Challenges and insights on the audit profession – young auditors’ perspective

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Amsterdam Business School

Challenges and insights on the audit profession – young

auditors’ perspective

Name: Aura Dinu

Student number: 11931779

Thesis supervisor: Dr. Elma van de Mortel Date: June 25, 2018

Word count: 23.252

MSc Accountancy and Control, Accountancy track

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2 Statement of Originality

This document is written by student Aura Dinu who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

In this master thesis, I examine the effect of various factors on the process of on-the-job learning in the case of junior auditors, focusing on the differences that may appear between the Generation X and Generation Y (or Millennials). The study is performed in one of the Big Four accounting firms from Romania, by interviewing five auditors from each of the two generations. The results show that there is a positive correlation between the individual factors analyzed and on-the-job learning, for both generations. However, the magnitude of this correlation is weaker for Generation Y, mostly due to its features which are significantly influencing the attitude of juniors in the workplace. For the organizational factors, the results show both positive and negative effects on the process of learning on-the-job, depending on the context of a company, without significant differences between the two generations.

Keywords: on-the-job learning, generations, junior auditors, factors, Big Four firms, Generation X, Generation Y.

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Acknowledgements

I would like to thank my master thesis supervisor, Elma van de Mortel, for all the support, feedback and for the pleasant meetings. I am also very grateful to all the interviewees for their involvement and cooperation.

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List of tables and figures

List of tables

Table 1. Interviewee selection ... 33

Table 2. Description of the interviewees ... 35

Table 3. The position of junior auditors - overview of answers ... 37

Table 4. On-the-job learning - overview of answers ... 40

Table 5. Individual factors - overview of answers ... 45

Table 6. Organizational factors - overview of answers ... 55

List of figures Figure 1. Organizational structure ... 16

Figure 2. Proposed conceptual model ... 31

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1. Introduction

The role of independent auditors is known as an important component of assuring the integrity of the financial statements, protecting the companies and their investors. The role of the auditors is continuously growing, along with the growth of the financial markets and the complexity of the financial regulations. Auditors are the ones helping the organization managing their corporate affairs, being able to provide guidance on different accounting issues (including the financial efficiency or the development of the internal controls).

But what comes behind an audit report? A lot of work and very skilled people. Auditors must acquire a “considerable body of highly complex knowledge in order to attain the level of

professional proficiency required to comply with auditing standards, pass regulatory inspections, and uphold their public responsibility” (Westermann et. al, 2015, p.864). In

addition, they must follow fundamental principles such as integrity, objectivity, professional competence and due care, confidentiality and professional behavior, stated in the conceptual framework prepared by IFAC1.

In this social context, the legitimacy of the profession has an obvious weight, when it comes to the importance of the quality of the audit work for all the users of the financial statements. And, the same as in any other profession, in order to be seen as a legitimate professional practice, there is a need for substantial expertise (Holm and Zaman, 2012), which is gained through education, but also through a lot of on-the-job experiences.

Prior research emphasizes the development of technical knowledge in the case of auditors (Bonner & Walker, 1994; Earley 2001, 2003), which is seen as a necessary condition for professionalization (Kornberger et al. 2011). The auditors are also expected to have

“communication skills, interpersonal skills, general business knowledge, accounting knowledge, problem-solving skills, information technology, personal attitudes and capabilities and computer skills” (Palmer, Ziegenfuss and Pinsker, 2004, p. 895).

Interest in learning in the workplace has increased in the last decades (Billett, 2001; Ellstrom, 2001; Illeris, 2003; Ellinger, 2005), emphasizing the need of integrating work and learning.

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On-the-job learning, defined as “activities and processes, embedded in working and work-

related performance, leading to relatively permanent changes in knowledge, attitudes or skills”

(Berings & Doornbos, 2003, p.48) has, therefore, a great significance in shaping professionals over time.

Westermann mentions that “professional auditors are not born - rather they are developed

through continuous and recursive professional work practices” (Westermann et al., 2015, p.867)

gaining most of the knowledge while being at their job, in the form of “supervised, progressively

more complex work” (Westermann et al., 2015, p.864).

Lately, studies on generations in the workplace have become of great interest (Kelan, 2014), as well. In the last years, the workplace has been changing, and one reason for this is the new wave of young workers gaining access in the organizations (Fenzel, 2013).

