysia,

E-mail: norman@ukm.edu.my

Romlah Jaffar,

Universiti Kebangsaan Malaysia, 

Bangi, Selangor, Malaysia,

E-mail: romlah@ukm.edu.my

Abstract. Background: This study employs a field experiment to examine the relationship between professional skepticism, experience, and time budget pressure on auditors’ assessment of risk of misstatement. In addition, the study examines the moderating effect of experience and time budget pressure on the relationship between professional skepticism and auditors’ assessment of risk from material misstatements; 2) Method: This study employs a multiple regression analysis on 248 auditors from both Big4 and non-Big4 firms; 3) The results indicate that professional skepticism and experience have positive effects while time budget pressure has a negative effect on auditors’ assessment of risk from material misstatements; and 4) The positive effect of professional skepticism on auditors’ assessment of risk from material misstatement is stronger among more experienced auditors than that among less experienced. On the other hand, the positive effect of professional skepticism on risk assessment is weaker when auditors work under high time budget pressure than that when they work under low time budget pressure. Additional analysis on the samples from the two selected areas, Kuala Lumpur and Selangor, produces consistent results indicating that the use of separate models for different samples is not necessary. Hence, the study uses a single model for the final analysis. The results provide a better understanding on whether the auditors are able to sustain professional skepticism with a given amount of relevant audit experience and under different levels of time budget pressure.

Received: March, 2017

1st Revision: July, 2017

Accepted: October, 2017

DOI: 10.14254/2071-789X.2017/10-4/17

JEL Classification: M41

Keywords: professional skepticism, experience, time budget pressure, and risk of material misstatement