Professional skepticism and behavioral bias in financial professionals

Over the past few years professional skepticism has received attention from various stakeholders such as policymakers, practitioners, regulators, and the public. The interest was driven by financial professionals’ failure to apply professional skepticism and the damage it has caused the reputation of the accounting profession. This study investigates the relationship between professional skepticism as a trait and decision-making biases, while also exploring how factors such as gender, age, experience, and personality traits influence financial professionals’ susceptibility to decision-making biases. The study adopted an advanced statistical technique using structural equation modelling to explore the relationship between professional skepticism and decision-making biases. Online surveys were distributed and completed by professional accountants who have professional accreditation with the International Auditing and Assurance Board (IAASB). Findings revealed the presence to a significant extent among financial professionals of confirmation bias, misconceptions of regression to the mean bias, conjunctive event bias, overconfidence bias, and affect bias. Further findings reveal that specific constructs within the professional skepticism trait such as questioning mind, suspension of judgement, search for knowledge, and self-determining, show significant positive (and in some instances negative) relationships with decision-making biases. Gender, experience, and personality traits (such as extraversion and neuroticism) were found to influence susceptibility to certain biases. This research contributes to literature, offering insights into the relationship between professional skepticism and decision-making biases, underlining the importance of understanding skepticism’s implications for decision-makers.