It is known that generational differences exist among workers (Smola & Sutton, 2002; Alsop, 2008; Twenge, 2010) and, even if this mix of generations leads to value added in the organization, it’s also a way of creating complexity (Fenzel, 2013). The complexity comes from the fact that different generations have different expectations, different career goals, are motivated by different incentives and need different learning tools (Palo & Dokadia, 2015, p.53). Therefore, in order for an organization to know how to develop learning “interventions”, suited for its employees, first it is necessary to understand the differences between the generations, their needs, expectations and preferences.

Following the arguments presented above, I intend to examine how the junior auditors are learning on-the-job, focusing on the factors that influence this process, but also to seek for differences in how these factors affect on-the-job learning, by comparing two generations of auditors, Generation X and Y. In order to do this, I proposed the following research question:

What are the factors that influence on-the-job learning for the young auditors and how this influence changed between generations?

I consider that this topic has relevance for both the academics and the audit profession. While working on my case, I found various papers emphasizing the on-the-job learning in different work contexts, since lately there has been a change from a training orientation to a learning

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11 orientation. However, deepening my analysis, I discovered that there are very few qualitative studies using real and not only theoretical information in order to reflect the full practice environment. In addition, even though the paper of Westermann et al. (2015) has also focused on the views of auditors on the on-the-job learning, their interviews include only the partners from a Big Four accounting firm, and not juniors or trainees.

Another reason for examining this topic is that, in the last decades, there has been a lot of pressure on the auditors, when it comes to the legitimacy of the profession and the quality of their work. Hence, there is a need for understanding how auditors are gaining the knowledge and how they learn their job on-the-job, in order to be able to provide quality services. Finally, since research suggests differences in generations (and in their work-related features, their motivation, career goals and learning interventions), this paper’s final aim is to have a fresh perspective on how different generations of auditors cope with the variety of factors that affect their learning process and the quality of their work.

This paper’s aim is addressed through a case study prepared in one of the Big Four accounting firms from Romania, which involved conducting semi-structured interviews with audit professionals, both juniors and experienced, in order to get insights with regards to their perception on learning on-the-job and how different factors affected this process in the beginning of their career. In the same time, the study is based on the differences between generations, considering the auditors under 31 years old as part of the Generation Y (or Millennials) and the auditors above 31 years old as part of the previous generation, the Xers.

The reasons for choosing Eastern Europe for this case study are the following. First of all, the literature prepared in the context of Eastern Europe and, specifically, Romania is very limited. Secondly, since the audit profession is very young, compared to countries from Western Europe, I considered relevant to analyze this context and see how learning for the young auditors is developed on the job and how different factors affect it - now and in the previous generation. The remainder of the paper is organized as follows. Chapter 2 will provide background information regarding the context in which the audit sector has developed in the Romanian market. Later, chapter 3 will present the literature review on learning, on the factors influencing on-the-job learning and on generations, devising the conceptual model. Chapter 4 will focus on the research design, providing details with regards to the method used (i.e. interviews), the case

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context, a description of the sample, data collection and data analysis. Next, chapter 5 will comprise a discussion on the case and an overview on the results. Finally, in the last chapter I will discuss the conclusions, followed by possible limitations of the study and future areas of research.

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2. Background

A general definition for auditing refers to this process as to a complex set of actions which provides an opinion regarding the ability of the company to present a true and fair view of its annual financial statements, by using specific techniques, instruments and methods.

As presented in the audit standards, auditing is “a systematic process of objectively obtaining

and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria, and communicating the results to interested users.” (Hayes et al. 2015, p. 10).

Therefore, an auditing firm is a company specialized in providing this type of services; it will be able to review the client’s activities in order to identify deficiencies, it will verify the reporting accuracy and the compliance with applicable laws and regulations and it will investigate potential fraud.

The nature and importance of the information provided by the financial statements is particularly complex and the interests of users are sometimes contradictory. In order to obtain a reasonable assurance, it is necessary to have the auditors, who will contribute to the protection of the interest that different categories of beneficiaries have on the financial information. The auditor is the professional who, by using objectivity and professional skepticism, “assesses the reliability

and sufficiency of the information contained in the underlying accounting records and other source data” (Hayes et al. 2015, p. 10). Based on this assessment, the main objective of the

auditor will be “to obtain reasonable assurance about whether the financial statements as a

whole are free from material misstatements, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework” (Hayes et al. 2015, p.

