It Goes without Saying: The Effects of Intrinsic Motivational Orientation, Leadership Emphasis of Intrinsic Goals, and Audit Issue Ambiguity on Speaking Up

Abstract

Regulation requires auditors to raise significant audit issues and concerns to the attention of audit engagement leadership and requires leadership to encourage such communication. This research demonstrates, using an experiment and a survey, that audit team members' willingness to speak up about such issues is associated with their intrinsic motivational orientation. Based on this result, we test whether audit leadership can leverage this relationship to increase speaking up, particularly when audit issues are more ambiguous, by emphasizing intrinsic goals. Results across three additional experiments indicate that auditors whose leaders emphasize intrinsic goals, whether directly or through tone at the top and firm culture, are more likely to speak up than are other auditors. We also find that auditors are more likely to speak up when an audit issue is less versus more ambiguous. We conclude that leadership can fulfill their obligation to encourage upward communication by emphasizing intrinsic versus extrinsic goals, regardless of the level of ambiguity surrounding the audit issue.

When the Client Is a Former Auditor: Auditees' Expert Knowledge and Social Capital as Threats to Staff Auditors' Operational Independence

“…Bennett and Hatfield () report that staff‐level auditors often perceive themselves as younger, less experienced, and less knowledgeable than client management, and consequently refrain from requesting additional evidence. Furthermore, less experienced auditors may be hesitant to raise audit issues to the attention of audit engagement leadership (Kadous et al ) and to share fraud‐relevant information during brainstorming (Gissel and Johnstone ).…”

“…The influence of auditees on staff auditors' work can have significant consequences for audit quality. As Kadous et al (, 2114) note, “Upward communication is particularly critical to audit quality because lower‐level (staff) auditors gather most of the audit evidence … placing them in the best position to discover potential accounting and audit issues.”…”

Audit Firm Culture: Recent Developments and Trends in the Literature

“…Nelson and Proell (2018) further find that in the performance assessment process, audit leaders encourage speaking up through higher performance ratings for those who do so. Lastly, Kadous et al (2019) find that speaking up is associated with auditors' intrinsic versus extrinsic motivation for their job performance. Supervisors can leverage that effect by making intrinsic rewards more salient in their own emphasis.…”

Root cause analysis – what do we know?

“…To effectively conduct an RCA, the involved individuals need to share their experiences uninhibitedly. Blaming the individuals risks creating an unsafe learning environment and creates difficulties for speaking up (Andiola et al 2020;Gold et al 2014;Kadous et al 2019;Nelson et al 2016). Also, when the RCA targets the individuals rather than the system in which the adverse events occurred, deficiencies in the system are not addressed (e.g.…”