The Negative Effect of Time Budget Pressure to Auditor Independence and Professional Skepticism
Keywords:Time budget pressure, auditor independence, professional skepticism, auditor, public accounting firm, JEL classification, M410, M420
This research examines whether time budget pressure affect professional scepticism and if so, whether the affect is mediated by auditor independency. A web-based survey is used in deploying and delivering questionnaires to 163 auditors from big four and non-big four in Jakarta. The result shows that auditor independency (AI) is partially mediated the relationship between time budget pressure (TBP) and professional scepticism (PS). Which means, external auditor in Jakarta who experiencing high time pressure will tend to decrease their independency and resulted a low scepticism. Seeing this result, this study suggests by increasing number of audit team member, set the number of minimum supporting evidence and having supervisor to monitor auditor’s job, will help to minimize the negative effect of time pressure.
American Institute of Certified Public Accountants (AICPA). 1972. AU Section 110: Responsibilities and functions of the independent auditor. Accessed: April 2018, https://www. aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-00110.pdf.
American Institute of Certified Public Accountants. 1992. Statement on Auditing Standards. https://www.aicpa.org/research/stan-dards/auditattest/sas.html.
Baron-Cohen S., Leslie A. M., and Frith U. (1985). Does the autistic child have a ‘theory of mind’? Cognition, 21, 37-46.
Bills, K. L., Swanquist, Q. T., and Whited, R. L. (2015). Growing pains: Audit quality and office growth. Contemporary Accounting Research, 33(1), 288-313.
Bowrin, R. A., and King, J. (2010). Time pressure, task complexity, and audit effectiveness. Managerial Auditing Journal, 25(2), 160-181.
Broberg, P., Torbjorn, T., Daniela, A., Niclas, G., and Ola, M. (2016). Explaining the inﬂuence of time budget pressure on audit quality in Sweden. Journal of Management and Governance, 14(4), 351-377.
Chen, Q., Kelly, K., and Salterio, S. E. (2012). Do changes in audit actions and attitudes consistent with increased auditor scepticism deter aggressive earnings management? An experimental investigation. Accounting, Organizations and Society, 37(2), 95–115.
Chiang, C. (2016). Conceptualizing the linkage between professional scepticism and auditor independence. Pacific Accounting Review, 28(2), 180-200.
Cianci, A. M., and Bierstaker, J. (2009). Auditors’ efﬁciency motivated evaluation. Advances in Accounting, 25(1), 20-27.
Consideration of fraud in a financial statement audit. 1997a. Statement on Auditing Stan-dards, 82.
Consideration of fraud in a financial statement audit. 2002. Statement on auditing standards, 99.
Coram, P., Ng, J., and Woodliff, D. R. (2004). The effect of misstatement on the propensity to commit reduced audit quality acts under time budget pressure. Auditing: A Journal of Practice & Theory, 23(2), 159-167.
Dillman, D. A., Mail and Internet Survey: The Tailored Design Method, Second Edition, John Wiley and Sons., New York, 2000.
Dhar, R., and Nowlis, S. M. (1999). The effect of time pressure on consumer choice deferral. Journal of Consumer Research, 25, 369-384.
Due care in the performance of work. 1997b. Statement on auditing standards, 1.
Due professional care in the performance of work. 2006a. AU Section 230. https://pcaobus. org/Standards/Archived/PreReorgStandards/Pages/AU230.aspx
Ettredge, L. M., Bedard, C. J., and Johnstone, M. K. (2008). Empirical tests of audit budget dynamics. Behavioral Research in Accounting, 20(2), 1-18.
Fornell, C., and Larcker, D. F. (1981). Evaluating structural equation models with observable variables and measurement error. Journal of Marketing Research, 18(1), 39-50.
Grey, C. (1998). ‘On being a professional in a ‘‘big six’’ firm’. Accounting, Organizations and Society, 23(5-6), 569-587.
Gundry, C. L., and Liyanarachchi, A. G. (2007). Time budget pressure, auditors’ personality type, and the incidence of reduced audit quality practices. Paciﬁc Accounting Review, 19(2), 125-152.
Hair, J. F., Black, W. C., and Babin, B. J. Multi-variate Data Analysis: A Global Perspective, Prentice Hall, Upper Saddle River, 2010.
Hair, J., T. Hult., C. Ringle., and M. Standart., A Primer on Partial Least Squares Structural Equation Modelling (PLS-SEM), Sage, Los Angeles, 2013.
Hurtt, R. K. (2010). Development of a scale to measure professional skepticism. Auditing: A Journal of Practice & Theory, 29(1), 149-171.
Hurtt, R.K., Brown-Liburd, H., Earley, C.E., and Krishnamoorthy, G. (2013). Research on auditor professional skepticism: Literature synthesis and opportunities for future research. Auditing: A Journal of Practice and Theory, 32(1), 45-97.
Ittonen, K., Va ¨ha ¨maa, E., and Va ¨ha ¨maa, S. (2013). Female auditors and accruals quality. Accounting Horizons, 27(2), 205–228.