11).

In order to perform this work, the audit profession follows a set of standards called ISAs (International Standards on Auditing), issued by the International Auditing and Assurance Standards Board. These standards “contain basic principles and essential procedures together

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14 with related guidance in the form of explanatory and other material” (Hayes et al. 2015, p. 6), in

order to be applied when performing the financial audit.

Although financial audit has existed for decades in the Anglo-Saxon and Francophone countries, in Romania we can talk about the introduction of the financial audit only in the beginning of the 1990s, when the country moved from communism to a free market. One of the first changes was to re-establish the Body of Expert and Licensed Accountants in Romania (CECCAR) in 1992 (after previously being dissolved in 1951). However, due to the economic instability caused by the fall of communism in 1989, there was an increased need for stronger corporate governance codes and, further, for increased trust and transparency of the financial statements. Even if the accountants had the necessary technical knowledge to understand the financial statements, the need for auditors became obvious. This is why a professional body that could oversee the audit activity was established in 1999.

The Chamber of Financial Auditors in Romania (CAFR), established by the Government Ordinance no. 75/1999, represents the professional body that coordinates and legitimates the auditor profession and the conduct of the audit activity in Romania. According to CAFR, an auditor is “the professional certified by CAFR, who takes the accounting information from the

entities' financial reports and analyzes them in order to formulate an opinion on the credibility of these reports, which is a matter of decision in the public interest.”2

After becoming a member of European Union in 2007, Romania had to follow the requirements regarding financial reporting and financial auditing as presented in the European Union Directives.

In the last years, besides the interest in becoming members of the national bodies (i.e. CECCAR and CAFR), the professionals has moved their attention also to the international accreditation provided by ACCA. The Association of Chartered Certified Accountants is one of the largest and fastest-growing international accountancy bodies, existing for more than 100 years, being globally recognized. In Romania, besides the recognition provided by the European Directives, ACCA has also agreements signed with the local professional bodies.

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The largest companies providing auditing services in Romania are the Big Four firms (i.e. PricewaterhouseCoopers, Deloitte, KPMG and Ernst & Young), followed by mid firms, such as BDO and Mazars.

The case study presented in this paper was prepared in one of these Big Four firms. However, due to confidentiality reasons, the name of the company will not be disclosed; therefore, for the rest of the paper, the company will be referred to as BF. The next paragraphs will provide a short description of this company.

BF entered the Romanian market in 1995, providing different types of services through separate legal entities, by using the same brand. Since it is one of the largest companies of professional services in Romania, BF provides services such as audit, tax advisory, legal services, financial advisory, consulting, risk management and technology consulting, employing more than 1000 professionals.

The legal entity providing audit services has its headquarters in Bucharest, with additional offices in two other cities, Timisoara and Cluj-Napoca. The firm is organized based on the national Romanian legislation.

BF counts more than 200 auditors, from interns to partners, including the assisting personnel. Out of these, less than 20% have a managing position, structured as follows: twelve managers and senior managers, six directors and five partners.

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16 Figure 1. Organizational structure

Based on the figure presented above, the first position an auditor can get in the company is the

analyst (usually corresponding to the first year of work and preceded or not by an internship),

followed by senior analyst (usually the second year). After these two, the auditor can promote to the position of consultant, which is an intermediate position between the junior and the senior level, equivalent to the third year of experience. After the first three years, the auditor can advance in his/her career as senior consultant, followed by possible management positions. When describing the case in the next chapters, I will use the term “junior auditor” with reference to the first positions, i.e. analyst and senior analyst.

Due to the fact that the audit profession is very young in Romania, the employees are mostly young, usually starting their career in the beginning of their 20s, with high opportunities of promotion on upper positions. Therefore, a manager’s age can vary between 28 and 35, a director – between 36 and 40, while a partner can be younger than 50 years old.

Also, in terms of gender, in the firm there is a balance between males and females, for lower positions and for managing positions, as well.

Further, a discussion on the theories and the review of previous literature will be presented in the next chapter.

