Received: 23 September 2022 | Revised: 27 November 2022 | Accepted: 30 December 2022

Recoletos Multidisciplinary Research Journal Vol. 10 no. 2 December 2022

DOI: https://doi.org/10.32871/rmrj2210.02.04

Auditors’ Professional Skepticism and Its Relationship with Their

Thinking Styles
Teovy Erdel B. Bongcales , Ariel A. Balunan , Loriemar O. Igot , Jurienel Mae L.
Laude , JJ Jycka D. Mojados , and Kristine June D. Uy*
School of Business and Management, University of San Jose-Recoletos, Cebu City, Philippines
*Email Correspondence: kristinejuneuy@usjr.edu.ph

Abstract
The complexity of financial reporting highlights the need for professional skepticism
among auditors. This study examined the relationship between auditors’ professional
skepticism (PS) and thinking styles (TS) and explored what associations exist among PS,
TS, and auditors’ sociodemographic attributes. Using snowball sampling, we surveyed
139 auditors in the Philippines using the Thinking Styles Inventory – Revised II and the
Professional Skepticism Scale. Confirmatory analysis using Kendall’s tau-B showed a
strong correlation between PS and TS I (creativity-generating style), implying that it plays a
prominent role in professional skepticism. Contrary to earlier studies, our study found only
a moderate correlation between TS II (norm-favoring style) and PS. The k-Modes clustering
algorithm revealed that auditors showing high PS were low-ranking, less-experienced
licensed female CPAs in firms with global affiliations and manifesting creative-generating
TS. These findings add to the accounting profession’s understanding of PS and may be of
valuable help in cultivating PS among auditors.

Keywords: thinking styles, professional skepticism, Philippines, sociodemographic attributes,

auditors

1.0 Introduction auditing and accounting literature, professional

As businesses and economies evolve, the skepticism is a requirement for due professional
use of management estimates, business model care (Public Company Accounting Oversight
evolutions, and technological developments also Board [PCAOB], 2016) and an attitude expected
expand. Professionals need to respond to these of professional accountants when they perform
changes promptly. Although adjustments and auditing and assurance engagements (International
modifications of technical standards, regulations, Ethics Standards for Board for Accountants [IESBA],
and business practices form an important part 2020). Often manifested in auditors’ keenness to
of the response, business professionals’ thought inquiry and in their suspension of judgment until
processes play pivotal roles in it, particularly the they can gather sufficient and appropriate evidence
following: effective thinking, critical thinking, and (Hurtt, 2010), professional skepticism refers to the
professional skepticism. questioning and objective mindset that auditors
must have throughout the audit while, at the same
Professional Skepticism time, maintaining a neutral assumption about
A widely discussed and debated concept in the client (PCAOB, 2016). A professional who has
2 Recoletos Multidisciplinary Research Journal Vol. 10 no. 2 December 2022

professional skepticism usually also manifests the different levels of state skepticism even among
following characteristics: search for knowledge, those with similar levels of trait skepticism
suspension of judgment, autonomy, interpersonal (Robinson et al., 2018). From such an observation
understanding, self-confidence, and questioning one can deduce that the variable controllable by
mind (Hurtt, 2010). auditors is their trait skepticism. The latter inference
However, not all auditors hold on exclusively is also congruous with one study’s findings that
to the tenet of neutrality espoused by current higher levels of trait skepticism exhibit behaviors
auditing standards, for the application of reflecting higher levels of state skepticism (Hurtt,
professional skepticism lies on a continuum that 2010).
depends on the audit area and client circumstances
(Glover & Prawitt, 2014). Along this continuum, PS and Effective Thinking
auditors can never completely trust or doubt an Effective thinking combines critical thinking
audit, and so they are induced to neutrality (i.e., and professional skepticism (Urboniene et
the auditor assumes that the client is neither telling al., 2013). With critical thinking, accountants
the truth nor lying) (PCAOB, 2012; Popova, 2013) can achieve sound decisions, solve existing
or presumptive doubt (i.e., the auditor assumes company issues, and avoid possible fraud-related
the falsity of the client’s financial statement). circumstances (American Institute of Certified
According to one study, presumptive doubt Public Accountants, 1999; Urboniene et al., 2013).
affects the efficiency and effectiveness of the audit Interestingly, professional skepticism plays an
because the auditor tends to over-collect evidence integral part in the critical thinking processes of
(Nelson, 2009), but another study reported that accountants, especially when they investigate
it could predict auditors’ skeptical judgments financial and non-financial information from audit
and decisions in high-risk contexts much more clients.
effectively than neutrality could (Quadackers et
al., 2014). Regardless, professional skepticism Factors Affecting PS Development
exerts a positive effect on audit quality because it Several studies have identified and examined
provides a critical perspective in the assessment of various factors that influence the level of
the existence of fraud and material misstatements professional skepticism among auditors. Such
(Mardijuwono & Subianto, 2018; Coppage & Shastri, factors include, but are not limited to, the auditor’s
2014; Hai et al., 2020; Popova, 2013; Sunday, 2020). sex, years of experience, rank, firm size, and
possession of a Certified Public Accountant (CPA)
The Skeptic Mindset license.
Two things fuel an auditor’s skeptic mindset: Auditors’ length of experience and rank affect
state skepticism (or external variables) and trait the development of their professional skepticism.
skepticism (auditor’s traits) (Hurtt, 2010; Nelson, Hussin et al. (2017) found that auditors’ perceived
2009). State skepticism refers to a temporary value of professional skepticism is directly
phase of skepticism arising from aspects of proportional to their experience. Those with more
external situations, whereas trait skepticism, experience in higher ranks tended to be more
which is relatively stable, comes from aspects of an skeptical (Hussin et al., 2017; Janssen et al., 2020).
individual’s characteristics. However, based on rank alone, staff auditors
Variations in clients’ contexts can result in exhibited more skepticism than high-ranking
https://doi.org/10.32871/rmrj2210.02.04 Bongcales et al. 3

