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.