Staff auditors often rely on team members as a source of information to determine the behaviors that are normal and acceptable. This may be one cause of the prevalence of audit quality reducing dysfunctional audit behaviors (DAB) within the profession. Social influence theory, applied in an auditing context, posits that staff auditors are influenced not only by the preferences of their superiors (i.e., compliance pressure) but also by their peers' DAB (i.e., conformity pressure). Given the importance of the work performed by staff auditors, I conduct an experiment to identify the role that a peer team member's behavior and a superior's preference plays in influencing staff auditors' behavior. I predict, and find, that staff auditors with a peer team member who engages in a DAB are more likely to engage in a DAB. I also predict, and find, that staff auditors with a superior who has a preference toward efficiency are more likely to engage in a DAB. Finally, I predict that a superior's preference toward efficiency will amplify the influence of a peer team member's involvement in a DAB. Interestingly, I find that a superior's preference amplifies the effect of a peer team member's behavior when it is toward efficiency only, not effectiveness, for a face-to-face request from the client, but not for an email request. These results suggest that peer behavior influences the effect of a superior's preference of staff auditors in the intimidating situation of having a face-to-face interaction with the client. This could be because of the cognitive dissonance staff auditors experience when their general understanding of the standards does not align with their peer's behavior. The results of this study provide insights into a potential risk introduced to the audit engagement through audit team dynamics. / Doctor of Philosophy / Financial statement audits conducted by public accounting firms are frequently performed in a team setting. Most of the audit team consists of younger, inexperienced staff auditors who perform much of the testwork that informs the final audit opinion. Staff auditors’ lack of knowledge requires them to seek information to complete their testwork, from both their peer team members and their superiors. Peer team members may engage in behaviors that reduce the quality of the audit, which shows staff auditors that these dysfunctional behaviors are acceptable. At the same time, superiors often display a preference toward effectiveness (i.e., improving audit quality) or efficiency (i.e., saving time). I perform an experiment to determine if staff auditors mimic the audit quality reducing behaviors of their peer team members, while also considering the preference of their superior. I find that staff auditors are more likely to engage in audit quality decreasing behaviors when their peer team members have done so previously. I also find that staff auditors are more likely to engage in audit quality decreasing behaviors when their superior has a preference toward efficiency. I find that a superior’s preference toward efficiency, but not effectiveness, amplifies the effect that a peer team member’s behavior has on the likelihood that a staff auditor engages in an audit quality increasing behavior of requesting information from the client in a face-to-face interaction, but not for an email request. These results suggest that peer behavior influences the effect of a superior’s preference of staff auditors in the intimidating situation of having a face-to-face interaction with the client. In general, I find that peer behavior and superior preference influence staff auditors’ chosen behaviors.