auditors (Phillips, 1999; Shaub & Lawrence, 1999) as affect auditors’ professional skepticism. A study by
auditors under this latter category were less likely Shaub and Lawrence (1996) found that CPAs were
to suspect fraud (Phillips, 1999) and relied heavily less likely to demand additional tests or conduct
on audit routines (Wheeler & Arunachalam, 2008). client confrontations, making CPAs less skeptical
The sex of the auditor also significantly affects than their uncertified counterparts.
professional skepticism (Mardijuwono & Subianto,
2018) and influences audit quality (Triani, 2018; Culture and PS Development
Atmaja & Sukartha, 2021; Sari, 2014). Females In addition to sociodemographic factors,
reportedly render more accurate judgment in culture also exerts a strong influence on the
complex audit tasks, so they exert a positive effect development and manifestation of PS. Cultural
on audits (Chung & Monroe, 2001; Vinciguerra, influences significantly shape Filipinos’ judgment,
2003). moral reasoning, and decision-making (Thomson
The size of the accounting firm likewise et al., 2007; Vasquez et al., 2001). The Philippines’
affects the development of auditors’ professional colonial past likewise influenced the country’s
skepticism. Whether large or small, audit firms economic and social characteristics, especially its
bear the responsibility of developing professional culture, lifestyle, language, laws and regulations,
skepticism among their auditors (Hussin et al., and notably, accounting (Kamla, 2007; Muniandy &
2017; Payne & Ramsay, 2005). The scrutiny that Ali, 2012; Nobes, 2011; Saudagaran & Diga, 1998).
large U.S. audit firms undergo from the Securities One might easily presume the Philippines, being
and Exchange Commission (SEC) and the Public an Asian country, to be predominantly Eastern in
Company Accounting Oversight Board (PCAOB) its cultural makeup, yet centuries of being under
simply magnifies the need to train auditors, the rule of colonial masters have created for the
develop professional skepticism among them, Philippines a unique blend of both Eastern and
and have them apply it in their practice (Gissel, Western cultures (Florido, n.d.).
2018). Compared with their smaller counterparts,
large auditing firms hold a bigger advantage in Thinking Styles in Sternberg’s Theory of Mental
the exercise of such a responsibility because they Self-Government
can access and share resources, such as training In his theory of mental self-government,
information (Arens et al., 2012; Baskerville & Sternberg proposed the notion that an individual’s
Hay, 2010), for developing their auditors’ career thinking and expression of cognitive abilities can
(Acampado & Pajares, 2021) while being subjected be described in terms of functions, forms, levels,
to foreign internal monitoring to maintain scope, and leanings — five dimensions that portray
standards of quality (Suseno & Nofianti, 2018). the forms of mental government as self-reflections
Affiliations with firms in other countries also created by one’s mind (Sternberg, 1997; Sternberg
matter in an auditing firm’s success in developing & Wagner, 1991). Sternberg’s theory proposed
professional skepticism among its auditors. The so- 13 thinking styles (TS) classified into these five
called Big Four, along with the national accounting dimensions, but in 2005, Zhang and Sternberg
firms and many of the regional and large local re-categorized them into three types (TS I, TS II,
firms, have affiliations with firms in other countries, and TS III). Each type comprises several thinking
but the small local ones do not (Arens et al., 2012). styles identified in Sternberg’s theory of mental
Professional certifications and licenses, such as self-government (Sternberg & Wagner, 1991;
the Certified Public Accountant (CPA) license, also Urboniene et al., 2013; Zhang & Sternberg, 2005).
4 Recoletos Multidisciplinary Research Journal Vol. 10 no. 2 December 2022

