The balanced scorecard in a local auditing firm : a case study

Abstract

Purpose: Provided the ongoing rigorous regulations being imposed on the auditing profession, firms operating within the auditing sector, by their very nature, are putting performance measurement on the back burner. This has therefore entailed the need for a deep study on a suitable system which can be used in the running and management of the business, such as the Balanced Scorecard. The main objective of this study was therefore to design and propose a Balanced Scorecard within the context of a local auditing firm. Design: A qualitative case study method was chosen in order to reach the research objectives. Semi-structured interviews using a series of open-ended questions were first conducted with the two partners of the case audit firm. Interviews were then conducted with the heads and other employees further down the chain of command, working within the main revenue generating departments. To gain further insight on the company’s operations, interviews were also conducted with other departments. A validation interview was ultimately conducted to identify the suitability of the proposed Balanced Scorecard. Findings: After going through the nature of the company in question and identifying the current situation with regards to performance measurement, a Balanced Scorecard was planned and developed. Two additional perspectives were included with Kaplan and Norton’s in addition to the original four perspectives. Objectives, measures, targets, and initiatives were established for each perspective and linkages were embraced in the strategy map presented. Conclusions: Considering the findings obtained and the nature of the case company, it was deemed that the use of the proposed Balanced Scorecard can help the case firm in question at this phase of its business lifecycle, especially after taking into account the current problems in the current performance measurement system in place. Moreover, the partner’s validation of the proposed Balanced Scorecard and the strategy map highlighting the linkages between the perspective, further underpin the conclusion. Value: This study is of value for the case audit firm as the company is currently shifting from its roots i.e., from a family-business mentality to a more corporate business mindset. Moreover, the study will also help the company to address the current problems in place when it comes to performance measurement. Furthermore, this study can be also used as a guide for other local audit firms, especially provided that, so far, no studies have been made on this research topic locally.