FARview #17 with Tjibbe Bosman (podcast in Dutch)
FARview podcast number 17 is now online. In it, UvA PhD student Tjibbe Bosman talks about his paper 'Audit Firm Culture Dimensions, Audit Quality and Office Growth' (with co-authors Jan Bouwens and Olof Bik).
Surveys of over 1,100 auditors (and over 7,000 of their financial statements audits) show that firm culture differs significantly between audit firms and between office locations. Culture appears to be related to audit quality, audit client retention and client portfolio growth. For example, firms with a quality-oriented culture have lower growth rates.
Audit quality is measured by the tendency to issue a report with an adjusted opinion (qualification, disclaimer of opinion or disapproval) or with a mandatory explanatory paragraph regarding going concern.
The culture dimensions examined are: (1) error climate (culture related to making, analyzing, and warning about errors); (2) voicing (saying what you think); (3) tone at the top of leadership; and (4) quality threatening pressures (forms of pressure that can affect quality).
Bosman advocates working on an open and safe mistake culture. This contributes significantly to the quality of audits.