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    Does Charismatic Client Leadership Constrain Auditor...
    research summary posted June 22, 2017 by Jennifer M Mueller-Phillips, tagged 04.0 Independence and Ethics, 09.01 Audit Scope and Materiality Judgments 
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    Title:
    Does Charismatic Client Leadership Constrain Auditor Objectivity?
    Practical Implications:

    The potential threat of constrained auditor objectivity due to charismatic leadership is one that has not previously been addressed before. Therefore, auditors should be proactive in making sure they are aware of this threat while working on various audit engagements. Additionally, audit firms should pay attention because it is unlikely that there are any mitigating strategies in place to combat the threat within the firm. 

    Citation:

    Svanberg, Jan, and P. Ohman. 2017. “Does Charismatic Client Leadership Constrain Auditor Objectivity?”. Behavioral Research in Accounting. 29.1 (2017): 103.

    Keywords:
    auditing; auditor objectivity; charismatic client leadership; client identification
    Purpose of the Study:

    An auditor’s objectivity can be negatively affected by various financial or social characteristics of the client. This study examines whether or not auditor objectivity is constrained by perceived charismatic leadership of management. The initial assumption is that perceived charismatic client leadership will in fact negatively affect auditor objectivity. This threat is particularly concerning because it can rapidly materialize and is unable to be addressed by auditor rotation. Previous studies have focused on the financial size of clients as an indicator of possible problematic relationships between the auditor and client. If the initial assumption in this study is correct than this will suggest that charismatic leadership plays a role in auditor objectivity along with the financial size of the firm. 

    Design/Method/ Approach:

    The sample consists of 1,000 Swedish auditors randomly selected using a Revisorsnamnden register. There was a 19.9% response rate to a questionnaire that was sent out on September 2013. The majority of respondents were male partners or managers. The questionnaire was a cross-sectional survey where auditors were asked to recall their largest client’s leader, and then to assess the extent to which the leader is charismatic. A regression model was then used to test the hypothesis.

    Findings:

    Overall, the authors find that there is a positive relationship between constrained auditor objectivity and the extent to which the auditor perceives the client leaders as charismatic. This suggests that client identification is not necessarily the only social factor leading to constrained objectivity.     

    Additionally, the authors find the following:

    • Stronger levels of professional identification are not associated with more objective judgment.
    • Auditors for Big 4 firms are more objective when compared to auditors in smaller audit firms.
    Category:
    Auditor Judgment, Independence & Ethics
    Sub-category:
    Prior Dispositions/Biases/Auditor state of mind
    Home:

    http://commons.aaahq.org/groups/e5075f0eec/summary