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Honesty-humility is key to auditors monitoring quality

November 3, 2024

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Honesty-humility is key to auditors monitoring quality

External auditors play a vital role in upholding the accuracy of financial reports. However, recent high-profile accounting scandals have raised concerns about their effectiveness, sparking questions about why auditors sometimes fail to flag financial discrepancies.

In a new study researchers examined whether two personality traits—honesty-humility and agreeableness—influence an auditor’s likelihood to report financial misstatements.

The study’s findings reveal that auditors with higher honesty-humility scores were more likely to prioritize professional integrity and report financial infractions, while those with lower scores did not. Agreeableness—often associated with conflict avoidance and a desire for social harmony—did not reliably affect auditor reporting behavior, suggesting that this trait may not be as crucial for ensuring audit quality.

What the researchers say: “Personality traits can play a key role in identifying individuals who will communicate disagreement with clients and effectively uphold financial reporting standards,” the lead author explained. “Our findings show that screening auditors for honesty-humility could enhance monitoring quality and help prevent costly oversight failures.”

The study explored the HEXACO model of personality, which identifies six dimensions of personality (honesty-humility, emotionality, extraversion, agreeableness, conscientiousness, and openness), across two experiments, one of which involved approximately 200 certified public accountants. HEXACO honesty-humility, characterized by fairness and modesty, was the only trait to consistently predict better monitoring quality.

“Given the critical role of auditors in preventing financial misreporting, these findings are very relevant,” the researchers said. “Organizations should consider hiring auditors who display high levels of honesty-humility and provide interventions for those who could benefit from developing behaviors characteristic of this trait.”

So, what? This is another study which shows the genetic basis of behavior. Clearly the context of the organization where the auditing takes place is an influencing factor—though the researchers didn’t investigate this aspect—as well as the auditors’ previous family, school and work experience.

Behavior of any kind is influenced by the workings of our nervous system (including our brain) our genes, our context, our experience and our gut microbiology. Much more research is needed before a sweeping conclusion such as the one drawn by the present researchers can be said to be valid.

Dr Bob Murray

Bob Murray, MBA, PhD (Clinical Psychology), is an internationally recognised expert in strategy, leadership, influencing, human motivation and behavioural change.

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