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Cost-quality conflict in audit firms: an empirical investigation

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  • B. Pierce
  • B. Sweeney

Abstract

Findings are reported from an empirical investigation of cost-quality conflict using a survey of audit juniors and seniors in four of the Big Five audit firms in Ireland. Prior findings, mainly from US studies, indicate the presence of a cost-quality conflict in the audit environment. Conventional accounting controls are only partially effective and, in response to such controls, auditors sometimes engage in dysfunctional behaviours. Evidence from this study suggests that dysfunctional behaviours are significantly related to time pressure (created through a combination of budgets and deadlines) and performance evaluation (incorporating both style and frequency of evaluation). The relationship between dysfunctional behaviours and other specified variables (participation and leadership style) was not statistically significant. There was evidence that major changes have taken place in the audit environment such as a flattening of organizational structures and a de-emphasis on budgets as a form of control. The findings are interpreted in the context of the changed audit environment. Implications for resolving the cost-quality conflict from the perspective of audit firm management are set out and future research opportunities are identified.

Suggested Citation

  • B. Pierce & B. Sweeney, 2004. "Cost-quality conflict in audit firms: an empirical investigation," European Accounting Review, Taylor & Francis Journals, vol. 13(3), pages 415-441.
  • Handle: RePEc:taf:euract:v:13:y:2004:i:3:p:415-441
    DOI: 10.1080/0963818042000216794
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    9. Inyoman Agus Wijaya & Mentari Tri Yulyona, 2017. "Does Complexity Audit Task, Time Deadline Pressure, Obedience Pressure, and Information System Expertise Improve Audit Quality?," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 398-403.
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    12. Gold-Nöteberg, A.H. & Knechel, W.R. & Wallage, P., 2008. "The Effect of Audit Standards on Fraud Consultation and Auditor Judgment," ERIM Report Series Research in Management 11687, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    13. Espinosa-Pike, Marcela & Barrainkua, Itsaso, 2016. "An exploratory study of the pressures and ethical dilemmas in the audit conflict," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 19(1), pages 10-20.
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    18. Andiola, Lindsay M., 2014. "Performance feedback in the audit environment: A review and synthesis of research on the behavioral effects," Journal of Accounting Literature, Elsevier, vol. 33(1), pages 1-36.
    19. Horacio Molina-Sánchez & Antonio Ariza-Montes & Mar Ortiz-Gómez & Antonio Leal-Rodríguez, 2019. "The Subjective Well-Being Challenge in the Accounting Profession: The Role of Job Resources," IJERPH, MDPI, vol. 16(17), pages 1-17, August.
    20. Jose Joaquin del Pozo-Antúnez & Francisco Fernández-Navarro & Horacio Molina-Sánchez & Antonio Ariza-Montes & Mariano Carbonero-Ruz, 2021. "The Machine-Part Cell Formation Problem with Non-Binary Values: A MILP Model and a Case of Study in the Accounting Profession," Mathematics, MDPI, vol. 9(15), pages 1-16, July.
    21. Marlena Ciechan-Kujawa, 2015. "Professional financial and accounting services in the light of European Union directives and the deregulation of professions in Poland – current status and research needs," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 4(2), pages 65-77.
    22. Andiola, Lindsay M. & Bedard, Jean C., 2018. "Delivering the “tough message”: Moderators of subordinate auditors’ reactions to feedback," Accounting, Organizations and Society, Elsevier, vol. 70(C), pages 52-68.
    23. Brennan, Niamh & Kelly, John, 2007. "A study of whistleblowing among trainee auditors," The British Accounting Review, Elsevier, vol. 39(1), pages 61-87.

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