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3. Theoretical foundation

The relevant literature used in the research is structured in four sub-sections. First, it starts with a short discussion on learning and, more specifically, on-the-job learning process. Next, it elaborates on the factors impacting on-the-job learning, briefly discussing 6 factors chosen for the purpose of this paper. The third section continues with a discussion on generations, partially concentrated on the features of Generations X and Y in Romania. Finally, in the last section, the conceptual framework is described, concluding with the prepared conceptual model.

3.1. On-the-job learning

People learn all the time; it cannot be avoided (Elkjaer, 2004). To a larger or smaller extent, they engage at work in different activities and processes that, voluntarily or not, lead to changes in skills and knowledge; therefore, they learn.

When it comes to the development of their employees, organizations have long been focused solely on trainings and institutional education. However, research done in the last decades showed that more than 70% of the knowledge is gained through work experience. Therefore,

“the place where most of the learning occurs […] is at work itself” (Morrison, 1992, p.926), by

facing challenges at the job and by interacting with the co-workers (Eraut, 2004).

The literature is limited when it comes to studying the process of developing new technical knowledge at the job. Due to the major changes in the world of work, on-the-job learning starts becoming a priority for many companies from different industries and various countries, since

“the need for continual learning and development is now taken as a given” (Seibert, 1999, p.54). Since recently it became a common topic, researchers outlined different definitions for the concept. According to Berings & Doornbos (2003), on-the-job learning represents “Implicit or

explicit mental and/or overt activities and processes, embedded in working and work- related performance, leading to relatively permanent changes in knowledge, attitudes or skills.”

(Berings & Doornbos, 2003, p.48). Hence, the young trainees will use a combination of implicit and explicit learning activities in order to perform their job, called learning strategy.

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Berings et al. (2005) emphasize the idea that it is more difficult to make distinctions between style types in a work context, since “in workplace learning contexts, people are working,

thinking, making decisions, innovating and learning in the same time.” (Berings et al, 2005,

p.376).

Billett (2006) suggests that “much, if not most, learning in the course of working lives will be

acquired, refined, and developed in workplace settings as individuals deploy and extend their knowledge through their everyday work activities” (Billett, 2006, p.31).

Watkins and Marsick (1992) portrayed on-the-job (or informal) learning as being “based on

learning from experience; embedded in the organizational context, oriented to a focus on action; governed by non-routine conditions; concerned with tacit dimensions that must be made explicit; delimited by the nature of the task, the way in which the problems are framed, and the work capacity of the individual undertaking the task; and, enhanced by proactivity, critical reflectivity and creativity” (Watkins and Marsick, 1992, p. 287).

Being the most frequent way of learning, on-the-job learning is also described as “learning that

is predominantly unstructured, experiential, and noninstitutionalized” (Marsick and Volpe,

1999, p. 4) and “tacit and integrated with work activities” (Marsick, 2003, p.389).

Therefore, summarizing, we can refer to on-the-job learning as to all the activities incurred at workplace, mostly unstructured and experiential, which eventually lead to changes in knowledge, attitudes and skills.

Further, the factors impacting the on-the-job process will be presented, based on the existing literature.

3.2. Factors that influence on-the-job learning

Learning should be seen as an individual and also a social process (Illeris, 2003b). While in an academic setting, learning is usually represented by an individualistic set of actions, on-the-job learning will be happening most of the times in collaborative activities (Beckett & Hager, 2002).

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On-the-job learning is a complex process and is not the same for everyone. As Illeris suggests,

“understanding learning simultaneously implies understanding the human psychological mechanisms involved and the external conditions and their adequacy” (Illeris, 2003b, p. 169).

There are a variety of factors influencing it, either related to the individual itself or to the context in which he or she is developing activities. The literature provides different classifications of these factors.

Based on the research of Marsick and Waktins (2001), learning is viewed on three distinct levels – organizational (learning resulting from the work environment), group (learning through communication with co-workers and collaborative activities) and individual (the way in which the individual obtains skills and knowledge based on his/her attitude, curiosity, approach of the opportunities received). Therefore, there are organizational, group and individual factors that will shape the individual’s learning process on-the-job differently.

