Auditors’ perceptions of alternative performance measures – alternative truths and professional skepticism

Figures & data

Figure 1. The conceptual model.

Table 1. Descriptive statistics and factor loadings for the professional (trait) skepticism.

Variable	Mean	SD	Min	Max	t-Statistic (≠3)	Loading
Search for knowledge (Lambda = 2.33, Alpha = 0.83)
I think that learning is exciting.	4.44	0.77	1	5	27.71***	0.94
I relish learning.	4.37	0.74	1	5	27.57***	0.94
Suspension of judgement (Lambda = 1.86, Alpha = 0.89)
I take my time when making decisions.	2.53	0.98	1	5	−7.08***	0.72
I don’t like to decide until I’ve looked at all of the readily available information.	3.60	0.98	1	5	9.11***	0.67
I dislike having to make decisions quickly.	2.81	1.11	1	5	−2.54**	0.86
Questioning mind (Lambda = 1.72, Alpha = 0.62)
My friends tell me that I often question things that I see or hear.	3.20	0.94	1	5	3.14***	0.91
I frequently question things that I see or hear.	3.60	0.80	1	5	11.10***	0.86
Self-determining (Lambda = 1.68, Alpha = 0.78)
I tend to immediately accept what other people tell me.	1.98	0.73	1	4	−20.58***	0.86
I usually accept things I see, read, or hear at face value.	1.97	0.82	1	5	−18.67***	0.80
I often accept other people’s explanations without further thought.	1.80	0.72	1	5	−24.51***	0.87

Notes: Obs. = 220. Factoring method: principal component analysis. Kaiser–Meyer–Olkin test of sampling adequacy: KMO = 0.62. Bartlett’s test of sphericity: Chi²(45) = (p-value < 0.001). Min. value in all items 1, max. value in all items 5. Statistical significance: ***p-value < 0.01; **p-value < 0.05.

Table 2. Descriptive statistics and factor loadings for the APM survey instrument.

Variable	Mean	SD	t-Statistic (≠3)	Loading
Useful (Lambda = 5.44, Alpha = 0.89)
It is good to eliminate one-off events from the financial statement figures and present alternative performance measures.	3.70	1.06	9.90***	0.86
Alternative performance measures provide useful information for investors about the company’s financial results.	3.79	0.88	13.30***	0.80
Using alternative performance measures provides useful information for auditing.	3.24	1.13	3.16***	0.85
Alternative performance measures are misleading to financial statement users.	2.57	0.91	−6.99***	0.55^R
Reporting alternative performance measures is useful in auditing.	3.04	1.09	0.56	0.78
Presenting alternative performance measures facilitates forming a true and fair view on the financial statements.	3.42	0.94	6.67***	0.84
Alternative performance measures give useful information about the formation of the company results.	3.71	0.81	13.00***	0.70
Trust (Lambda  = 2.39, Alpha = 0.64)
I trust the information provided by the alternative performance measures.	3.28	0.78	5.33***	0.48
Finnish companies know how to comply with the guidance related to alternative performance measures, issued by the European Securities and Market Authority, ESMA.	3.00	0.68	0.10	0.93
Companies know how to operate correctly when reporting alternative performance measures.	3.09	0.75	1.79*	0.67
Skeptical behavior (Lambda  = 1.25, Alpha = 0.62)
I am usually skeptical regarding what management tells me.	2.71	0.93	−4.45***	0.53
When presenting alternative performance measures companies typically embellish the image of the company.	3.18	1.00	2.69***	0.80
Companies attempt to maximize their stock value by presenting alternative performance measures.	3.27	0.94	4.21***	0.84
State skepticism (Lambda = 1.22, Alpha = 0.80)
If a company reports losses according to IFRS but profit according to alternative performance measures, it is a sign of an increased audit risk.	3.25	0.99	3.80***	0.88
If a company reports losses according to IFRS but profit according to alternative performance measures, it is a sign of an increased risk for financial statement manipulation.	3.02	0.93	0.36	0.90
If a company reports losses according to IFRS but profit according to alternative performance measures, I am more skeptical in my audit.	3.68	0.81	12.38***	0.71
Dropped items from state skepticism
Presenting alternative performance measures means increased auditing risks.	3.00	1.05	−0.06
Presenting alternative performance measures increases the risk of financial statement manipulation.	3.11	1.05	1.54

Notes: Obs. = 220. Factoring method: principal component analysis. Kaiser–Meyer–Olkin measure of sampling adequacy: KMO = 0.82. Bartlett’s test of sphericity: Chi²(120) = 1588.02 (p-value < 0.001). ^RReversed measurement scale. Min. value in all items 1, max. value in all items 5. Statistical significance: ***p-value < 0.01; *p-value < 0.1. The novel statements for the state skepticism instrument are presented in italics.

