Auditors with greater honesty and humility are more likely to prioritize professional integrity and report financial infractions, according to a new study.
Researchers at the Tepper School of Business at Carnegie Mellon University and the University of Denver examined whether two personality traits — honesty-humility and agreeableness — influence an auditor's likelihood to report financial misstatements.
It found that those with higher honest-humility, characterized by fairness and modesty, were more likely, while those with lower scores were not. Agreeableness, characterized with cooperativeness and trustworthiness but associated with conflict avoidance and a desire for social harmony, did not reliably affect auditor reporting behavior, meaning the trait may not be as crucial for ensuring audit quality.
The study explored the HEXACO model of personality, which identifies six aspects: honesty-humility, emotionality, extraversion, agreeableness, conscientiousness and openness. The study suggests that screening for HEXACO personality traits is likely to have a meaningful impact on monitoring quality.
"Given the critical role of auditors in preventing financial misreporting, these findings are very relevant," Lily Morse, assistant professor of management at the University of Denver's Daniels College of Business, who led the study, said in a
High-profile monitoring failures — including at Tesco, General Motors, Toshiba and Rolls- Royce — have raised concerns about the effectiveness of third-party monitoring. The study says that while organizations see the need to improve monitoring quality, little research has focused on identifying traits in auditors who can be relied upon.
The study was coauthored by Morse and Taya Cohen, professor of organizational behavior and business ethics at Carnegie Mellon's Tepper School of Business. The research was funded by the Deloitte Center for Ethical Leadership at the University of Notre Dame and the Center for Behavioral and Decision Research at Carnegie Mellon.