Berings et al. (2005) distinguish, five different types of factors of the on-the-job learning situation: the task and job content, the information environment, the social work environment, the learning climate, and coincidental factors. In this context, the information environment refers to the “physical characteristics of the working environment, including the presence of manuals,

job aids” (Berings et al, 2005, p.381), while the learning climate is defined by Poell and van

Moorsel (1998) as “The temporary manifestation of the dominant norms, insights and rules

regarding learning of a group, department or organization in shared practices in the field of learning which implicitly influences the learning activities employees undertake.” (Poell & van

Moorsel, 1998, p.35) including the learning objectives, the content structure, the organization of the learning process, feedback culture or error management.

Berg & Chyung (2008) determine, as well, several factors relevant for the on-the-job, or informal learning engagement, starting with the interest in the field, computer access, personality and professional capability, relationship with colleagues, job satisfaction, job itself, work environment, physical proximity and monetary rewards.

Sambrook and Stewart (2000) identified organizational, functional and personal factors like a learning culture and senior management support, the organizational structure, job design or access to resources that support learning. Also, Ellinger & Cseh (2007) emphasize in their study

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the role of senior management support, manifested in 2 ways: “managers and leaders who role

model learning and development by example; and managers and leaders who encourage, support, and reinforce the importance of developing others” (Ellinger & Cseh, 2007, p. 445).

Previous literature doesn’t show one single classification of these factors, since I found variations in naming and grouping them: from organizational, group and individual in the paper of Marsick and Waktins (2001), to organizational, functional and personal in the paper of Sambrook and Stewart (2000), or to more extended classifications, as in the research developed by Berings et al. (2005), described in the previous paragraphs, even though the idea behind all of them is similar.

Nevertheless, studies like Thoonen et al. (2011) and Ellinger & Cseh (2007) include the factors from the “group” or ”functional” level in the organizational climate (such as collaborative experiences, teamwork, managerial support). Using this idea, for the purpose of my case, in the context of the young auditors and their process of on-the-job learning, I grouped these factors in two main categories: individual factors (i.e. the interest in the field, motivation and the confidence and reaction to challenges) and organizational factors (i.e. information and communication technology, the task and job content and the organizational climate).

All these factors will be detailed in the next sections.

3.2.1 Individual factors

3.2.1.1. Interest in the field

The concept of interest, as a psychological state, plays an important role in everyday life, being found that a person’s interest is a powerful influence on learning (Hidi & Renninger, 2006). In their study, Hidi & Renninger came with a 4-phase model in which they present how interest is developed over time. They used an approach through which they emphasize that interest is a combination of both individual and situational elements, this split in components being used in previous research, as well (Hidi & Baird, 1988; Renninger, 2000). In addition, the paper also underlines the idea that interest is shaped based on the knowledge, the positive affect and the personal meaning that the individual gives to it.

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Focusing on the factors that influence informal learning in the workplace, the study of Berg and Chyung (2008) shows that, based on the questionnaire they used for their respondents, the interest in their current field was ranked the highest. This means that respondents felt that learning on-the-job is the most affected by the interest they have in the work performed every day, since inherent motives will arise on learning once the individual is really interested and has a purpose for his/her work.

3.2.1.2. Motivation

“The reasons for people's actions, desires, and needs” (Alizadeh, 2016, p. 12) – motivation

comes within the individual and it is not only about acquiring knowledge and skills, but also about the extent to which they are used.

Literature in the field describe many theories of motivation. An early theory was brought by Maslow (1943), providing a hierarchy of the human needs. Later, Vroom (1964) developed the “Expectancy theory”, while Herzberg (1974) introduced the “Two-factor theory”.

Maslow asserts that an individual gets motivated by different types of needs and that some of

those needs might be more important than others. Following this idea, he created a hierarchy of needs, assuming that once the individual fulfilled the needs from the first level, he will move to the next one, and so on. These levels comprise the physiological needs (at the base), followed by

safety, social needs and esteem needs (such as recognition and appreciation). After the first four

levels are accomplished, the hierarchy ends with the self-actualization needs (self-fulfillment, realizing personal potential, seeking personal growth, “become everything one is capable of

becoming” – Maslow 1943, p.64).

Expectancy theory, the model developed by Vroom (1964), suggests that each individual will behave in a specific way because he is motivated to select a specific behavior instead of other, based on what result he expects. The theory is founded on the basic notions that people will be motivated to exert a high level of effort when they believe there are relationships between the

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Therefore, the key constructs of this theory will be valence (the value one puts on a particular outcome); expectancy (subjective probability of action or effort leading to an outcome or performance) and instrumentality (the belief that performance is related to rewards).

