Prof. dr. Jere Francis

Function Role

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.

Perspectives on Audit Firm Culture
AFM’s culture initiative aims to improve audit quality by changing internal cultures of audit firms. This initiative is based on the belief that internal culture influences audit quality and can be measured and changed. But there are important challenges, including the ability to measure culture, the link to audit quality, and the assessment of the costs and benefits of cultural changes. It also is unclear whether clients are willing to pay for increased audit costs resulting from cultural changes. To gain insights about audit firm culture, Francis’ research team interviewed senior leaders of the Big Four audit firms in the Netherlands to provide perspectives on their culture initiatives. These initiatives primarily focus on changing partner behaviors, emphasizing (audit) quality, and using feedback mechanisms. “A common concern among all four firms is that the focus on a zero-error culture comes at the expense of innovation and a neglect of the business side of the audit firms’ practices. A singular focus on a zero-error culture is probably not sustainable, given the commercial and business needs of the firms to be profitable.” The paper also outlines challenges specific to instilling culture in audit firms, such as their decentralized nature and reliance on small partner-led engagement teams. Francis proposes to use a survey based on the widely applied Competing Values Framework to measure perception of audit firm culture and assess the success of culture change initiatives.  
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Audit Externalities and Regulation
In his paper on regulation, Jere Francis explains why audits are regulated. Audits are regulated because the major parties (auditors and their clients) settle for lower levels of assurance. Society requires higher levels of assurance since they (e.g., future shareholders, banks, employees, customers)  benefit from higher levels of assurance. Legislation and regulation purportedly motivate auditors to set higher levels of assurance (and thus audit quality). However, since auditors are required to produce on average a higher level of quality audit than the market requires, and arguably incur higher costs than the client is willing to pay, the question is who foots the bill for the higher cost: the auditor, the client, future shareholders, banks, society as a whole? Read Jere’s insightful paper,. It is important to understand why under the current system there will always be tension between what the firms believe is an appropriate level of assurance versus what auditors are expected to deliver.  
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What Exactly Do We Mean by Audit Quality?
The concept of audit quality is of fundamental importance in auditing, but there is little agreement on its definition or measurement. Jere Francis reviews several approaches to understanding audit quality and argue that the most meaningful measure is based on what the auditor is legally required to do, which is to opine on the client’s financial statements. This has resulted in a black and white (pass/fail) binary model of the audit report. However, we know there is a continuum of quality in the audited financial statements of clients, and that much of this variation is the result of the client’s accounting policy choices and estimations. Yet most firms receive a standard clean opinion despite the wide variation in financial statement quality. Jere Francis argues that while it is important for auditors to follow procedural rules (standards) to gather sufficient evidence, it is equally important that auditors carefully monitor and constrain, where necessary, a client’s aggressive accounting policy choices and estimates. The logical consequence is that the quality of audited financial statements and the quality of the audit report are related, and both are continuums, fifty shades of grey. Thus, audit report quality is better understood as a spectrum rather than a binary pass/fail model. Going forward, the challenge is to find ways for an auditor to convey information about the quality of audited earnings that go beyond the binary model of the current audit report.
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What Exactly Do We Mean by Audit Quality?
The concept of “audit quality” is of fundamental importance in auditing but there is little agreement on its definition or measurement. Jere Francis reviews several approaches to understanding audit quality and argue that the most meaningful measure of audit quality is based on what the auditor is legally required to do, which is to “opine” on the client’s financial statements. This has resulted in a black and white binary (pass/fail) model of the audit report. However, we know there is a continuum of quality in the audited financial statements of clients, and that much of this variation is the result of the client’s accounting policy choices, particularly accrual estimations. Yet most firms receive a standard clean opinion despite the wide variation in financial statement quality. He argues that while it is important for auditors to follow procedural rules (standards) to gather sufficient evidence, it is equally important that auditors carefully monitor and constrain, where necessary, the client’s accounting policy choices and accrual estimates. The logical consequence is that the quality of audited financial statements and the quality of the audit report are both continuums, fifty shades of grey. Thus, audit report quality is better understood as a spectrum rather than a simple binary pass/fail model. Going forward, the challenge is to find ways for an auditor to convey information about the quality of audited earnings that go beyond the binary model of the current audit report.
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Accountant Article Jere Francis
As a knowledgeable non-European, the American professor Jere Francis can provide a relatively objective view on the current developments in the field of auditing in The Netherlands: ‘I think, that if there is a structural deficit, it is not in the organizational aspect of the audit firms, rather than in the limits of the investigative tools of the auditors’.  
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Audit Partner-Manager Dyadic Fit and Team Functioning
