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.