by Tsui Lam Sin Lai, Judy. / Includes questionaire in Chinese. / Thesis (Ph.D.)--Chinese University of Hong Kong, 1994. / Includes bibliographical references (leaves 248-267). / ABSTRACT --- p.i / TABLE OF CONTENTS --- p.vi / LIST OF FIGURES --- p.xi / LIST OF TABLES --- p.xiii / ACKNOWLEDGEMENTS --- p.xv / CHAPTER / Chapter I. --- INTRODUCTION AND BACKGROUND / Chapter 1.1 --- Introduction --- p.1 / Chapter 1.2 --- Background --- p.8 / Chapter 1.2.1 --- Meaning and Concept of Ethics --- p.8 / Chapter 1.2.2 --- Approaches to Understand Ethical Behaviour in Accounting --- p.10 / Chapter 1.2.3 --- Tenets of Ethical Conduct --- p.19 / Chapter 1.2.4 --- Concept of Independence --- p.21 / Chapter 1.2.5 --- Auditor-Client Conflict --- p.23 / Chapter 1.3 --- Motivation for the Study --- p.26 / Chapter 1.4 --- Objective of the Study --- p.31 / Chapter 1.5 --- Outline of the Study --- p.32 / Chapter 1.6 --- Summary --- p.34 / Chapter II. --- LITERATURE REVIEW / Chapter 2.1 --- Introduction --- p.36 / Chapter 2.2 --- Accounting Ethics Literature --- p.37 / Chapter 2.2.1 --- Situational Variables in Third Party Perceptions --- p.40 / Chapter 2.2.2 --- Individual Differences --- p.43 / Chapter 2.2.3 --- Auditor Independence in Fact --- p.45 / Chapter 2.2.4 --- Cognitive Process --- p.47 / Chapter 2.3 --- Business and Marketing Ethics Literature --- p.52 / Chapter 2.4 --- General Decision Making Model --- p.59 / Chapter 2.5 --- Theoretical Model for Auditors' Ethical Decision Making --- p.63 / Chapter 2.5.1 --- Research Questions --- p.67 / Chapter 2.6 --- Summary --- p.68 / Chapter III. --- COGNITIVE MORAL DEVELOPMENT THEORY / Chapter 3.1 --- Introduction --- p.70 / Chapter 3.2 --- Cognitive Process --- p.71 / Chapter 3.3 --- Kohlberg's Theory of Cognitive Moral Development --- p.77 / Chapter 3.4 --- Criticisms of Kohlberg's Cognitive Moral Development Theory --- p.89 / Chapter 3.5 --- Antecedents of Moral Development --- p.92 / Chapter 3.6 --- Moral Reasoning Levels of Professional Accountants --- p.94 / Chapter 3.7 --- Summary --- p.101 / Chapter IV. --- HYPOTHESES DEVELOPMENT / Chapter 4.1 --- Introduction --- p.103 / Chapter 4.2 --- Decision Making Task --- p.104 / Chapter 4.3 --- Moral Reasoning and Ethical Behaviour --- p.108 / Chapter 4.4 --- Hypotheses --- p.114 / Chapter 4.4.1 --- Moral Reasoning --- p.117 / Chapter 4.4.2 --- Individual Differences --- p.119 / Chapter 4.4.2.1 --- Locus of Control --- p.121 / Chapter 4.4.2.2 --- Locus of Control and Moral Reasoning --- p.124 / Chapter 4.4.2.3 --- Cognitive Style --- p.126 / Chapter 4.4.2.4 --- Cognitive Style and Moral Reasoning --- p.129 / Chapter 4.4.3 --- Contextual Factor --- p.130 / Chapter 4.4.3.1 --- Size of Audit Fees --- p.132 / Chapter 4.4.3.2 --- Size of Audit Fees and Moral Reasoning --- p.135 / Chapter 4.4.3.3 --- Size of Audit Fees and Individual Differences --- p.137 / Chapter 4.4.3.4 --- "Moral Reasoning, Individual Differences and Size of Audit Fees" --- p.140 / Chapter 4.5 --- Summary --- p.143 / Chapter V. --- RESEARCH METHODOLOGY / Chapter 5.1 --- Introduction --- p.144 / Chapter 5.2 --- Field Experiment --- p.145 / Chapter 5.3 --- Measurement of Variables --- p.148 / Chapter 5.3.1 --- Dependent Variable --- p.150 / Chapter 5.3.2 --- Moral Reasoning --- p.151 / Chapter 5.3.3 --- Locus of Control --- p.158 / Chapter 5.3.4 --- Cognitive Style --- p.158 / Chapter 5.3.5 --- Size of Audit Fees --- p.159 / Chapter 5.4 --- Subjects and Sample Size --- p.160 / Chapter 5.5 --- Procedures --- p.170 / Chapter 5.6 --- Research Instruments --- p.172 / Chapter 5.7 --- Scoring Methods of Research Instruments --- p.175 / Chapter 5.8 --- Summary --- p.175 / Chapter VI. --- DATA ANALYSIS AND RESULTS / Chapter 6.1 --- Introduction --- p.177 / Chapter 6.2 --- Data Analysis Techniques --- p.178 / Chapter 6.3 --- Limitations of the Multiplicative Model --- p.182 / Chapter 6.4 --- Descriptive Statistics of Variables --- p.184 / Chapter 6.5 --- Validity and Internal Reliability of Variables --- p.184 / Chapter 6.6 --- Defining Issues Test: Internal Checks on Subject Reliability --- p.185 / Chapter 6.7 --- Results --- p.187 / Chapter 6.8 --- Summary --- p.200 / Chapter VII. --- DISCUSSION OF RESULTS / Chapter 7.1 --- Introduction --- p.201 / Chapter 7.2 --- Hypotheses with Significant Results --- p.202 / Chapter 7.2.1 --- Test of Null Hypothesis 2 --- p.202 / Chapter 7.2.2 --- Test of Null Hypothesis3 --- p.205 / Chapter 7.2.3 --- Test of Null Hypothesis 8 --- p.216 / Chapter 7.3 --- Hypotheses with Insignificant Results --- p.225 / Chapter 7.4 --- Summary --- p.234 / Chapter VIII. --- CONCLUSION / Chapter 8.1 --- Introduction --- p.236 / Chapter 8.2 --- "Summary of Objective, Research Questions and Hypotheses" --- p.236 / Chapter 8.3 --- Summary of Findings --- p.238 / Chapter 8.4 --- Contributions --- p.240 / Chapter 8.5 --- Implications --- p.241 / Chapter 8.6 --- Limitations --- p.242 / Chapter 8.7 --- Directions for Future Research --- p.244 / Chapter 8.8 --- Summary --- p.247 / BIBLIOGRAPHY --- p.248 / APPENDICES / Appendix I Normative Ethical Theories --- p.268 / Appendix II Fundamental Principles of Ethical Conduct --- p.272 / Appendix III Theoretical Frameworks on Ethical Behaviour --- p.275 / Figure 1 A Contingency Model of Ethical Decision Making in a Marketing Organisation --- p.280 / Figure 2 General Theory of Marketing Ethics --- p.281 / Figure 3 A Behavioural Model of Ethical/Unethical Decision Making --- p.282 / Figure 4 A Model of Ethical Decision Behaviour --- p.283 / Figure 5 Three Types of Causal Relations --- p.284 / Figure 6 Cognitive-Contingency Model for the Study of Ethics in Accounting --- p.285 / Appendix IV The Six Equilibrium Stages of Ethical Cognition --- p.286 / Appendix V Auditors' Decision Making Questionnaire --- p.287 / Appendix VI Debriefing Questionnaire --- p.306 / Appendix VII Social Opinion Survey (Chinese Version) --- p.307 / Appendix VIII Nature of Audit Conflict Cases as Reported by Subjects --- p.312 / Appendix IX A Summary of Subjects' Perceptions of the Purpose of the Experiment --- p.313 / Appendix X Use of Partial Derivatives for Data Analysis --- p.314

