Audit quality thesis – Term Paper

Auditors-Client Identification: Effects on audit quality


First, I present my gratitude to all people who were instrumental in the development of this thesis. I sincerely thank them for their time, financial support and knowledge as well as their prayers in the course of this work.

I also acknowledge the important role that my supervisor, (Name), played. He was very helpful in providing his expertise to me. In a special way, his suggestions always kept me on track and I cannot thank him enough. Supervision and feedback by the supervisor were in the most professional manner, and I owe him for this.

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I would also like to thank my family and friends for the immense support. I appreciate the moral and financial assistance I received from my family and friends. I also thank them for believing in my goals and me.

Lastly, I would like to thank all the respondents who made this work successful. I appreciate how willing they were to take part in interviews and to provide me with the relevant information that I needed for this work.

(Your Name Here)


How client identification affects the audit quality results is the main purpose of this research. Here, I introduce a measure that is based on theory to know the level of client identification and use the same to measure client identification and the effect it has on the quality of audit realized.

From the 257 responses of practicing auditors, it is clear that the theoretical predictions are correct. The study concluded that an auditor could have identification with a client. Also, there is a greater probability of auditors identifying to a large extent with clients to accept the wish of the client. Auditors who have more experience, as well as those who possess a higher level of professional identification, have a lower probability of yielding the client-preferred position.

Keywords: audit quality; client identification; professional identification; Social Identity Theory

List of Abbreviations

Big 4- Big Four audit firms in Sweden

IAASB-International Accounting and Assurance Standards Board

ISB- Independence Standards Board

TBP-Time Budget Pressure

RAQ-Reduced Audit Quality

Auditor’s responsibility

1. Introduction

This first chapter gives a general idea about the study and helps in guiding towards the objective of the survey and the research questions.

In a nutshell, Auditor-Client identification is a professional relationship/psychological bond where the auditor’s actions are a reflection of the client’s needs, and more importantly, they both act as a singular unit. There is a difference between Auditor-Client Identification and Auditor-Client Commitment in that the latter denotes that the Auditor is working independently from the client and this scenario suffers the dangers of audit failure. Auditor-Client identification is hence a very important factor to consider in any audit. Results of most studies suggest that Auditor-Client identification tends to negatively affect the objectivity of the auditor. In this research, we shall look at the nitty gritty details of how exactly Auditor-Client Identification affects auditing quality.

In the course of clients consulting auditors for the sole purpose of generating audited financial statements, a variety of psychological bonds develop between the auditor and the client. One of these bonds is Auditor-Client Identification. The quality of the results of auditing has been the center of attention in recent years. Governments, auditors, and regulators are all interested in the quality of audit (Shafer, ; Wang, 2010) that is provided by auditors across the world. As noted by Jenkins ; Lowe (1999), this effort in audit quality is evident with the recent measures taken by the International Accounting and Assurance Board. In 2013, the board came up with a framework that stressed on audit quality and enhancement of dialogue on the same concept.

It is known that auditors do not always follow the laid down audit principles (Sedikides, ; Brewer, 2001) and this results in audits that are not of the desired quality (Sundgren, 2009)- telling us that is very important to discuss the concept of audit quality. This paper mainly deals with this concept by investigating the effects of client identification on the quality of the audit.

Auditor job description

According to Cianci ; Bierstaker (2009), recent debates on the regulation of auditors concentrate on auditors; independence and how auditors interact with their clients (Bamber, ; Iyer, 2007) to achieve the desired levels of audit quality. The measure, like consulting activities; ban and tightening requirements for partner rotation, are all aimed at improving the quality of audit (Power, 1999) provided to clients around the globe.; ; ; As stated by Tajfel ; Turner (1985), auditors need to be familiar with their clients. This poses the threat of auditor objectivity in their work (Sweeney, Arnold, ; Pierce, 2010). With this in mind, critics have moved on to propose that auditors cannot be completely objective in their work. They argue it is acceptable for auditors to exercise some level of bias during the audit process.

This has led to further debate since following this line of thought would only lead to poorer audit results (Shafer, ; Wang, 2010) and disappointment of clients as well as other stakeholders. This study aims to settle this by going deeper and examining how client identification can improve the quality of audit results (Cianci, ; Bierstaker, 2009). This study aims at coming up with an empirical model of the relationships that auditors have with their clients. We can then understand how this influences audit quality.

The Social Identity Theory is used here to theoretically create and then test a measure of client identification. From the research of Pentland (2000), the level with which clients are identified by auditors is considered when coming up with this measure. With this measure, we want to find out if auditors identify with their clients as identified by Kunda (1999).; If so, we also want to find out if client identification differs among auditors. The second thing that is to be measured is the outcome of client identification by auditors. Lastly, this measure will look at client identification antecedents (Svanberg, ; ;hman, 2013).