John T. S. and Scott L. S. (2002). The effect of the busy season workload on public accountants' job burnout. Behavioural Research in Accounting, 14(1), 223-245.
Kelley, T., and Margheim, L. (1990). The impact of time budget pressure, personality, and leadership variables on dysfunctional auditor behavior. Auditing: A Journal of Practice & Theory, 9(2), 21-42.
Kruglanski, A. W., Webster, D. M. and Klem, A. (1993). Motivated resistance and openness to persuasion in the presence or absence of prior information. Journal of Personality and Social Psychology, 65(5), 861-876.
Margheim L., Kelley, T., and Pattison, D. (2005). An empirical analysis of the effects of auditor time budget pressure and time deadline pressure. The Journal of Applied Business Research, 21(1), 23-36.
Mautz, R.K. and Sharaf, H.A., The Philosophy of Auditing, American Accounting Association Monograph No.6, Savasto, Florida Book, USA, 1961.
McNair, C., The effects of budget pressure on audit firms: An empirical examination of the underreporting of chargeable time, Disertations and Theses, Columbia University., New York, 1987.
Mehta, A. and Bhavani, G. (2017). Application of forensic tools to detect fraud: The case of Toshiba. Journal of Forensic and Investigative Accounting, 9(1), 692-710.
Meneses, R. W. and Larkin, M. (2016). The ex-perience of empathy: Intuitive, sympathetic, and intellectual aspects of social understanding. Journal of Humanistic Psychology, 57(1), 3-32.
Naess, A., Skepticism: International Library of Philosophy and Scientiﬁc Method, Humanities Press., New York, 1969.
Nelson, M. (2009). A model and literature review of professional skepticism in Auditing. Auditing: A Journal of Practice & Theory, 28(2), 1-34.
Obermiller, C., and E. R. Spangenberg. (1998). Development of scale to measure consumer skepticism towards advertising. Journal of consumer psychology, 7(2), 159-186.
Otley, D. T., and Pierce, B. J. (1996). Auditor time budget pressure: Consequences and ante-cedents. Accounting, Auditing & Accountability Journal, 9(1), 31-58.
Pierce, B., and Sweeney, B. (2004). Cost-quality conflict in audit firms: An empirical investigation. European Accounting Review, 13(1), 415-441.
Pierce, B., and Sweeney, B. (2006). Perceived adverse consequences of quality threatening behavior in audit firms. International Journal of Auditing, 10(1), 19–39.
Public Company Accounting Oversight Board. (2004). An audit of internal control over financial reporting performed in conjunction with an audit of financial statements. https://pcaobus.org/Rulemaking/Docket008/2004-03-09_Release_2004-001-all.pdf.
Responsibility and function of the independent auditor. 1972. AU Section 110. https:// pcaobus.org/Standards/Archived/PreReorgStandards/Pages/AU110.aspx
Sarstedt, M., Hair, J. F., Hopkins, L., and Kuppelwieser, V. G. (2014). Partial least squares structural equation modeling (PLS-SEM): An emerging tool in business research. European Business Review, 26(2), 106-121.
Sekaran, U., and Bougie, R., Research Method for Business: A Skill-Building Approach, Sixth Edition, John Wiley & Sons., UK, 2013.
Sholihin, M., and Ratmono, D., Analisis SEM-PLS dengan WarpPLS 3.0 untuk Hubungan Nonlinier dalam Penelitian Sosial dan Bisnis, Yogyakarta, 2013.
Sikka, P. (2009). Financial crisis and the silence of the auditors. Accounting, Organizations and Society, 34(6-7), 868-873.
Soobaroyen, T., and Chengabroyan, C. (2006). Auditors’ perceptions of time budget pressure, premature sign offs and under-reporting of chargeable time: Evidence from a developing country. International Journal of Auditing, 10, 201-218.
Sweeney, B., and Pierce, B. (2006). Good hours, bad hours and auditors’ defence mechanisms in audit ﬁrms. Accounting, Auditing & Accountability Journal, 19(6), 858-892.
Tepalagul, N. and L. Lin. (2014). Auditor independence and audit quality: A literature review. Journal of Accounting, Auditing & Finance, 30(1), 101-121.
Williams, E.S., Konrad, T.R., Scheckler, W.E., Pathman, D.E., Linzer, M., McMurray, J.E., Gerrity, M. and Schwartz, M. (2001), “Under-standing physicians’ intentions to withdraw from practice: The role of job satisfaction, job stress, mental and physical health, Health Care Manage Review, 26(1), 7-19.
Yuen, D. C. Y., Law, P. K. F., Lu, C., and Qi Guan, J. (2013). Dysfunctional auditing behaviour: Empirical evidence on auditors' behaviour in Macau. International Journal of Account-ing & Information Management, 21(3), 209-220.
Authors who publish with this journal agree to the following terms:
- Authors retain the copyright and publishing right, and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) followingthe publication of the article, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).<a href="http://creativecommons.org/lice