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FAR Working Paper 2024/09 - 28: Understanding Audit Firm Culture through the Lens of the Competing Values Framework

KEY TAKE-AWAYS

Audit firm culture is viewed by regulators and inspectors as the means to enhance audit quality. This study uses the Competing Values Framework (CVF) to explore the culture of
large audit firms, and their attempts to change their cultures. We find that these firms predominantly emphasize a culture characterized by collaboration and control, which is consistent with an inward focus. We also find that audit firms struggle to implement a consistent understanding of culture across their offices and function levels, and there is a gap in how partners perceive culture compared to that of non-partner staff. This “culture gap” has negative consequences on auditors, as larger culture gaps are associated with lower psychological safety and poorer person organization fit. Embedding mechanisms can lower the culture gap, but having adequate resources is far more important of an embedding mechanism than “tone at the top.” The findings underscore the importance of actively communicating and reinforcing stated cultural values, and provide audit firms with a practical tool to diagnose problems in achieving culture change.

Authors

Prof. dr. Murray R. Barrick

Professor Barrick’s research focuses on the impact individual differences in behavior and personality have on job performance and on methods of measuring and predicting such differences.  He also is a co-author of the Theory of Purposeful Work Behavior, which highlights the role of purposefulness and experienced meaningfulness arising within the person as a key to explaining person-situation interactions.  Further, Barrick studies executive team success, examining the role of the CEO, personality and leadership of TMT members, team composition, team interdependence, and team processes on individual, team, and firm performance.  Finally, he also has examined the influence candidate self-presentation tactics have on the interviewer during an employment interview.

Prof. dr. Olof Bik RA

Olof Bik is professor of Auditing & Assurance at the University of Groningen. In his research he takes a special interest in the study of culture, leadership, and behavior in the realm of the auditing and assurance profession, firms, and teams. Since its inception in 2015 until 2022, Bik was one of two managing directors and academic member of the Board of the Foundation for Auditing Research. He worked in the audit practice of PwC for 18 years, since 2002 always in combination with a university appointment (Groningen), and joined academia in full since 2012 (Nyenrode). 

Prof. dr. Jere R. Francis

Professor Jere Francis is ranked among the top ten academics to publish in leading scientific journals in the field of accountancy research. He won two awards from the American Accounting Association (AAA) for his substantial contribution to auditing research. He was also named Outstanding Audit Educator in 2013 by the AAA. Professor Francis served on the editorial boards of several leading scientific journals, including Abacus, Accounting Organizations & Society, Accounting & Finance, Auditing: A Journal of Practice & Theory, Contemporary Accounting Research, Journal of Accounting & Economics, Review of Accounting Studies, and The Accounting Review. In addition to being of scientific import, his research has been of practical significance to accountants and regulatory authorities and he has presented his research to leading international accountancy firms, the American Institute of Certified Public Accountants, the World Bank and the Public Company Accounting Oversight Board in the United States. As FAR Research Chair, Professor Francis conducts scientific research on the quality of audits. He will also boost auditing education in the Netherlands with the help of several PhD students as part of this chair position.

Dr. Lena Pieper

Lena Pieper is Assistant Professor at Gies College of Business at the University of Illinois Urbana-Champaign. She joined Gies after completing a PhD from Maastricht University’s School of Business and Economics in the Netherlands. Lena spent time at Gies as a visiting PhD student in Spring 2022, and she brings research experience in auditing and leadership.

Prof. dr. Ann Vanstraelen

Ann Vanstraelen is Full Professor of Accounting and Assurance Services at Maastricht University and serves as Head of the department of Accounting and Information Management. She coordinates the multidisciplinary research theme "Culture, Ethics and Leadership". She earned her PhD at the University of Antwerp. Her research interests relate to the broad field of auditing and assurance services, governance, corporate reporting and disclosure, with a specific focus on the quality of accounting and auditing practices. 

 


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