Pressure on Auditors and Dysfunctional Behaviour as Institutional Work

  • Suyanto Suyanto

    Student thesis: Doctoral ThesisDoctor of Philosophy


    This study aims to examine the relationships between pressure from the institutional environment and auditor behaviour in the context of Indonesia. Auditors play an important role in the economy of a country by providing credible information for various users of audited financial statements for decision-making. However, auditors often show inappropriate behaviour when performing audit procedures, and this may affect audit quality and influence the users of financial statements. Institutional theory and literature provides an analytical framework which suggests that besides being a source of stability, the institutional environment is, at the same time, a source of pressure for auditors and affects their behaviour with implications for audit quality.

    Through interviewing 33 and surveying 356 auditors during February-June 2013, this study reveals several key findings. First, the institutional environment, comprising both external and internal audit firm factors, significantly affects auditor behaviour. In Indonesia, the external environment, encompassing rules and regulations, audit market and culture and society, in conjunction with internal factors (audit process and firm culture) coercively, normatively and culturally create complexity and pressure for auditors. Auditors in larger firms tend to have more pressure from both external and internal firm environments than those in smaller firms. Second, this institutional environment urges audit firms to pursue a simultaneous fulfilment of professional and commercial logics. With higher pressure from the environment, audit firms focus more on pursuing commercial goals than complying with their professional role. Although professional and commercial logics compete with one another, both are seen as necessary and complementary. Third, as a result of pressure and competing logics, auditors commit various behaviours from professional to dysfunctional to manipulative. Auditors in bigger firms commit less dysfunctional behaviour as a response to higher pressure than those in smaller audit firms. This suggests that bigger firms are likely to have more resources and capacities to deal with institutional pressure. Fourth, auditor behaviour is a complex issue, since it is affected by multiple environmental variables rather than a single factor such as time pressure, which is often documented in the literature. Furthermore, certain institutional pressures establish particular settings of auditor behaviour. Fifth, although dysfunctional behaviour as institutional work may affect audit quality, auditors commit such behaviour to seek to fulfil the duality of professional and commercial logics to achieve a level of performance and to maintain their appearance.

    The thesis contributes to and enriches an understanding of the social construction of auditor behaviour. Facilitated by the combined lens of institutional logics and institutional work, in conjunction with an adopted methodology, dysfunctional auditor behaviour as institutional work is affected by a complex institutional environment and two competing logics of audit firms. Auditor institutional work is ambivalent, consisting of multiple realities, from a negative tone to normalcy, from a taken-for-granted to a rationalised action-based sense making of the auditing environment, to preserve and transform their organisations.
    Date of Award2014
    Original languageEnglish
    SupervisorChristine Helliar (Supervisor), David Collison (Supervisor) & Louise Crawford (Supervisor)

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