Someone with Type I thinking style exhibits a describes a person’s preferences for thinking about
higher level of cognitive complexity and creativity. given information and making decisions out of it
The following thinking styles comprise the Type I (Rani & Agarwal, 2015; Sternberg, 1998; Yaakobi,
thinking style: 2017). It can affect one’s potential in approaching
• legislative (decides and plans for actions), and solving a problem, as Sternberg’s model of the
• judiciary (evaluates regulations and theory of mental self-government illustrates (Rani
processes), & Agarwal, 2015).
• hierarchical (sets priorities since all goals Several researchers (e.g., Hou et al., 2011;
cannot always be fulfilled), Hovencamp, 2014; Turki, 2012; Zhang, 2012) have
• global (sees abstract issues from a bigger studied the influence of TS upon different variables
perspective), and such as creativity, organizational commitment,
• liberal (clarifies vague regulations and goes and employees’ emotional intelligence (Hou et
beyond them). al., 2011; Hovencamp, 2014). Besides broadening
One with Type II thinking style is norm- people’s understanding of employees’ capabilities
favoring, prefers following standards, and exhibits and how they perform their duties, such studies
a lower level of cognitive complexity. Those also guide employers in selecting and training their
classified under Type II exhibit the following employees. These studies suggest that thinking
thinking styles: styles play an essential role in one’s performance
• executive (acts on problems using existing and development.
procedures and structures), In turn, certain variables — e.g., culture,
• local (focuses on the details of a situation), gender, age, parenting style, religious upbringing,
• monarchic (thinks single-mindedly and is schooling, and occupation — also affect the
inflexible), and development of thinking styles (Sternberg, 1997,
• conservative (sticks with familiar situations 1998; Sternberg & Wagner, 1991; Zhang & Sternberg,
and processes). 2006). Studies have found that a culture-specific
Individuals who do not exhibit either Type I or thinking style is often the fruit of a culture’s
II thinking style consistently are classified as having preference towards a particular technique and
Type III thinking style, characterized by adaptability varies from country to country (Bernardo et al.,
to situations or tasks. The following thinking styles 2002; Han, 2010; Paik et al., 2019; Sternberg, 1997).
comprise the Type III thinking style: For instance, Sternberg (1998) has pointed out that
• anarchic (has a random approach to history’s view of men as leaders and rule setters,
problems), while women as followers, points to the legislative
• oligarchic (driven by multiple competing thinking style as being more associated with the
goals confusing completing any of the former than the latter. Distinct thinking styles are
goals), also cultivated among preschools and youngsters
• internal (prefers to work in isolation), and that are rewarded for creativity, as compared to
• external (extroverted and people-oriented). adults who are more conscious about conforming
to the norms set by their environment and society.
TS and Critical Thinking Religious traditions, beliefs, and practices also form
One’s thinking style influences one’s potential part of how a child, and later an adult, think and
to exercise critical thinking. Thinking style view the world.
https://doi.org/10.32871/rmrj2210.02.04 Bongcales et al. 5