This study investigates the formation of audit partner-manager pairings (called dyads) on audit engagements, and the consequences of this dyad formation on the functioning of the engagement team. Prior studies mainly focus on the role of a single team leader, while in practice, an audit team is usually led by two senior individuals, the manager and the engagement partner. This dual-leadership structure and its potential effect on the team are largely unexplored topics. We draw on the theory of homophily to develop and test predictions using data from 221 Dutch engagement teams. The analyses suggest that partners and managers that form a dyad are more similar in terms of their skills and leadership behaviors than would be the case for randomly matched partners and managers. However, dyad similarity is not always beneficial for the functioning of the engagement team. In fact, dyad similarity generally has a negative effect on team climate and team performance. The exception is when the partner and manager are both highly skilled and demonstrate strong leadership behaviors. Otherwise, a complementary matching of skills and leadership behaviors of the partner and manager is superior and leads to better team climate and team performance. Team performance is self-assessed: how well the audit engagement team performed. Team climate is measured as the team’s assessment of psychological safety, team commitment, and team identity. Our findings on partner-manager dyads can inform audit firms on how to better assign and manage their audit teams, particularly since the audit partner chooses the manager most of the time (68 percent of the engagements in our study)
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Leadership behaviors by partners and managers, and audit team performance
Leadership research in the organizational behavior (OB) literature has generally focused on single-leader teams. Yet many organization, including audit firms, have more complex dual leader structures in which leadership duties are shared between two team leaders. We study this in the context of audit teams in which the dual leaders are the audit partner and the audit manager. We find some evidence that division of labor in leadership behaviors is effective. However, the most effective audit teams are those in which both the partner and manager have what are called “consideration” behaviors that exhibit a concern for the welfare of team members. We call this “the power of consideration.” This finding makes sense given that audit teams come together for short periods of time, and there is a need for the audit team to feel confident in order to be effective. The other condition in which audit teams perform well is when the partner exhibits strong leadership behaviors for both initiating structure (defining goals, communication channels, time-lines) and consideration, irrespective of the manager’s leadership behaviors. We call this the “super partner” effect. Overall, the results point to active engagement by partners and managers with the audit team as being the most effective leadership behaviors. While initiating structure behaviors are important, consideration behaviors are far more important in audit teams, a finding which differs from prior OB research. Finally, the results underscore the importance of training partners and managers in the effective use of consideration behaviors to build team confidence and to ensure the best audit team performance.
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FAR Master Class slides: Partners, Managers & Leadership Behaviors
This FAR Masterclass explored how audit partners and managers influence team performance and audit quality through personality and leadership behaviors. Research shows that while client factors dominate audit outcomes, partners and managers play a critical role in shaping team climate. Personality traits affect job performance, and leadership behaviors, especially “consideration” and voice modeling, are essential for creating psychological safety and effective collaboration. Managers emerge as key drivers of team commitment and performance, while partners contribute to team identity and safety. The findings highlight the need for strategic pairing of leaders, targeted training, and fostering diverse personalities to strengthen audit quality.
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Audit Externalities and Regulation
In his paper on regulation, Jere Francis explains why audits are regulated. Audits are regulated because the major parties (auditors and their clients) settle for lower levels of assurance. Society requires higher levels of assurance since they (e.g., future shareholders, banks, employees, customers) benefit from higher levels of assurance. Legislation and regulation purportedly motivate auditors to set higher levels of assurance (and thus audit quality). However, since auditors are required to produce on average a higher level of quality audit than the market requires, and arguably incur higher costs than the client is willing to pay, the question is who foots the bill for the higher cost: the auditor, the client, future shareholders, banks, society as a whole? Read Jere’s insightful paper. It is important to understand why under the current system there will always be tension between what the firms believe is an appropriate level of assurance versus what auditors are expected to deliver.
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Understanding Audit Firm Culture through the Lens of the Competing Values Framework
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.
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When Dual Team Leaders Model Voice Behavior: Boundary Effects of Involvement, Mixed Messages, and Stifling Hierarchy on Team Safety, Voice Climate, and Performance
What leaders can do to help team members feel safe enough to create a climate of voice in a dual-leader: The manager plays a key role in the team: voice-modeling behavior from the manager has a stronger association than the partner’s behavior. Need for leadership training to help managers demonstrate, through their own “voice” leadership behaviors, that there is an environment of psychological safety that enables voice for the audit team. Managers’ influence is accentuated when they are more involved and avoid mixed messaging (by not engaging in counterproductive RAQ acts). Partner’s voice role modeling may help in absence of the manager, but otherwise has a stifling effect (less actual team voice). More manager involvement cannot compensate for this.
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Francis Voice Modeling Behaviour (Slider)
Important take-away: managers and partners need to be trained in how to effectively demonstrate that they have a genuine commitment to psychological safety and a strong climate for team voice.  
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