How Auditors’ Approach to Client Inquiry May Affect Skeptical Judgment: A Mixed-method Examination of Client Inquiry and Note Taking

Client inquiry is a foundational financial statement audit procedure. However, the literature offers little evidence regarding how auditors perform client inquiry and how note taking during client inquiry is associated with audit quality. We conduct a mixed-methods study to examine these issues. First, we conduct interviews with seven highly-experienced auditors and five staff auditors to understand current practices regarding client inquiries, as well as evaluating and documenting evidence gathered from client inquiries. These interviews provide a thorough description of inquiry, highlighting that auditors routinely take notes during inquiry but can have difficulty with the interrelated, complex cognitive tasks of asking questions, processing client answers, and taking notes during inquiry. Second, we conduct two experiments to examine the impact of note taking during inquiry on skeptical judgments. Results from both experiments indicate that auditors taking note of more ideas during the inquiry is positively associated with memory accuracy. However, this does not improve skeptical judgments, and may lead to less skeptical judgments. Our second experiment indicates a prompt to develop expectations prior to the inquiry improves identification of inconsistencies in the inquiry, leading to more skeptical judgments. We offer contributions to the academic literature and practice, and suggestions for future research.