Cost–quality conflict in audit firms: an empirical investigation

Findings are reported from an empirical investigation of cost–quality conflict using a survey of audit juniors and seniors in four of the Big Five audit firms in Ireland. Prior findings, mainly from US studies, indicate the presence of a cost–quality conflict in the audit environment. Conventional accounting controls are only partially effective and, in response to such controls, auditors sometimes engage in dysfunctional behaviours. Evidence from this study suggests that dysfunctional behaviours are significantly related to time pressure (created through a combination of budgets and deadlines) and performance evaluation (incorporating both style and frequency of evaluation). The relationship between dysfunctional behaviours and other specified variables (participation and leadership style) was not statistically significant. There was evidence that major changes have taken place in the audit environment such as a flattening of organizational structures and a de-emphasis on budgets as a form of control. The findings are interpreted in the context of the changed audit environment. Implications for resolving the cost–quality conflict from the perspective of audit firm management are set out and future research opportunities are identified.