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

Alternative performance measures (APMs) and alternative ways of presenting financial information pose a threat to the comparability of financial statement information and the assessment of alternative information may rouse increased professional skepticism (PS). The alternative performance measures or “alternative truths” presented in financial statements range from excluding few non-recurrent items to stating full “ non-IFRS”, “non - GAAP” or “ p ro forma” results. In a case where the presentation selected leads either to profit or loss, two differing figures may increase uncertainty in audit work and affect the perceived risks in the case. In this paper, we study how Finnish public auditors perceive audit work and professional skepticism related to APMs, with a survey (N=220) with statements focusing on the professional skepticism (PS) both generally (as a personal trait, trait skepticism ) and as case-specific state skepticism . We develop a measurement instrument for state skepticism. We find that state skepticism related to APMs is a largely separate component of professional (trait) skepticism. State skepticism seems to be helpful, together with considerations of the practical usefulness of those measures, in assessing APMs. Further, we find that auditors hold various views on APMs, and that search for knowledge seems a key feature in coping with APMs.