In recent years, companies with a strong “green” reputation have gained increased attention from investors and markets. But how does the role of auditors change when faced with firms that present themselves as sustainable? Can technology enhance their professional judgement? 

The study by Ashish Varma, Daniela Mancini, and Shreya Kaushik, published in The International Journal of Digital Accounting Research, explores the role of professional scepticism in the auditing of companies with a strong environmental reputation. Through experimental analysis and interviews with industry professionals, the research shows that auditors tend to be more sceptical of “green” companies, examining their sustainability claims with greater scrutiny. Moreover, while advanced technologies improve both the effectiveness and efficiency of the auditing process, they can also introduce new complexities. 

How does auditors’ judgement shift when dealing with firms that are perceived as highly sustainable? Is technology an ally or a challenge in auditing “green” companies? 

Article Title

“Professional Skepticism for Green Reputation Clients: A Mixed Method Study of Technology-Enabled Audits”

Authors

Ashish Varma (IMT Ghaziabad, India), Daniela Mancini (University of Teramo, Italy), Shreya Kaushik (IMT Ghaziabad, India)

Journal

The International Journal of Digital Accounting Research, Vol. 23, 2023, pp. 137-179
ISSN: 2340-5058
DOI: 10.4192/1577-8517-v23_6

Abstract 

The research investigated auditor’s Professional Skepticism (PS) mindset while auditing the “integrated financial statement” of green reputation clients in a technology-enabled audit environment. The study tries to understand the difference in thought and action of auditors based on the perception of their client as sustainability responsible or not. Subsequently, the study offers meaningful insights about the nuances that uphold this distinction. This research comprises two studies using the mixed method procedure as per Creswell and Clark (2017). The first study is a 2 x 2 between-subject experiment. The second study uses the Theories in Use (TiU) methodology by analyzing qualitative interviews of practicing auditors in an emerging market setting. The findings of study 1 (comprising the experiment) highlight that auditors are more professionally skeptical while auditing clients with a green reputation. Study 2 (utilizing qualitative interviews) points out that technology assists the PS mindset by enhancing the audit effectiveness and audit efficiency of green client audits. The study offers an in-depth understanding of the level of auditor’s PS mindset toward clients with a green reputation and therefore demystifies the inherent forces at play during such a phenomenon. Although the setting of the study is an emerging market, the study offers transferable findings to improve the overall understanding of auditors’ mindsets. The study has implications for multiple actors engaged in the audit process, viz., auditors, audit firms, regulators of the audit profession, audit committees, academia, and policymakers.

Keywords: Integrated financial statement, green reputation, professional skepticism, non-financial reporting, audit.

Varma, A., Mancini, D., & Kaushik, S. (2023). Professional skepticism for green reputation clients: A mixed method study of technology enabled audits. International Journal of Digital Accounting Research, 23.

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