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2020B04 – Audit firm culture, audit quality and other organizational outcomes
Project Number – 2020B04
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2020B04 – Audit firm culture, audit quality and other organizational outcomes

What?

What?

This project examines how audit firm organizational culture influences auditor attitudes and behavior, audit team performance, audit quality, and broader organizational outcomes such as job satisfaction, turnover, and operating performance. Building on prior FAR research on audit partner leadership and team dynamics, the study explicitly incorporates the firm-level cultural context in which audit teams operate. It empirically measures cultural values, culture fit, and culture embedding mechanisms and links them to individual, team, and firm-level outcomes.

Why?

Audit teams do not operate in isolation but are shaped by the organizational culture of their audit firms, which may reinforce or undermine high-quality auditing. Regulators and audit firms increasingly emphasize culture as a key lever for improving audit quality, yet there is limited empirical evidence on whether and how culture actually affects auditor behavior and performance. This project provides scientific evidence to inform audit firms’ ongoing culture initiatives and helps practitioners understand how to design, embed, and manage culture to sustainably support high-quality audits.

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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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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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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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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.  
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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 Firm Culture: Recent Developments and Trends in the Literature
This paper synthesizes research on audit firm culture (AFC) over the past decade, reviewing recent developments in research on factors instilling culture in audit firms, and how culture influences audit quality and auditors’ work attitudes. We develop and apply a three-phase model based on prior research and  professional  guidance  (IAASB,  2014),  which  maps  cultural  embedding  mechanisms  (EMs,  visible manifestations and organizational conditions to establish culture), perceptions of existing culture, and consequences of culture. Our synthesis shows that the culture of an audit firm is most oriented toward quality if leadership emphasizes professionalism over commercialism, promotes ethical judgments, and facilitates learning  through  systems,  integration  of  specialists,  and  interpersonal  interactions  among  auditors. The research cited shows strong influence on AFC of tone at the top set by leadership, as well as incentives in performance/reward systems. Studies we review generally imply continued concern for the influence of commercialism on AFC, but future research should investigate whether recent forces (i.e. pressure from regulators and efforts by the firms) have caused a cultural shift toward professionalism. We close by suggesting opportunities for future research that can strengthen understanding how AFC can be better managed by firms.
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Project info

Project Lead

Jere Francis

Research team

Ann Vanstraelen
Olof Bik

Involved University

Maastricht University
University of Antwerp
Project Number – 2020B04

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