Further, the Two-factor theory, the model introduced by Herzberg (1974), assumes that the job satisfaction of an individual is affected by a different set of factors than the job dissatisfaction and these two are independent of each other. Therefore, his model makes a distinction between the motivators (providing positive satisfaction, such as personal growth, challenges, recognition), and hygiene factors (like the work conditions, financial benefits, job security, that don’t improve the satisfaction, but their absence would lead to dissatisfaction).

3.2.1.3. Confidence and reaction to challenges

Another factor that I considered relevant in analyzing its impact in the on-the-job learning process is the confidence and the reaction to challenges.

As a general definition, confidence represents the feeling or belief that one can have faith in or rely on someone or something. In a work context, confidence is related to how well the individual is able to do his work and to complete given tasks.

Literature in the field emphasizes the effect of confidence and the reaction to challenges on how the employee performs work. Eraut et al. (2000) accentuates the overwhelming importance of confidence. Learning at work happens by being proactive, saying “yes” to challenges, to opportunities and tasks that may seem difficult, and all these require confidence. In addition, they observed there is a relation between challenge, confidence and support (Eraut et al., 2000). Elaborating this idea, they observed that confidence was a consequence of the fact that individuals reacted to challenges at work and, further, this reaction was due to the support of the colleagues.

Ellstrom (2001) also stresses the importance of individual characteristics as conditions for learning – since one might not be able to complete its tasks or be able to improve the work-based learning if he/she lacks necessary skills for that, including self-confidence.

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Confidence can also be improved at work, through effective coaching (Edmondson, 1999). Due to the supportive environment, individuals will be able to seek progress, eliminate barriers and will feel more confident in achieving success.

3.2.1.4. Overview on the individual factors

These previous sub-sections provided a broad overview on the literature focused on the individual factors that can affect the on-the-job learning process. As already mentioned, the factors chosen were the interest in the field, the motivation, as well as the confidence and the reaction to challenges. Even though the literature finds other individual factors, as well, these three were chosen since were the most appropriate and relevant for this case.

As presented above, the research shows that, in the case of each of those three factors, there is a positive correlation between them and on-the-job learning process.

Therefore, taking into consideration the results of previous literature and the context of this case, I expect that the results of the case study prepared in this paper to express a positive relation between the individual factors and the on-the-job learning for the young audit professionals.

3.2.2 Organizational factors

3.2.2.1. Information and communication technology

Technology has become lately an integrated part of the work and every organization, independent of its size or industry sector, uses technology to some extent.

The use of information and communication technologies (or ICTs) is a fundamental factor enabling learning on the job (Sambrook, 2005). Sharing knowledge across the organization becomes easier and there are more learning opportunities for individuals in the work-related context. Other advantages of using ICT emphasized in the paper are accessibility, flexibility and improved overall productivity.

Supporting the same idea, in their study about the factors influencing informal learning in the workplace, Berg and Chyung (2008) show that “access to computer technology” is one of the most important factor for the respondents, affecting the informal learning. The same research

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illustrates that the respondents gave more value to the computer technology than to the interaction with the colleagues.

In the same time, research shows that ICT started changing the structure of jobs in different sectors, leading to employee distress and tension (Chesley, 2014). There is a sustained fear that automatization will lead to disappearance of many jobs but, in the same time, some researchers have an opposite opinion, that the “human capital” cannot be replaced, even though automatization will indeed take over various routine tasks as part of current jobs (David, 2015). Finally, Colbert et al. (2016) focused on the influence that technology can have on the individual’s competencies, communication skills and self-awareness, but also on the challenges that come along with the usage of technology, such as the amount of emails which can lead to pressure and work interruptions, or the use of technology for work purposes outside working hours, which can increase stress and anger.