Thinking Styles and Professional Skepticism PS, TS, and Critical Thinking
Previous studies have shown a relationship Professional skepticism and thinking styles
between thinking styles and professional influence one’s critical thinking. Studies of
skepticism. One study investigating such a Urboniene et al. (2013) and Heidar and Nikomaram
relationship among students in Lithuania found (2018) investigated the relationship between
that professional skepticism required conservative thinking styles and professional skepticism and
thinking and lower levels of cognitive complexity found a positive relationship. Legislative thinking
(Urboniene et al., 2013). In Iran, researchers styles, however, showed a significant negative
examining the effect of the thinking style in influence on professional skepticism (Heidar &
Sternberg’s mental self-government model upon Nikomaram, 2018). Interestingly, the study further
auditors’ professional skepticism found that concluded that professional skepticism required
the latter had a positive relationship with the conservative thinking and lower levels of cognitive
executive, judicial, introspective, extroverted, and complexity (Urboniene et al., 2013).
free-thinking styles and that it had a significant
negative association with the legislative thinking A Growing Need for PS in the Modern Workplace
style (Heidar & Nikomaram, 2018). Yet, despite In the face of the complexity of business
sharing variables in common, these studies need and financial reporting these days, professional
to be verified further in other populations because skepticism becomes more significant and relevant
empirical data establishing the association between and requires highlighting and emphasis. Case
thinking style and professional skepticism scarcely in point — the U.S. SEC investigated auditor
exist. To the best of our knowledge, for instance, deficiencies for the period 1998 to 2010 and found
we have not yet encountered any study that tested that 60% of the cases showed insufficient levels of
which thinking style from Zhang and Sternberg’s professional skepticism where auditors struggled
(2005) threefold model exhibits a higher degree of to maintain an appropriate questioning mind
professional skepticism among auditors. in various stages of the audit process (Beasley
Figure 1, which depicts our study’s conceptual et al., 2013). Clearly, auditors value professional
model, illustrates how thinking styles, professional skepticism highly, and since very little is known
skepticism, and relevant sociodemographic about how an auditor develops professional
characteristics relate with one another. skepticism over time, identifying the thinking style
that can stand in or act as an indicator for high
professional skepticism (because of its significant
association with it) will be of great value to auditors
and their profession.
Considering the influence of culture on
thinking style development and postulating that
thinking style and professional skepticism are
related, we examined the thinking styles and
Note: TS =Thinking styles PSA = Professionally skeptic
TS I = Type I auditor
professional skepticism of external auditors in
TS II = Type II T = Type of thinking style the Philippines, hoping to uncover facets of the
PS/P = Professional skepticism S = Sociodemographic attributes
relationship between the two and to characterize
Figure 1. Conceptual Model professional skepticism through patterns of
6 Recoletos Multidisciplinary Research Journal Vol. 10 no. 2 December 2022

attributes of external auditors with high or low styles, and exhibits varying combinations of Type
levels of professional skepticism. We examined the I and Type II, thus making it unstable and difficult
relationship between external auditors’ thinking to measure effectively, so we excluded it from our
styles (Type I and Type II) and their professional study. Moreover, auditors’ trait skepticism and
skepticism to discover the patterns that exist among experience with prior clients were found to affect
professional skepticism, thinking styles, and socio- audit quality (Popova, 2013), so we also studied
demographic attributes. We hypothesized that an trait professional skepticism as a variable because
auditor’s thinking style had a significant positive of its relative stability and its influence on the
relationship with his or her level of professional auditor’s skeptic mindset (Hurtt, 2010).
skepticism and that certain other factors (e.g., We pilot-tested the data collection instrument
years of experience, rank, sex, training, and work with 30 fourth-year Bachelor of Science in
environment [especially firm size], and possession Accountancy students in a university. The students
of the Certified Public Accountant license) shape were in their final year in their accountancy
their level of professional skepticism. studies, so they presumably already possessed
knowledge and skills from their years of tertiary
2.0 Methodology education, and, therefore, could appropriately
We used the survey method in a quantitative serve as surrogates for external auditors (Farag &
design to answer our research questions and test Elias, 2012; Kwock et al., 2016; Rufino, 2016; Ying
our hypotheses. To gather data, we administered & Patel, 2016). Pilot testing yielded a Cronbach’s
an online cross-sectional survey consisting of three alpha of 0.95 (excellent) for the overall TSI-R2, 0.93
parts: (excellent for the Type I items), 0.86 (good) for the
• respondents’ sociodemographics Type II items, and 0.83 (good) for the Professional
• Thinking Styles Inventory – Revised II Skepticism Scale.
(TSI-R2) — This questionnaire uses the Type After the pilot test, we administered the
I and Type II classification of Sternberg et al. validated survey from December 13, 2021, to March
(2007). It consists of 45 Likert-type questions 12, 2022, to a total of 139 external auditors working
(originally 7-point, but we decided to use in firms providing audit services in the Philippines.
6 points to eliminate neutral responses) Owing to the unavailability of the sample frame,
describing how the respondents usually we decided to conduct non-probability snowball
perform their tasks. sampling, fully aware of the limitation and the
• Professional Skepticism Scale — This restriction of this specific sampling technique,
questionnaire developed by Hurtt (2010) particularly regarding projecting data and
contains 30 Likert-type questions (6 points) interpretations beyond the sample. Our use of
about how the respondents generally feel. nonprobability sampling was one of the chief
limitations of our study. We were constrained to
We measured only the Type I and Type II use a nonparametric test because we could not
thinking styles because, like trait skepticism, access data to help us determine a statistically
which was the other variable that we studied, relevant sample size. To get around the limitation
they are relatively more stable characteristics of presented by the unavailability of such data, we
an individual. The Type III thinking style is task- used a larger sample size. Since nonparametric
dependent, implying non-dominance in any of the tests do not consider population parameters, the
https://doi.org/10.32871/rmrj2210.02.04 Bongcales et al. 7

