Using Cultural Mindsets to Reduce Cross‐National Auditor Judgment Differences

ABSTRACT In a globalized audit environment, regulators and researchers have expressed concerns about inconsistent audit quality across nations, with a particular emphasis on Chinese audit quality. Prior research suggests Chinese audit quality may be lower than U.S. audit quality due to a weaker institutional environment (e.g., lower litigation and inspection risk) or cultural value differences (e.g., greater deference to authority). In this study, we propose that lower Chinese audit quality could also be due to Chinese auditors' different cognitive processing styles (i.e., cultural mindsets). We find U.S. auditors are more likely to engage in an analytic mindset approach, focusing on a subset of disconfirming information, whereas Chinese auditors are more likely to take a holistic mindset approach, focusing on a balanced set of confirming and disconfirming information. As a result, Chinese auditors make less skeptical judgments compared to U.S. auditors. We then propose an intervention in which we explicitly instruct auditors to consider using both a holistic and an analytic mindset approach when evaluating evidence. We find this intervention minimizes differences between Chinese and U.S. auditors' judgments by shifting Chinese auditors' attention more towards disconfirming evidence, improving their professional skepticism, while not causing U.S. auditors to become less skeptical. Our study contributes to the auditing literature by identifying cultural mindset differences as a causal mechanism underlying lower professional skepticism levels among Chinese auditors compared to U.S. auditors and providing standard setters and firms with a potential solution that can be adapted to improve Chinese auditors' professional skepticism and reduce cross‐national auditor judgment differences. RÉSUMÉ Miser sur les modes de pensée culturels pour réduire les différences de jugement entre les auditeurs d'un pays à l'autre Dans un contexte d'audit mondialisé, les responsables de la réglementation et les chercheurs ont fait part de leurs préoccupations concernant la qualité inégale des audits d'un pays à l'autre, en s'attardant particulièrement à la qualité des audits effectués en Chine. Des études antérieures portent à croire que les audits faits en Chine sont peut‐être de moins bonne qualité que ceux menés aux États‐Unis, en raison d'un cadre institutionnel moins contraignant (p. ex., risques de litiges ou d'inspections moins élevés) ou de différences sur le plan culturel