Do Rewards Encourage Professional Skepticism? It Depends

Joseph F. Brazel, Justin Leiby, Tammie J. Schaefer

Research output: Contribution to journalArticlepeer-review


In three experiments, we find that rewarding professional skepticism can backfire and decrease skepticism on future audit tasks where red flags are present. We focus on rewards for costly skepticism: skepticism that is ex ante appropriate, but generates incremental ex post costs and does not identify a misstatement. Auditors interpret a reward for costly skepticism as a better-than-expected outcome and view subsequent tasks from a risk-averse gain frame. As a result, auditors seek to avoid the downside risk of skeptical action, which decreases auditors’ sensitivity to red flags and their willingness to communicate severe red flags to their managers, compromising audit quality. However, we also find that a supervisor consistently rewarding costly skepticism decreases auditors’ risk aversion and increases their skepticism. In sum, auditors believe skeptical action has downside risk. A cultural shift toward credible, consistent rewards for appropriate skepticism likely helps ensure that rewards have their intended effect.

Original languageEnglish (US)
Pages (from-to)131-154
Number of pages24
JournalAccounting Review
Issue number4
StatePublished - Jul 2022
Externally publishedYes


  • incentives
  • performance evaluation
  • professional skepticism
  • rewards
  • risk aversion

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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