Dysfunctional audit behaviour in Maltese audit firms

Abstract

PURPOSE: This study analyses the incidence and impact of dysfunctional behaviour within Maltese audit firms. It examines the influence of the organisational culture and individual auditor characteristics on the acceptance of dysfunctional behaviour among audit personnel. DESIGN: A mixed approach is employed to address the objectives of the study. A questionnaire is distributed among the audit personnel of Maltese audit firms which enabled a general linear model to be developed. This is complemented by 8 semistructured interviews held with audit partners from different audit firms. FINDINGS: Although most dysfunctional practices were rarely performed, a high incidence of underreporting of time was noted among audit personnel. The study suggests that the perceived reinforcement of underreporting, inappropriate behaviours by superiors and an individual's locus of control are significant predictors of the acceptance of dysfunctional practices among audit staff. By including the demographic variables in the model, two further predictors were identified. Results indicate that audit experience leads to a reduction in dysfunctional behaviour. Moreover, audit personnel from big four firms seem to be less accepting of dysfunctional practices than audit staff from smaller firms. CONCLUSIONS: The organisational culture within audit firms exhibits significant influence on the acceptance of dysfunctional behaviour among audit personnel. Audit firms are sending a mixed signal to staff on the acceptability of underreporting of time which may lead to other dysfunctional practices. The emphasis on budget attainability may also be contributing to dysfunctional behaviour. Furthermore, a lack of control in performing audit work may cause audit personnel to be more accepting of these detrimental acts. VALUE: This study raises awareness on the impact of dysfunctional practices and sheds light on the causal factors of such behaviour, with the objective of contributing to the enhancement of audit quality.