THE OPERATION OF CONTROL-SYSTEMS IN LARGE AUDIT FIRMS

This study is an empirical investigation into the operation of control systems in large audit firms in Ireland. All audit seniors in three B ig 6 firms were included in a postal survey. The results showed eviden ce of under-reporting of time, premature sign-off and other audit qual ity reduction acts. The analysis was extended beyond that reported in previous studies by developing regression models to explain these thre e types of dysfunctional behavior. Perceived attainability of time bud gets and the leadership style of audit managers had a significant infl uence on dysfunctional behavior, but the perceived amount of emphasis on meeting budgets did not. Although organizational commitment was a f urther explanatory variable, professional commitment was not. Perceive d effectiveness of audit review procedures was found to be significant ly associated with lower levels of premature sign-off and other qualit y reduction acts, while the explicit and implied approval of superviso rs was significant in the under-reporting of time decision. The discus sion identifies two important types of informal control, and suggests that audit firms need to address a number of key issues in order to im prove the effectiveness of their formal control systems. The study con tributes to the literature on management control by examining the impa ct on individual behavior of a widely used formal control system. Furt hermore, while previous studies in an audit setting have tended to rep ort perceived influences on auditor behavior, or the outcome of testin g involving a single variable, this study constitutes an extension of earlier work by examining the combined effect of specific variables on actual behavior, as reported by practising auditors.