generalizations from our study’s results would responses. Auditors who scored more than 134
apply only to our sample population and would in the Professional Skepticism Scale were said to
not be generalizable to a wider population. have high professional skepticism while those
To be included as a respondent, one must whose scores fell below 134 were considered to
(1) be an external auditor working in an audit have low professional skepticism. We eliminated
firm offering audit services in the Philippines, (2) the middle level to extract the most likely direction
belong to an audit team performing financial of actions and decisions that auditors lean towards
statement audit and external audit work, and when exhibiting professional skepticism. All other
(3) have at least six months of financial audit variables used in the clustering were categorized
experience. We did not require the respondents to in the same fashion as they were categorized in the
be licensed CPAs. The term audit firm in the first survey.
criterion covered accounting firms that offered
various services (including but not limited to audit 3.0 Results and Discussion
services) (Ogunjimi, 2018), sole practitioners, and In this section, we report our findings and
partnerships. interpretations for both the confirmatory and
To determine the relationship between exploratory analyses that we performed on our
thinking styles and professional skepticism, we data.
conducted a confirmatory analysis of our data
by computing Kendall’s tau-B using IBM SPSS Confirmatory Analysis
Statistics (Version 28.0) software. We found this Table 1 shows the results of our confirmatory
measure appropriate to use as it caters to tied analysis of the data. This part of our study was
ranks that occur in the data. Authors also found designed to determine the relationship between
that it drew more accurate generalizations than thinking styles (Type I and Type II) and professional
other nonparametric measures (Akoglu, 2018; skepticism using Kendall’s tau-B.
Pennsylvania State University, n.d.).
To find out what relationship patterns existed Table 1. Tau and p-values from the Kendall Tau
Analysis of Responses
between the sociodemographic attributes and
thinking styles of a professionally skeptical auditor, Thinking Interpretation
tau p-value
we performed an exploratory analysis using the Style of tau
k-Modes clustering algorithm, an unsupervised Type I 0.47 Strong 0.00*
learning algorithm that handles categorical Type II 0.27 Moderate 0.00*
domains. Modes (centroids) were updated per
*p < 0.05
iteration in the clustering process (Goyal &
Aggarwal, 2017).
Since the terms for ranks varied across firms, The p-value of 0.00 on both types of TS
we decided to standardize them into three rank confirms the significant positive relationship
labels: associate, manager, and partner. between TS and PS, implying that both variables
To determine the level of professional under investigation move and interact in the same
skepticism, we arranged the scores in increasing pattern and direction. Our study investigated
order and identified the median. Since the median correlation and not causation, as correlation does
split occurred at 134, we needed to drop three not strictly impose a variable to be independent or
8 Recoletos Multidisciplinary Research Journal Vol. 10 no. 2 December 2022

