Who Rewards Appropriate Levels of Professional Skepticism?

In this article, we provide a practitioner summary of our paper “Who Rewards Appropriate Levels of Professional Skepticism?” (Brazel, Leiby, and Schaefer 2025; hereafter BLS). Recent research suggests that audit supervisors who reward appropriate skeptical behavior, regardless of the outcome, appear to develop staff that are more likely to detect and convey fraud red flags to their superiors. In BLS, we first identify audit supervisors who are more likely to reward appropriate skepticism. We then investigate which personality traits, knowledge, and incentives are associated with supervisors who reward appropriate professional skepticism even when no misstatement is identified. We find that trait skepticism, especially suspending one’s judgment, drives the evaluations of professional skepticism in our setting. Also, we observe that when supervisors believe that their own audit partner will view the skepticism favorably, they “pay it forward” by rewarding their own staff who engage in skepticism.

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JEL Classifications: L2; M40; M42; M51.