I conduct experiments to investigate how episodic knowledge obtained from prior experience as an auditor or a manager affects audit committee members' judgment in supporting the auditor in a disagreement with management. This paper sheds light on the advantage of first-hand accounting-related experience in the important oversight task. It also brings to bear the potential benefit from direct manager experience as claimed by researchers and regulators. I find that the episodic knowledge obtained from prior experience as an auditor, especially the experience of having been a diligent auditor, strengthens the degree of auditor support of participants in the role of an audit committee member. By contrast, the effect of episodic knowledge from first-hand experience as a manager on the likelihood of auditor support varies with the manager type. While the episodic knowledge acquired from direct experience as an aggressive manager augments the level of auditor support, such knowledge attained by prior experience as a conservative manager has no significant effect.

In recent years there has been a growing use of expectancy theory to study motivation and performance in accounting environments. Such research efforts have resulted in reporting some inconsistent findings and low explanatory power for the expectancy model. In an attempt to increase the explanatory power of the model, several researchers have suggested the inclusion of nonexpectancy components in the model. This research was undertaken to develop an integrative expectancy model by incorporating some elements of goal setting theory and attribution theory into the expectancy formulation. The study was also designed to provide empirical evidence on the validity of a within-subject design of the proposed model through an empirical investigation of auditors* performance behaviors to meet budgeted time in public accounting firms. Alternative performance behaviors to meet budgeted time were modeled in three choice processes. The first deals with auditors choice to report unfiltered time (i.e. report actual time worked) as opposed to filtered time worked (i.e., underreporting and sign-off behaviors). The second process deals with auditors' choice to engage in underreporting as opposed to sign-off behaviors. The third process deals with auditors' choice to reduce or overrule some audit procedures based on professional judgment. Data were collected using an anonymous questionnaire from a sample of auditors at the staff, senior, and supervisory staff levels of fifty-three national, regional and local accounting firms in the Dallas- Fort Worth area. Data received from 671 participants were analyzed using th Automatic Interaction Detector (AID3) and multiple regression techniques. The findings of this research support the expectancy formulation and its relevancy to the accounting environments. However, five nonexpectancy variables were found to have significant relationships with auditors' choice processes to meet budgeted time. These five variables were supervision, budget feasibility, length of experience, organizational level and firm size classification.

