Improving auditor performance evaluations: The impact on self‐esteem, professional skepticism, and audit quality

• Published in: The Journal of corporate accounting & finance 2021-10, Vol.32 (4), p.84-98
• Main Authors: Blix, Leslie H., Chui, Lawrence C., Pike, Byron J., Robinson, Shani N.
• Format: Article
• Language: English
• Subjects: Audit quality; Employee retention; Employees; Feedback; Performance evaluation; professional skepticism; Self esteem; Skepticism
• ISSN: 1044-8136; 1097-0053
• DOI: 10.1002/jcaf.22512

In public accounting, the performance evaluation process involves assessing and communicating feedback to employees. In the financial statement audit setting, in particular, supervisors provide feedback to subordinates frequently throughout a fiscal year. Prior research finds that performance evaluations are based largely on the subordinate's work outcomes, such as task completion and budgeted hours, and also are related to employee satisfaction/dissatisfaction and an increase/decrease in overall job performance. Utilizing psychology theories, we investigate whether a manager's feedback tone (supportive/non‐supportive) and evaluation focus (tasks/goals) influence auditors’ self‐esteem as well as their corresponding professional skepticism, including their search for evidence. Based on an experiment with 118 experienced auditors, we find that supportive and goal‐focused performance evaluations, independently, lead to higher self‐esteem. This elevated self‐esteem translates into desirable auditor attributes, such as greater professional skepticism and an increase in search for evidence and audit quality. Our results are valuable to practice, as firms attempt to train and retain their employees through the performance evaluation process.