Professional skepticism of internal auditors and perception of risks in internal controls

Abstract

This article analyzes the relationship between professional skepticism of internal auditors and perception of risks in internal controls. Internal auditors know the company’s functioning and environment, so their premise lies on the prevention and identification of signs of errors, fraud, risks, and weaknesses in internal control systems. Even though the literature does not emphasize the theme in internal auditing, the internal auditor must exercise professional skepticism in audit work, especially in an environment that exhibits reduced independence. Given the relevance of professional skepticism in audit work, internal auditors must also take a skeptical attitude, helping to prevent and identify signs of fraud, risks, and weaknesses in internal control systems. Research relating the auditor’s skeptical trait to the ability to perceive risks in internal controls makes a major contribution to organizations, as companies can suffer significant losses as a result of fraud or inefficiency of internal processes. This is a research with a deductive perspective, a positivist methodological approach and a survey data collection method. The professional skepticism of internal auditors was measured by using the Hurtt (2010) questionnaire. For the variable risk perception, 10 scenarios were created by having research by Deloitte (2015), Ge and McVay (2005), and KPMG (2000) as a basis. The professional skepticism level has a positive relationship with perception of risks in internal controls. These findings help organizations to strengthen these characteristics in internal auditors, since perception of risks in internal controls can prevent the risk from materializing and constituting a deficiency in internal controls or fraud. The theoretical contribution is highlighted with the presentation of scenarios as a measure of perception of risks in internal controls.