In recent years, considerable interest has been stimulated concerning potential conflicts of interest between a company's management and their independent auditors. Many researchers examined the association between corporations who changed their present auditors, and factors such as auditor's opinion on the financial statements, management changes, mergers, financial distress, etc. Some of these research efforts resulted in findings that were inconsistent with each other. The current research was therefore undertaken with the objective of developing a theoretical model of auditor change process and to explain the justification for considering certain specific factors that may be present in an auditor-client relationship. The research design and the methodology for analyses were developed on the basis of the theory on power conflicts found in political science literature and by the use of Wrong's power model on authority relationship. Sources of power such as the size of an audit firm, size of a corporation, the stock exchange membership, the ability of an auditor to qualify the opinion on the financial statements, the ability of the management of a corporation to terminate the audit contract following the issue of a qualified opinion, and change of a corporation's CEO were identified and converted into independent variables. Data were collected from secondary sources on a sample of 200 corporations, 100 companies that had changed their audit firm at least once during the period 1983-85, and 100 corporations that did not change their audit firm during this period. The resulting data were analyzed using the MDS-ALSCAL procedure and logit regression with maximum likelihood estimators. The findings of this research support the power model and its relevancy to the study of auditor-client relationship. The variables, client size, stock exchange membership, and audit firm size were found to have a significant association with corporations who changed their audit firms. However, the variable, change of CEO, was not found to be a significant cause of audit firm changes.

Text in Afrikaans / Hierdie studie is onderneem om aan te dui of wetsvoorskriftelikheid as 'n omgewingsfaktor van finansiele verslagdoening in staat is om te verseker dat f inansiele inligting sinvol vir beleggingsbeslui tneming aan gebruikers geopenbaar word. Die volgende fasette is bespreek: (1) 'n Teoretiese verwysingsraamwerk vir finansiele verslagdoening waarin wetsvoorskriftelikheid beklemtoon is. (2) 'n Oorsig van die historiese en huidige uitwerking van wetsvoorskriftelikheid op finansiele verslagdoening. (3) Wetsvoorskriftelikheid as.'n omgewingsfaktor van finansiele verslagdoening in Suid-Afrika. Soos in die Verenigde Koninkryk, die VSA en Australie, het wetsvoorskrif telikheid in Suid-Af rika die bruikbaarheid van f inansiele state aansienlik verbeter maar daar bestaan tekortkominge in Suid-Afrika, wat aangespreek moet word. Om onafhanklike en volgehoue navorsing te verseker, behoort 'n taakmag aangestel te word sodat wetsvoorskriftelike openbaarmaking voortdurend aan die nuutste omgewingsontwikkelinge kan voldoen. Terselfdertyd behoort wetgewing maatskappye te verplig om basiese ontledingsverhoudings te openbaar vir sinvolle belegg ingsbesluitneming. / This research was undertaken to show whether regulation as an environmental factor of financial reporting can provide useful information for making decisions. The following aspects were discussed: (1) A theoretical framework for financial reporting emphasizing accounting regulation. (2) A review of the historical and current influence of regulation on financial reporting. (3) Regulation as an environmental factor of financial reporting in South Africa. As in the United Kingdom, the USA and Australia, regulation of accounting in South Africa has improved the usefulness of financial reporting to a great extent, but there are still shortcomings in South Africa that require attention. To ensure independent and continuous research, it is recommended that a task force be appointed to enable financial disclosure to cope with the latest environmental developments. The South African law should also force companies to disclose basic analytical ratios for meaningful decision-making. / Management Accounting / M.Com. (Accounting)