dependent. Since TS and PS are both traits innate competence and due care, and objectivity.
to a person’s mental disposition, one can affect Of these five, the ethical requirement of due
the other and vice versa. Moreover, correlation professional care also requires PS, reminding
does not eliminate the possibility of extraneous auditors to be wary of information risk in gathering
variables affecting the TS-PS relationship. The tau and evaluating audit evidence. Here, the role of
value also shows a strong positive relationship for TS comes into focus. For example, an auditor’s TS I
TS I but a moderate positive relationship for TS II. judicial function expresses fondness for evaluation
These results reveal the interdependence between and analysis, a hallmark of an auditor’s work. This
TS and PS. Interestingly, the moderate positive TS II judicial function incidentally heightens an auditor’s
- PS relationship denotes that although TS II and PS PS when the auditor notices lacking or restricted
may increase with respect to each other, the norm- information. Such an example demonstrates the
favoring thinking style does not strongly affect strong relationship between TS I and professional
professional skepticism and vice-versa. skepticism. On the other hand, a TS II auditor’s
Urboniene et al. (2013) reported that executive function is satisfied when she or he does
professional skepticism required a conservative a task well according to the given instructions.
mindset, but the results of the TS II and PS However, when a TS II auditor’s PS is heightened,
interaction in our study poses an interesting other factors, including but not limited to the
insight into how other vital determinants, such as individual’s nondominant TS I, come into play
the other nondominant TS or other variables not with the auditor’s executive function in his or her
under investigation, could be at play. This finding decisions and actions. Hence, an increase in PS
has an impact on how an audit is sometimes will not directly indicate a simultaneous increase
viewed as a rigid process that follows a step-by- of the same intensity in an individual with TS II.
step approach and supports the initiatives of Auditors with TS II can tap their nondominant TS
regulatory and standard-setting bodies to adopt a when alarming situations arise. Since the practice
more conceptual approach. of accountancy is laden with standards and
According to the results, factors external to regulations to follow, this is an especially important
their dominant thinking style (i.e., TS II) exert more capability to consider using in the audit process.
influence upon the PS of norm-favoring auditors Our observation about the interaction
that tend towards following imposed and expected between TS I and PS seems to counter the
procedures. The creativity-generating trait weighs findings of Urboniene et al. (2013), who reported
more on professional skepticism as opposed to no significant relationship between TS I and PS
the norm-favoring one. Such observation implies and claimed that PS requires neither cognitive
that, in the context of audit work, the central role complexity nor creativity. Table 1, however, shows
of professional skepticism in the audit process a strong positive relationship, indicating auditors’
needs to be viewed and promoted as an interplay gravitation towards greater creativity and cognitive
among personal traits (including thinking styles), complexity as their PS increases strongly, and vice
regulatory requirements, and firm policies, among versa. Such a result means that broadly interpreting
others. This insight is valuable since it adds to the audit evidence has a stronger association with PS
understanding of the multifaceted nature of PS. than merely settling with provided information.
Professional accountants need to conform Notably, the latter situation becomes a threat to
to a set of fundamental principles: professional due care, which directs back to PS.
behavior, integrity, confidentiality, professional Perplexed by the discrepancy between our
https://doi.org/10.32871/rmrj2210.02.04 Bongcales et al. 9

study’s findings and those of previous studies, ruled out the difference in respondent profiles as a
we investigated why the contradiction exists, reason for the discrepancy.
especially since correlation opens doors to the Since we had dismissed both statistical analysis
possibility of the existence of other determinants. and respondent profiles as potential causes for
We narrowed down the possible reasons to the discrepancy in our findings, we investigated
differences and variations in the following: (a) the difference in research locales as the possible
statistical analyses and methods, (b) respondent cause of the differences. Urboniene et al. (2013)
profiles, and (c) research locales. conducted their study in Lithuania; we did ours
We ran our data set through analysis of variance in the Philippines. The difference in results could
(ANOVA), which Urboniene et al. (2013) used in their have arisen from the influence of culture upon
study, yet our ANOVA still yielded results similar to the development of TS. According to the cultural
those of our Kendall’s tau-B analysis of a p-value dimension theory, each country and group of
less than 0.05, implying a significant relationship people have diverse cultures that prosper in schools
between TS I and PS. The p-values registered for and organizations (Hofstede, 2001). Lithuania has a
ANOVA and Kendall’s tau-B were 0.015 and 0.000, predominantly Western culture, which tends to be
respectively. So, we ruled out statistical analysis as more analytic; the Philippines, as is most of Asia,
the cause of the contradiction. has a predominantly Eastern culture characterized
Next, we investigated whether the difference by a holistic cognitive style (Han, 2010; Varnum et
in respondent profiles caused the discrepancy. al., 2010), which was found to have a significantly
Our study’s respondents did actual audit work. positive correlation with creative generating
In contrast, the respondents of the study by and cognitive complexity (TS I) (Zhang, 2002).
Urboniene et al. (2013) were students. Could this In contrast, the analytic mode of thinking has a
difference rationally explain the dissent in our significantly positive correlation with the norm-
findings and those of Urboniene et al. (2013)? favoring thinking style and cognitive simplicity (TS
Studies say otherwise. Although students do II). Further, multiple studies support Sternberg’s
not perform actual audit work yet, their tertiary claims that culture affects the development of TS
education trains them and prepares them to use and that cultural factors produce culturally unique
the knowledge and skills later in their professional TS (Bernardo et al., 2002; Gu et al., 2017; Han, 2010;
practice as competent and ethical accountants Nisbett et al., 2001; Tang, 2003). These studies also
(Rufino, 2016). Further, one study found no uphold our study’s findings as shown in Table 1.
significant difference between students’ and Besides confirming our hypothesis that TS and
auditors’ deception detection accuracy rates PS have a significant relationship, our confirmatory
when conducting interviews (Lee & Welker, 2008). analysis also shone a spotlight on the role of culture
Thus, data from students (as in the Urboniene et in the relationship between these two variables.
al. [2013] study) and from professional auditors Filipinos shy away from confrontation because,
already working in the field (as in the case of our unlike people brought up in Western cultures,
study) are equally valid. Yet, due diligence obliged Filipinos consider it taboo and disrespectful,
us to probe further, so we ran our pilot-testing data especially when directed at an older person or
(i.e., the data from senior accountancy students one with a higher status. Such a cultural norm
of a university) through Kendall’s tau-B analysis can throw off balance both the trust and doubt
— the results were similar to those yielded by the that professional skepticism requires. Even if it is
data from actual working auditors. Therefore, we done to avoid disrespect, avoiding confrontation
10 Recoletos Multidisciplinary Research Journal Vol. 10 no. 2 December 2022

