Dysfunctional auditing behaviour: empirical evidence on auditors' behaviour in Macau

• Pages: 209-226
• DOI: https://doi.org/10.1108/IJAIM-12-2012-0075
• Published date: 26 July 2013
• Date: 26 July 2013
• Author: Desmond C.Y. Yuen,Philip K.F. Law,Chan Lu,Jie Qi Guan
• Subject Matter: Accounting & finance

Dysfunctional auditing behaviour:

empirical evidence on auditors’

behaviour in Macau

Desmond C.Y. Yuen, Philip K.F. Law, Chan Lu and Jie Qi Guan

University of Macau, Macau, China

Abstract

Purpose – The purpose of the study is to investigate the factors that may result in a high turnover rate

of auditors in Macau. The factors considered include client importance, task complexity, time budget

constraints, auditor independence and acceptance of dysfunctional behaviour by Macau’s audit f‌irms.

Design/methodology/approach – This study involved three stages. In the f‌irst stage, interviews

were carried out with auditors from Big-4 (seven interviewees) and local non-Big-4 f‌irms (three

interviewees) in Macau to investigate the reasons for the high turnover rate amongst auditors in

Macau. They were asked to speculate about common explanatory factors. The second stage involved

141 auditors from Big-4 and local non-Big-4 accounting f‌irms who were asked to complete a

questionnaire survey for the explanatory factors. A total of 135 usable questionnaires were included in

the multiple regression data analysis. The third stage of research comprised follow-up interviews

aimed at learning more about the reasons for dysfunctional behaviour.

Findings – This research provides valuable information for audit f‌irms in Macau and will potentially

help them to reduce their turnover rate and identify the factors affecting dysfunctional behaviour

amongst auditors. The results extend the literature by focusing on the effect of perceived

responsibility on professional responses to time budget pressures, task complexity, pressure from

clients, and professional and ethical issues.

Practical implications – The challenge facing auditors today is to expand their auditing practices

and evolve standards for adequately monitoring the operations of business entities. The current high

turnover rate alarms audit f‌irms, which are concerned with training and the provision of suff‌icient

resources to solve the problems that auditors face in the workplace.

Originality/value – This is the f‌irst paper to examine the reason for turnover intentions in Macau.

This study sheds light on the factors that contribute to individual auditor differences in the acceptance

of dysfunctional behaviour that may result from the stressful nature of their duties.

Keywords Accounting,Turnover intention, Time budget pressure, Auditor’s independence,

Client’simportance, Task complexity,Dysfunctional auditing behaviour,Auditors’ behaviourin Macau,

Employees turnover,Auditors, China

Paper type Research paper

1. Introduction

After preliminary interviews of ten senior level auditors, it was found the major problem

is the high turnover rate amongst auditors in Macau. The motive of the study is to have

more understanding of this issue and thereby suggest ways to motivate and retain the

auditors in the f‌irms. It investigates the relationship between the high turnover rate and

dysfunctional auditing behaviour of 135 auditors. The results may assist the

accountants to improve their quality of work by being aware of such behaviour.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1834-7649.htm

The authors would like to acknowledge the support of CPA Australia and CPA Australia

Hong Kong Division for the research grant to complete the study.

Received 1 June 2009

Revised 8 June 2010

Accepted 17 December 2010

International Journal of Accounting

and Information Management

Vol. 21 No. 3, 2013

pp. 209-226

qEmerald Group Publishing Limited

1834-7649

DOI 10.1108/IJAIM-12-2012-0075

Dysfunctional

auditing

behaviour

209

This study also suggests that they f‌ind a better way to train their staff in offering a

more professional service to clients. More importantly, a second objective is to remind

the accounting profession should give appropriate emphasis to the possibility of

dysfunctional behaviour when developing professional auditing standards. Currently,

auditing standards and textbooks do not adequately consider the risks or implications of

dysfunctional auditor behaviour. The dysfunctional behaviour can be minimized if a

f‌irm adheres to the profession’s quality control standards. However, the potential for

dysfunctional auditor behaviour is not even discussed within the current quality control

standards. The result of on site interviews and questionnaire surveys of 135 auditors in

Macau reveals that despite pervasive perceptions of ethical conf‌licts, the participants

violate professional ethic and display dysfunctional behaviour when facing time budget

pressure and task complexity from their immediate superiors. The results also indicate

that participants who possess dysfunctional behaviour claim less responsibility for their

work than that participants who do not display it.

The International Accounting Standards Board (IASB) committed itself to

developing a set of high-quality, understandable and enforceable global accounting

standards in 2005. The International Organization of Supreme Audit Institutions

(INTOSAI) has cooperated with the IASB to produce a code of ethics and auditing

standards for practitioners. This code of ethics recommends that audit f‌irms design

audit steps and procedures to provide assurance that errors, irregularities and illegal

acts are detected in f‌inancial statements. A number of different factors may affect audit

behaviour under these guidelines, however. For example, the Public Oversigh t Board

(2000) suggests that time budgets place pressure on auditors and are the main factor in

turnover intention. Auditors play signif‌icant role of detecting f‌inancial frauds in order

to predict business failure in the unexpected f‌inancial crisis, audit f‌irms need to

provide quality independent opinions to their clients to establish goodwill in the

profession (Liou and Yang, 2008). The quality of service provided is heavily reliant on

the behaviour of the individuals who carry out f‌ield auditing work. Many prior studies

in behavioural research have concluded both that dysfunctional auditor behavi our

signif‌icantly affects audit quality and that it is a reaction to the stressful environment

caused by tight managerial control in audit f‌irms (Chan et al., 2009; Donnelly et al.,

2006; Otley and Pierce, 1995; Lightner et al., 1983; Alderman and Deitrick, 1982).

Auditors have to complete audits within a very limited timeframe and budget.

A revision in the quality of audit documents may impose invisible pressure in the

workplace (Louwers et al., 2005; Lord and DeZoort, 2001). The quality of audited

f‌inancial statements is controlled by both external and internal f‌irm policies and

procedures, such as generally accepted auditing standards and internal codes of ethics.

Auditors may sign off on audit steps without completing the entire auditing procedure

(Otley and Pierce, 1995; Rhode, 1978) by leaving out certain steps (Margheim and Pany,

1986). They may also underreport auditing time to complete their assigned jobs on

time. Rushing to f‌inish reports without collecting suff‌icient evidential materials

(Alderman and Deitrick, 1982) may result in inaccurate reports (McNair, 1991). The

underreporting of auditing time also has a signif‌icant, though indirect, impact on audit

report quality (Smith, 1995; Lightner et al., 1982). Although it may decrease labour

costs, it carries the risk of uncompleted audit jobs in future.

This study sheds light on the factors that contribute to individual auditor

differences in the acceptance of dysfunctional behaviour that may result from the

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