Table 3. Descriptive statistics.

Variable	Description	Mean	SD	Median	Min	Max
State	Bartlett score of the State construct.	0.00	1.01	−0.08	−2.71	2.29
Useful	Bartlett score of the Useful construct.	0.00	1.00	0.22	−3.25	2.02
Skeptical	Bartlett score of the Skeptical construct.	0.00	1.02	−0.14	−2.42	2.47
Trust	Bartlett score of the Trust construct.	0.00	1.01	−0.05	−3.66	2.97
Search for knowledge	Bartlett score of the Search for knowledge construct.	0.00	1.00	0.14	−4.46	1.26
Suspension of judgement	Bartlett score of the Suspension of judgement construct.	0.00	1.02	−0.02	−2.64	2.48
Self-determining	Bartlett score of the Self-determining construct.	0.00	1.00	0.07	−1.91	3.13
Questioning mind	Bartlett score of the Questioning mind construct.	0.00	1.00	0.13	−3.38	2.16
Listed	Dummy variable that equals one if the respondent has experience in auditing listed companies.	0.46	0.50	0.00	0.00	1.00
Experience	Auditing experience in years.	20.44	12.33	20.00	2.00	52.00
Long-term	Value of the statement ‘I intend to stay in my profession for a long time’, measured on a five-point Likert scale.	3.30	1.31	4.00	1.00	5.00
KHT	Dummy variable that equals one if the respondent holds the KHT certification.	0.54	0.50	1.00	0.00	1.00
Age	The respondent’s age in years.	51.22	14.57	51.50	26.00	82.00
Big4	Dummy variable that equals one if the responded works for a Big4 auditing firm.	0.26	0.44	0.00	0.00	1.00
Gender	Dummy variable that equals one if the responded is female.	0.25	0.43	0.00	0.00	1.00
Senior	Dummy variable that equals one if the responded is in a senior position.	0.69	0.46	1.00	0.00	1.00

Notes: Obs. = 220.

Figure 2. Structural equation model.

Table 4. Structural equation model results.

Path	Coef.	S.E.	p-Value
Independent variable → Mediator
Self-determining → State	−0.057	0.065	0.380
Suspension of Judgement → State	0.083	0.062	0.182
Search for Knowledge → State	0.132	0.067	0.047
Questioning Mind → State	0.059	0.064	0.360
Self-determining → Useful	0.008	0.068	0.903
Suspension of Judgement → Useful	−0.028	0.065	0.669
Search for Knowledge → Useful	0.196	0.069	0.005
Questioning Mind → Useful	0.061	0.066	0.361
Mediator → Dependent variable
State → Skeptical	0.180	0.066	0.006
Useful → Skeptical	−0.343	0.064	0.000
State → Trust	−0.076	0.064	0.239
Useful → Trust	0.370	0.062	0.000
Independent variable → Dependent variable
Self-determining → Skeptical	0.014	0.064	0.826
Suspension of Judgement → Skeptical	0.036	0.061	0.554
Search for Knowledge → Skeptical	0.045	0.067	0.507
Questioning Mind → Skeptical	0.123	0.063	0.050
Self-determining → Trust	−0.159	0.062	0.010
Suspension of Judgement → Trust	0.010	0.059	0.870
Search for Knowledge → Trust	0.123	0.065	0.059
Questioning Mind → Trust	0.132	0.061	0.031
Model fit statistics
χ^2	3.49		0.322
RMSEA	0.027
CFI	0.996
TLI	0.929
Coefficient of determination	0.36

Notes: Obs. = 220. Estimation method: maximum likelihood.

Table 5. Significant mediation effects.

Mediated path	Coef.	95% Bias-corrected confidence interval
Search for Knowledge → Useful → Skeptical	−0.067	−0.134, −0.019
Search for Knowledge → Useful → Trust	0.073	0.019, 0.144

Notes: Bootstrapping was carried out with 2000 replications.

