An audit quality climate in audit firms

Abstract

Audit quality is only achievable when audit firms have a quality-oriented culture reflected in their audit quality climate. Although audit quality has been widely researched, there is still uncertainty about how it takes shape among employees in audit firms. This study answers the following question: “What climate promotes audit quality among employees in audit firms?”. An institutional logic and organizational culture lens was adopted to investigate employees’ views of an audit quality climate in audit firms.

Following a quantitative research approach, the study used Patterson's Organizational Climate Measure as a basis to develop an instrument to measure employee perceptions of the audit quality climate in audit firms. The dataset was responses from non-executive employees at large audit firms and the Auditor-General of South Africa. Two rounds of exploratory factor analysis identified six audit quality climate dimensions as perceived by employees of audit firms. Confirmatory factor analysis provided evidence of the construct’s validity. The outcome is an Audit Firm Quality Climate (AFQC) measurement instrument to measure employee perceptions of the audit quality climate in audit firms.

The study contributes to practical interpretations of institutional logic at the frontline and expands the audit quality literature through the under-researched voice of audit firm employees without executive powers. The AFQC measurement instrument can be used by various stakeholders to monitor employees' perceptions of the audit quality climate in audit firms, identify causes of audit quality shortcomings and enable associated improvements.