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THE INTERSECTION OF AUDITOR INDEPENDENCE, OBJECTIVITY, AND INTEGRITY IN HIGH-RISK AUDIT CONDITIONS

Baah, George Kwadwo
http://orcid.org/0000-0001-6968-7400
http://rave.ohiolink.edu/etdc/view?acc_num=case1465427254

Abstract Details

2016, Doctor of Philosophy, Case Western Reserve University, Management.
The rich store of audit quality research and steady improvements to auditing standards over the decades have not yielded the desired impact on audit quality. While most litigations following corporate failure naming auditors as defendants tend to accuse auditors of lack of independence, objectivity and willful participation in fraud, the impact of these character dimensions on audit quality has not been fully explored. Professional accounting bodies impress upon their members to be independent in fact and in appearance, be objective and exhibit integrity in their decisions about their clients' financials statement, yet, not much is known about how independence, objectivity, and integrity impact audit quality. Secondly, not much is known about how auditors enact independence, objectivity, and integrity on an audit engagement. Also, inputs from auditors have been quite underutilized in audit quality research in recent years, yet auditors are the people who implement changes in auditing standards and regulations. This dissertation focuses on the very character dimensions that auditors tend to be accused of lacking to examine the impact of independence, objectivity, integrity, and environmental constraints on audit quality. Guided by institutional theory and the theory of negotiated order, a multi-staged, three-part sequential mixed methods study consisting of one quantitative and two qualitative studies were conducted using responses from audit managers. Survey responses from auditors in the United Kingdom and the United States were used to perform an exploratory theoretical study of the impact of Independence, Objectivity, Integrity, and Constraints on Audit Quality. The second study was conducted to identify a highly constrained business environment where the impact of Independence, Objectivity, and Integrity on Audit Quality could be validated. Following the second study, a third study was conducted to understand the effects of the institutional environment on audit quality and how auditors respond to the effects of the institutional factors. The research finds that auditors’ integrity is a consistent determinant of audit quality. The positive significant impact of integrity on audit quality does not change when integrity interacts with environmental constraints. Contrary to the general notions about the importance of independence to audit quality, the research finds that independence and objectivity do not have a significant direct effect on audit quality. However, moderating independence on objectivity leads to a significant effect on audit quality. Independence strengthens the positive effect of objectivity on audit quality. But the positive impact of interacting independence and objectivity on audit quality reduces substantially when the interaction variable interacts with environmental constraints. Auditors tend not rely on their independence when the impact of environmental constraints are weak, and they tend to ignore or bend their interpretation and enactment of independence and objectivity and rather rely on their integrity when the environmental constraints are high. These findings show that agents resort to their inner core beliefs when making decisions under high-risk conditions. This dissertation makes theoretical and practical contributions to the literature. The quantitative research for the dissertation is the first known empirical analyses or validation of impact of external constraints, independence, objectivity, and integrity on audit quality using data from auditors. The research challenges the continued emphasis on independence as the core determinant of audit quality instead of the integrity of auditors. Also, study two of the dissertation is the first known study to find that aid project failure was mainly due to managerial failure though literature has blamed poor institutions, weak economies, and corruption as the culprits. Though prior audit quality studies have used responses from auditors, most recent researches in that domain have used data from sources other than auditors, yet auditors are the people who actually perform the work. The finding that auditors’ perceptions about the core determinant of audit quality is integrity and not independence suggests that perhaps custodians of the profession have not focused on the fundamental character determinant of audit quality. This finding makes a contribution to theory and practice.
Richard Boland, Jr (Committee Chair)
Timothy Fogarty (Committee Member)
Kalle Lyytinen (Committee Member)
Nicholas Berente (Committee Member)
230 p.
Accounting
audit quality; institutional theory; negotiated order

Recommended Citations

Citations

  • Baah, G. K. (2016). THE INTERSECTION OF AUDITOR INDEPENDENCE, OBJECTIVITY, AND INTEGRITY IN HIGH-RISK AUDIT CONDITIONS [Doctoral dissertation, Case Western Reserve University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=case1465427254

    APA Style (7th edition)

  • Baah, George. THE INTERSECTION OF AUDITOR INDEPENDENCE, OBJECTIVITY, AND INTEGRITY IN HIGH-RISK AUDIT CONDITIONS. 2016. Case Western Reserve University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=case1465427254.

    MLA Style (8th edition)

  • Baah, George. "THE INTERSECTION OF AUDITOR INDEPENDENCE, OBJECTIVITY, AND INTEGRITY IN HIGH-RISK AUDIT CONDITIONS." Doctoral dissertation, Case Western Reserve University, 2016. http://rave.ohiolink.edu/etdc/view?acc_num=case1465427254

    Chicago Manual of Style (17th edition)

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This open access ETD is published by Case Western Reserve University School of Graduate Studies and OhioLINK.