Appendix 2. Correlation matrix

	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
State (1)	1.00
Useful (2)	−0.23*	1.00
Skeptical (3)	0.19*	−0.11	1.00
Trust (4)	−0.35*	0.39*	−0.05	1.00
Search for knowledge (5)	−0.01	−0.14*	−0.12	−0.01	1.00
Susp. of judgement (6)	0.03	0.18*	0.04	0.16*	0.00	1.00
Self-determining (7)	0.06	−0.01	0.11	−0.02	−0.01	0.01	1.00
Questioning mind (8)	0.13	0.16*	0.02	0.03	0.01	0.00	−0.01	1.00
Listed (9)	0.14*	0.10	−0.23*	−0.12	−0.03	0.13	−0.07	0.18*	1.00
Experience (10)	−0.05	−0.08	0.19*	0.05	−0.22*	−0.10	−0.05	−0.06	−0.23*	1.00
Long-term (11)	0.00	0.10	−0.21*	−0.01	0.10	0.29*	−0.02	0.08	0.23*	−0.39*	1.00
KHT (12)	0.07	0.01	−0.16*	−0.13	0.02	0.16*	−0.10	0.03	0.46*	−0.06	0.19*	1.00
Age (13)	−0.02	−0.14*	0.28*	0.05	−0.17*	−0.12	0.02	−0.08	−0.46*	0.87*	−0.40*	−0.26*	1.00
Big4 (14)	0.02	0.02	−0.26*	−0.14*	0.14*	0.06	−0.04	0.05	0.48*	−0.24*	0.11	0.41*	−0.43*	1.00
Gender (15)	0.07	−0.04	−0.10	0.00	0.09	0.19*	−0.03	−0.10	0.03	−0.07	0.14*	0.06	−0.06	0.28*	1.00
Senior (16)	0.04	−0.03	0.08	−0.04	−0.16*	0.03	−0.08	0.03	0.02	0.14*	0.15*	0.13*	0.06	−0.09	0.02

Statistical significance: *p-value < 0.05.

Table

Path	Coef.	S.E.	p-Value
Dependent variable: State
Self-determining → State	−0.057	0.065	0.380
Suspension of Judgement → State	0.083	0.062	0.182
Search for Knowledge → State	0.132	0.067	0.047
Questioning Mind → State	0.059	0.064	0.360
Listed → State	−0.132	0.170	0.439
Log(Experience) → State	−0.218	0.189	0.247
Long-term^# → State	−0.183	0.074	0.013
KHT → State	−0.026	0.152	0.864
Log(AGE) → State	0.919	0.544	0.091
Big4 → State	−0.248	0.188	0.185
Gender → State	−0.117	0.158	0.461
Senior → State	0.218	0.144	0.130
Constant	−2.957	1.744	0.090
Dependent variable: Useful
Self-determining → Useful	0.008	0.068	0.903
Suspension of Judgement → Useful	−0.028	0.065	0.669
Search for Knowledge → Useful	0.196	0.069	0.005
Questioning Mind → Useful	0.061	0.066	0.361
Listed → Useful	−0.243	0.176	0.168
Log(Experience) → Useful	0.354	0.196	0.071
Long-term^# → Useful	−0.023	0.077	0.763
KHT → Useful	−0.220	0.157	0.162
Log(AGE) → Useful	−1.019	0.564	0.071
Big4 → Useful	−0.279	0.195	0.152
Gender → Useful	0.039	0.164	0.812
Senior → Useful	−0.114	0.149	0.444
Listed → Useful	3.362	1.810	0.063
Constant	−0.243	0.176	0.168
Dependent variable: Skeptical
State → Skeptical	0.180	0.066	0.006
Useful → Skeptical	−0.343	0.064	0.000
Self-determining → Skeptical	0.014	0.064	0.826
Suspension of Judgement → Skeptical	0.036	0.061	0.554
Search for Knowledge → Skeptical	0.045	0.067	0.507
Questioning Mind → Skeptical	0.123	0.063	0.050
Listed → Skeptical	0.399	0.167	0.017
Log(Experience) → Skeptical	−0.242	0.183	0.186
Long-term^# → Skeptical	−0.061	0.072	0.399
KHT → Skeptical	0.074	0.148	0.618
Log(AGE) → Skeptical	0.558	0.535	0.297
Big4 → Skeptical	−0.236	0.184	0.200
Gender → Skeptical	0.274	0.155	0.076
Constant	−1.728	1.711	0.312
Dependent variable: Trust
State → Trust	−0.076	0.064	0.239
Useful → Trust	0.370	0.062	0.000
Self-determining → Trust	−0.159	0.062	0.010
Suspension of Judgement → Trust	0.010	0.059	0.870
Search for Knowledge → Trust	0.123	0.065	0.059
Questioning Mind → Trust	0.132	0.061	0.031
Listed → Trust	0.038	0.163	0.815
Log(Experience) → Trust	0.092	0.178	0.608
Long-term^# → Trust	0.021	0.070	0.759
KHT → Trust	−0.075	0.144	0.604
Log(AGE) → Trust	−0.629	0.520	0.227
Big4 → Trust	0.049	0.179	0.785
Gender → Trust	−0.150	0.150	0.318
Constant	2.243	1.663	0.178
Model fit statistics
χ^2	3.49		0.322
RMSEA	0.027
CFI	0.996
TLI	0.929
Coefficient of determination	0.36

Notes: ^#Standardized variable (Mean = 0, SD = 1). Obs. = 220. Estimation method: maximum likelihood.