Professional Skepticism and Auditors' Assessment of the Risk of Material Misstatement with Emphasis on Social Cognition Theory

Assessing the risk of misstatement is one of the auditors' actions to obtain reasonable assurance of the absence of misstatement of financial statements. This evaluation requires compliance with the criteria of professional skepticism. Professional skepticism is an attitude that always questions everything and critically evaluates audit evidence. The purpose of the present study is to investigate the effect of professional skepticism on the assessment of the risk of material distortion. The time domain of the research is 2019, the selected sample based on the Cochran formula is 384 people and the statistical population of this research is auditors working in public and private institutions. The data collected through questionnaires and scenarios were analyzed using the structural equation method. The results of the research show that professional skepticism has a positive effect on the assessment of the risk of significant distortion. Also, time budget pressure on the relationship between professional skepticism and distortion risk assessment, negative impact and effect of experience (individual variable) on the relationship between professional skepticism and distortion risk assessment were significantly rejected. Auditors are required to exercise a reasonable degree of professional skepticism to detect fraud and misstatement; because when the auditor has a low level of professional skepticism, he tends to ignore the signs of fraud and misstatement. The probability of discovering distortions is higher for auditors with a higher level of professional skepticism, because they do not accept the evidence easily and examine the accounting evidence and information more carefully, both quantitatively and qualitatively.