Walking the Talk? Managing Errors in the Audit Profession

61 Pages Posted: 17 Jun 2019 Last revised: 29 Apr 2022

See all articles by Anna Gold

Anna Gold

Vrije Universiteit Amsterdam; Norwegian School of Economics (NHH)

Dominic Detzen

VU University Amsterdam

Oscar van Mourik

Vrije Universiteit Amsterdam

Philip Wallage

VU University Amsterdam; University of Amsterdam - Business School

Arnold Wright

Northeastern University - Accounting Group

Date Written: February 14, 2022

Abstract

Errors reflect unintended deviations from plans or goals, and commonly carry negative connotations. While errors cannot be eliminated, they offer opportunities for learning and innovation. Audit firms employ powerful mechanisms, such as detailed audit manuals and review processes, to prevent or detect audit errors and safeguard their work in the public interest. At the same time, the profession recognizes potentially positive long-term outcomes of errors in terms of continuous learning to enhance auditor skills and, ultimately, audit quality. The current study employs semi-structured interviews with Dutch auditors to investigate how they manage the tensions emanating from perceiving audit errors as a threat to their public-interest work while embracing such incidents as opportunities for learning. Our findings reveal that auditors express an open attitude towards learning from audit errors, but, in substance, they espouse negative emotions and defensive strategies for fear of repercussions. We show that the excessive emphasis audit firms and regulatory oversight bodies place on error prevention conditions auditors into perceiving errors as negative and avoidable events. We argue these attitudes result from the profession’s efforts to maintain status and legitimacy, where any auditor error may elicit regulatory scrutiny and concomitantly shed doubt on auditors’ work in the public interest.

Keywords: error management; learning from errors; legitimacy; psychodynamics of work; audit profession

JEL Classification: M14, M42, M44

Suggested Citation

Gold, Anna and Detzen, Dominic and van Mourik, Oscar and Wallage, Philip and Wright, Arnold, Walking the Talk? Managing Errors in the Audit Profession (February 14, 2022). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3395273 or http://dx.doi.org/10.2139/ssrn.3395273

Anna Gold (Contact Author)

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 598 25 92 (Phone)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

Dominic Detzen

VU University Amsterdam ( email )

Netherlands

Oscar Van Mourik

Vrije Universiteit Amsterdam ( email )

Netherlands

Philip Wallage

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
31 6 5120 6178 (Phone)

University of Amsterdam - Business School ( email )

Faculty of Economics and Econometrics
Roetersstraat 11
1018 WB Amsterdam
Netherlands
31 6 5120 6178 (Phone)

Arnold Wright

Northeastern University - Accounting Group ( email )

406 Hayden Hall
United States

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