This study analyzes the concept of auditor independence and develops a theoretical model for examining an auditor's independence and the methods that can be used to assess, instill and maintain independence. In addition, this research reports the results of an empirical test of a portion of the model. In this work, independence is described as a multifaceted concept that includes both independence in appearance and independence in fact. By incorporating literatures from economics and sociology, relationships between these two forms of independence are developed to show that the observable structures and behaviors of the profession (independence in appearance) form the basis for implying the level of an individual auditor's independence (independence in fact). In this context, independence is operationally defined as: an auditor's perceived right to make audit judgments free from client and firm influences. The model further suggests that the observable structures of the profession form the socialization contexts for an individual's professional development. A survey of newly hired employees from five national accounting firms was conducted to examine the multidimensional aspects of auditor independence and the link between educational socialization processes and professional development. The results provide some support for the theoretical model and provide a basis for refining the linkages between educational socialization and professional development.

A central consideration in constructing a theory of the firm is the divergent preferences of managers and investors. Managers have incentives to take actions (shirk, consume perquisites) not in the best interests of the firm. Accounting reports are a primary method by which managers make assertions about their actions or the results of their actions. Auditing is a mechanism by which managers can purchase external verification of their disclosures. This dissertation develops the demand for auditing in two multiperiod environments. The first environment allows the manager to disclose with impunity. In such a case the manager's demand for auditing depends on the ability of the manager to obtain the cooperative solution without auditing. The second environment permits the investors to bring suit against a manager suspected of issuing fraudulent disclosures. In that environment, a cooperative solution can be obtained without auditing. The results of 16 experiments designed to test the analytical assertions suggests that there is a demand for auditing, regardless of whether or not legal recourse is present. Both the availability of auditing and the availability of legal recourse induces a higher level of managerial effort. The highest level of managerial effort was seen when both auditing and legal recourse were available, despite the prediction that the presence of a legal system would make auditing useless. The investors tended to overbid and the markets with auditing reduced that tendency. Truthful disclosures were generally only seen when legal recourse was available.

Auditors form judgments by integrating the evidence they gather with information stored in memory (knowledge). As they acquire experience, auditors have the opportunity to learn how different patterns of evidence are associated with particular audit problems. Research in experimental psychology has demonstrated that individuals with task-specific experience can match the cues they encounter with patterns they have learned, and form judgments without consciously analyzing the individual cues. Accounting researchers have suggested that auditors develop judgment templates through task-specific experience, and that these knowledge structures automatically provide decisions in familiar situations. I examined whether auditor knowledge leads to reliance on judgment templates. To test this thesis, I synthesized a theoretical framework and developed research hypotheses that predict relationships between task-specific experience (my surrogate for knowledge) and (1) measures of cognitive effort, (2) accuracy of residual memory traces, and (3) performance with respect to identifying potential problems. To test these predictions, I provided senior auditors with comprehensive case materials for a hypothetical client and asked them to use analytical procedures to identify potential audit problems. Subjects acquired information and documented their findings on personal computers using software that I developed to record their activities.

We employ some of the modern tools of economic theory and time series econometrics to consider a number of economic problems. The communication and coordination problems we study are relevant in accounting, business, economics and finance. The thesis begins by examining the behaviour of people and organisations, who are supposed to share a common goal. Then it considers the equilibriating mechanisms of behaviour by groups of economic agents, who usually have conflicting interests. We apply the tools of non-cooperative game theory, which constitutes a large part of modern economic theory. In the sequel, we address the question of why people behave the way they do in their economic a↵airs. Peoples' economic behaviour is mirrored in the aggregates of macroeconomics. We propose a Time Varying Autoregressive model to study the movements in the five main macroeconomic variables. The methods come from standard Time Series Analysis, but we do introduce some innovative time series techniques. Finally, we conduct an empirical investigation of the movements in one of the five main macroeconomic variables, the rate of inflation. Among the econometric tools employed are standard Autoregressive models (AR), Autoregressive Distributed Lag models (ADL) and the more recent Generalised Autoregressive Conditional Heteroskedasticity (GARCH) methodology.