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    Organizational Error Climate and Auditors’ Predispositions t...
    research summary posted October 3, 2013 by Jennifer M Mueller-Phillips, tagged 10.0 Engagement Management, 10.03 Interaction among Team Members, 10.04 Interactions with Client Management, 11.0 Audit Quality and Quality Control 
    Organizational Error Climate and Auditors’ Predispositions toward Handling Errors
    Practical Implications:

    The results of this study imply that an appropriately structured error climate may serve as a “soft” management control tool for an audit organization by encouraging the development of predispositions toward functional error handling behaviors, and reducing the tendency of auditors to engage in dysfunctional error handling behaviors such as ignoring or concealing errors. This increase in functional auditor error management behaviors supports both high quality work results and client cooperativeness. Managers of audit organizations should actively participate in the organization’s error climate by establishing, communicating, and practicing a high error management method. The efforts in actively dealing with the organization’s error climate could be documented and presented to regulators and oversight bodies such as the PCAOB as an integral part of the audit organization’s internal quality control.

    For more information on this study, please contact Ulfert Gronewold.


    Donle, M., and U. Gronewold. 2011. Organizational error climate and auditors’ predispositions toward handling errors. Behavioral Research in Accounting 23 (2): 69-92.

    organizational culture; handling errors; audit quality; predispositions
    Purpose of the Study:

    An auditor is required to comply with professional and ethical standards that mandate performing any engagement with professional competence and due care, that is, auditors must act carefully, thoroughly, and on a timely basis. Reasonably, one can infer that because of these professional standards, it is essential for auditors to able to openly address errors as they become aware of them. The authors chose to define “error” as any significant divergence that the auditor perceives between an actual state and what the auditor thinks would be the correct state, as defined by relevant goals and benchmarks. Additionally, the authors chose to focus this study on unintentional errors with respect to both the client and the auditor. Auditors need to effectively handle their own errors as well as the errors of their clients in order to assure audit quality. The way an auditor deals with a client’s error may affect that client’s cooperativeness which has an influence on the auditor’s ability to conduct the audit effectively and efficiently.

    The authors suggest that the audit organization’s error climate correlates with an auditor’s likelihood to address errors in an active and open way. Error climate is shaped by management’s tone at the top regarding its views and decisions towards the acceptability and handling of errors. An error climate that is high in error management would be beneficial for audit quality in both the long term and the short term by ensuring that errors are corrected in a timely basis and also enabling auditors to learn from errors in order to handle them or avoid them in the future.

    Moreover, high error management can suppress the temptation to conceal errors for fear of the repercussions which is quality threatening behavior in auditing. To explore the correlation between error climate and auditor’s predisposition toward dealing with both their own and their client’s errors, the authors developed an expectation that organizational error climate has a direct positive impact on auditors’ predispositions toward dealing with their own errors and detected client errors.

    Design/Method/ Approach:

    The data for this study was collected through a survey external, internal, and public sector auditors. The information was collected from October 2004 to May 2005 among auditors located in Germany.

    • High error management-oriented climates are beneficial for performance and work quality by affecting the predisposition of the members of the organization toward high error management behaviors.
    • There is a significant positive impact of organizational error climate on auditor’s predispositions towards handling their own errors.
    • The authors found no direct effect of error climate on the predisposition toward handling client errors. However, a positive and significant indirect effect was observed. The positive impact that a high error management-oriented climate has on auditor’s predisposition toward handling their own mistakes in turn affects how the auditor handles client which creates an indirect relationship between the audit organization error climate and client errors.
    • Auditors of organizations that handle errors with a high degree of error management have a higher propensity of also handling client errors with a high degree of error management.
    • Overall, an audit organization’s error climate influences auditors’ individual predisposition toward handling their own errors as well as their clients’ errors.
    Audit Quality & Quality Control, Engagement Management
    Interaction among Team Members, Interactions with Client Management