compromises the objectivity of the audit process. this style prefer to do things their way. On the
Culture-oriented audit-affecting factors such as other hand, autonomy in PS entails self-direction
these have been studied before. For instance, (Hurtt, 2010; Sagiv & Schwartz, 2000), an exercise of
one study found that even if auditing standards independent thought and action (Schwartz, 2012).
were substantially similar across countries, the Seen this way, a relation between the two supports
implementation might differ because auditors’ a more substantial relation between PS and TS I,
judgment and decisions are functions of their a point consistent with the results of the Kendall
self-perception influenced by their culture tau-B analysis.
(Endrawes, 2010). Another study pointed out
that every person needs to thoroughly assess the Exploratory Analysis
situation before taking any action that accords to The exploratory analysis portion of our study
right reason (Agaton, 2015). Thus, in audits, the was not intended to set qualifications or criteria for
predominant use of inquiries can yield possible PS; instead, it was designed to explore the patterns
confrontations that directly contrast with the in the sociodemographic attributes and TS of a
Filipino upbringing of being non-confrontational professionally skeptical auditor. The results of the
(Benitez, 2022) and may affect due professional k-Modes clustering are presented in Table 2.
care in the performance of an audit. The results of the k-Modes clustering left some
Lastly, we examined more deeply what may categories undetected. In the clusters, only the
have caused the stronger correlation between TS ranks of partners and associates came out, only
I and PS. One study reported that auditors who 6-10 years and 5 years or less appeared as years of
broadly interpret the audit evidence show a higher experience, and only licensed auditors surfaced.
level of PS and are more effective in processing Standard clustering techniques such as k-Modes
evidence (Rasso, 2015) since those who think do not assume statistical distribution of variables
broadly improve the audit quality (Griffith et al., (Pennazza & Santonico, 2019; Magidson & Vermunt,
2014). These findings affirm the global thinking 2002) and use randomly selected patterns, so to
style, which deals with abstract matters and falls rule out the possibility of a random algorithm error,
under TS I. We also observed some congruence we ran two simultaneous sets of cluster analyses
in the legislative style (under TS I) and autonomy with varying initial patterns as centroid. Both runs
(a component of PS). Individuals inclined towards completed with a similar set of patterns per cluster.

Table 2. Patterns Existing Among the Responses After Cluster Analysis

Firm Size
Years of (with Global CPA Thinking Professional
Experience Rank Sex Affiliation) License Style Skepticism
Cluster 1 6-10 years Partner Male No Yes II Low
Cluster 2 5 years or less Associate Female Yes Yes I High

Table 2 shows that auditors under Cluster PS under Cluster 2 are less-experienced female
1 with low PS are more-experienced male CPAs CPAs working as associates in auditing firms with
working as partners in an audit firm without global global affiliation and manifesting TS I.
affiliation and manifesting TS II. Auditors with high Further analysis of the cluster representations
https://doi.org/10.32871/rmrj2210.02.04 Bongcales et al. 11

