Effects of Maltese auditors’ time pressure on ethics and audit quality

Abstract

Purpose: The mail goal of this research was to analyse the main determinants which lead to time pressures amongst the Maltese auditors, working within an audit firm. The study assesses the significance of the consequences that arise from time pressures on the time reported by the Maltese auditors, and the audit quality of an audit engagement. Lastly, it examines the relationship between the audit firms’ ethical culture and the various dysfunctional audit behaviour that arise from time pressure induced by the auditors. Design: Online questionnaires were sent to 164 auditors in Malta. The data collected was used to measure the how time pressures relates with ethical culture and audit quality. The questionnaires were further complemented with a semi-structured interviews which was conducted amongst eight auditors. Findings: The study’s results show that time pressure exist in Maltese audit industry which is a result from competition between audit firms, engagement team rotation and auditor’s personal factors. Furthermore, auditors address time pressure by inducing both functional and dysfunctional behaviour. Findings reveal that there is a significant positive direct effect between reduced audit quality behaviour and under-reporting time and time pressure. However, ethical culture has a different effect on these types of behaviour, as whilst it has a significant negative effect on reduced audit quality, it does not have any effect on under-reporting of time. Lastly, results found that communication between the employees have a significant negative effect on time pressure. Conclusion: The study arrives at a conclusion that time pressure does have an effect on the quality of an audit, but it can be mitigated by the ethical culture endorsed by the audit firms, especially: tone at the top and communication. Implication: This study sought to understand how time pressure effect the audit quality, and whether ethical culture aids in having a high audit quality. Audit firms would be able to benefit from this study by focusing on the factors leading to time pressure so as to be able to reduce time pressure, and also implement stronger ethical culture in order to reduce any dysfunctional behaviour.