shows that an individual with a dominant TS I On the other hand, increased experience often also
exhibits high PS. Individuals with TS I favor low- includes increased exposure to the audit process.
degree structure, are more creative, and require Auditors with longer exposure to and association
cognitive complexity as they manifest higher with procedures develop a certain familiarity with
self-esteem and openness to experience. This the procedures, resulting in quicker decisions
is a particularly compelling interpretation, as PS and confirmation bias. Some studies found
is consciously embedded during discussions on that experience can be unfavorable to auditors’
accounting and auditing standards, but the results performance (Chia-Ah & Karlsson, 2010; Payne &
imply that merely following standards does not Ramsay, 2005) when interacting with PS (Hussin et
suffice. Although auditors need to be dutifully firm al., 2017).
in conducting the audit process, in most cases they
must exercise professional judgment in response Rank
to audit risk and setting up materiality. These As Table 2 shows, auditors occupying
results demonstrate that cognitive complexity higher ranks exhibit lower PS. Previous studies
and creativity (TS I) are essential in exercising also reported a similar observation (Payne &
professional judgment to promote and maintain Ramsary, 2005; Philips, 1999; Shaub & Lawrence,
high PS. 1999; Wheeler & Arunachalam, 2008). High-
ranking auditors lean towards management and
Sex supervisory roles, leaving low-ranking auditors
According to our results, females exhibit more more exposed to fieldwork. Because of minimal
skeptical mindsets than males. One possible reason personal and direct interaction, high-ranking
for this disparity is that females tend to use their auditors need to rely on the completion of audit
instinct and intuition to avert negative outcomes. routines, consequently impeding the “search for
They tend to put more effort into investigation and knowledge” and “interpersonal understanding”
set low materiality thresholds (Hardies et al., 2010). components of PS. High-ranking auditors, who
The keen attention to detail often associated with presumably have more experience, have access
females often results in a more thorough, although to almost all information (including confidential
time-consuming, audit. ones), allowing them to see the bigger picture.
Because of their broader view of things, they show
Length of Experience a greater tendency to side with a higher materiality
Table 2 shows that length of experience threshold than that of low-ranking auditors who,
diminishes professional skepticism. Previous with presumably lesser experience, assume most
research, however, does not offer a unanimous amounts as material.
view about the role of experience in one’s
professional skepticism. Less-experienced auditors Firm Size and Global Affiliations
often function in limited areas of audits and face Compared with auditors in firms without
unfamiliar tasks. Such conditions often lead them global affiliations, auditors in firms with such
to double-check their decisions and actions and to connections showed a higher level of PS, as our
avoid error by observing more keenly. They also analysis shows. The latter audit both large and
feel the pressure to perform well to be promoted, small companies (Arens et al., 2012) and often find
and consequently they do more work than needed. themselves subjected to foreign peer review. The
12 Recoletos Multidisciplinary Research Journal Vol. 10 no. 2 December 2022

pressure that they encounter from PCAOB and SEC environments that promote cognitive complexity,
scrutiny makes their exercise of PS prominent in an inquiring attitude, and the creative generation
every engagement (Gissel, 2018; Suseno & Nofianti, of ideas and solutions foster the growth of
2018). professional skepticism.
In addition, just as culture affects a person’s
CPA License individual traits, so does it also shape their
The results of our exploratory analysis show relationships and associations, and so one’s
that the highness or lowness of PS level does not thought process vis-à-vis dealing with information
change with possession of a CPA license. As Table is a psychological and a cultural function at the
2 shows, Cluster 1 and Cluster 2 both reflected CPA same time.
license holders, with the former exhibiting low In terms of sociodemographic attributes,
PS and the latter high PS. Previous studies (e.g., heightened skepticism is more prominently
Shaub & Lawrence, 1996; Tysiac, 2017) yielded manifested by low-ranking, less experienced
differing findings about which category of auditors female auditors working in globally affiliated firms.
(i.e., license holders or non-holders of license) The possession of a professional license is not a
manifested high PS, so our study’s findings fill up distinguishable mark.
some of that gap but at the same time also opens Our findings may prove helpful for
new questions for further study, especially about conceptualizing training programs that develop
how and why, CPAs are present in both clusters creative generation of ideas and cognitive
despite the diversity of their attributes. complexity among auditors with low professional
skepticism.
4.0 Conclusion The variation in findings and the limited
Professional skepticism is an individual’s literature about the relationship between the
rationalization of delaying conclusions until satisfied thinking styles and professional skepticism of
with the evidence, while thinking style, as a trait, is auditors continue to be a wellspring of opportunities
a personal preference for information processing for future cross-cultural research in psychology
and decision-making. Each person possesses and audit. One valuable endeavor might be to study
these relatively stable mental dispositions. We the causality of the variables under different cultural
acknowledge their significance, particularly to those settings. Another recommendation would be to
who perform external audit functions and deal with use probabilistic randomized sampling to give
information risk, especially when the public values the findings wider generalizability. Lastly, other
their opinion of financial statements. researchers may want to investigate why licensed
In this study, we deduced the interaction CPAs manifest both high and low levels of PS.
between PS and TS. For instance, in situations
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