3.2.2.2. Task and job content

Another organizational factor that I considered to be relevant for on-the-job learning is the task and job content. Extensive research shows the importance that different features of the task have on the way an individual learns, such as task complexity (Campbell, 1988) or task variety (Frese and Zapf, 1994), these two leading to a higher learning potential for the individual. However, besides these objective characteristics, the personal features (or the subjective ones) can lead to differences in how the tasks are perceived and, further, how learning occurs (Ellstrom, 2001). Nordhaug (1994) also observes the fact that this type of tasks with increased learning potential lead to more task-integrated jobs. This can happen by delegating more tasks to the individual, indirectly related to the job, or by “involving work teams into the analysis, planning and

optimization of the work process.” (Ellstrom, 2001, p.425)

Berings et al. (2005) also consider the task and job content an important factor that influences the on-the-job learning. In their paper, the task and job content is referred to as the “variety of tasks,

the degree of innovation, and the amount of problem solving required” (Berings et al., 2005,

p.381). In the same time, it can also include the amount of challenge and the degree of autonomy and control the individual has on the task (Karasek &Theorell, 1990).

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25 3.2.2.3. Organizational climate

The last factor I intend to analyze when it comes to on-the-job learning is the organizational climate. The research on the field describes broadly the concept. Berings et al. (2005) use the term “learning climate”, which implies talking about learning content and organization, the management of errors and feedback culture. Poell and van Moorsel (1998) come with the following definition for the learning climate: “The temporary manifestation of the dominant

norms, insights and rules regarding learning of a group, department or organization in shared practices in the field of learning which implicitly influences the learning activities employees undertake” (Poell & van Moorsel, 1998, p. 35).

An element of the organizational climate is represented by the collaborative experiences from the workplace – the exchange of knowledge, the team work, the open communication can lead to improved support and can ease the learning process (Thoonen et al., 2011).

Organizational climate also refers to participation of the employee in the decision making – (involving him or her when decisions are taken), as well as participation in handling problems and developing work processes (Ellstrom, 2001). Previous research already showed that problem handling or dealing with errors on the job can lead to improvements in learning (Norros, 1995). Ellstrom (2001) also emphasizes a difference between participation in handling problem in order to improve the commitment of the employee and participation in order to improve productivity and the overall work processes.

As part of the organizational climate we focus as well on the social environment. Research in the field shows the importance of mentoring and managerial support on the process of learning on-the-job. Ellinger & Cseh (2007) underlines the implications of a learning-committed leadership in facilitating learning: management is directly involved in creating and influencing the learning environment from the organization; managers have a role model in the company, leading by example, while they should also support and encourage the development of others (Ellinger & Cseh, 2007). In the same time, a leadership not committed to learning, a lack of time or lack of interest can have a negative effect on the learning on-the-job for each individual from the organization. Billet (2001) also shows a positive relation between the mentors’ willingness on

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providing efficient guidance or openness to efficient interactions, and on-the-job learning outcomes.

3.2.2.4. Overview on the organizational factors

These previous sub-sections provided a broad overview on the literature focused on the organizational factors which can affect the on-the-job learning process. As already mentioned, the factors analyzed were the information and communication technologies, the task and job content, as well as the organizational climate.

As presented above, the research shows mixed results in the case of all these three factors, in the sense that some of their features can have a positive correlation with the on-the-job learning process, while others can have a negative correlation. Therefore, taking into account the results of previous literature and the context of this case, I intend to determine if the effect that these factors will have on the on-the-job learning process in the case of young audit professionals will be a positive or a negative one.

3.3. Generations

3.3.1 Definitions and classification

“Every generation imagines itself to be more intelligent than the one that went before it and wiser than the one that comes after it.” (in “George Orwell”, Bloom, 2009, p. 124)

As a very broad definition, a generation is considered “an identifiable group that shares birth

years, age, location and significant life events at critical developmental stages” (Kupperschmidt

2000, p. 66). Parry and Urwin (2011) mention that a generation is characterized by people experiencing the same events. Due to the specific features of each generation, each will be motivated by different factors and will bring their own expectations in the workforce.

Ryder (1965) developed the Generational theory, distinguishing between the two following concepts: “contemporaries” (the individuals having different ages, but referring to them in a specific point in time) and “coevals” (the ones born approximately at the same point in history). By using this theory, the concept of generation can help explain why contemporaries of different

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ages experience the same events in a different manner. In the same time, coevals will be the ones experiencing and interpreting things in the same way, as a generation.

The extensive research on the field came up with the following classification of generations: the

traditional generation (also known as the Silent generation or the veterans - the individuals born

before 1945, most of them already retired now), Baby Boomers (born between 1946 and 1964; some studies also use the interval 1943-1960 - Paul and Urwin, 2011), Generation X (with individuals born until 1983) and Generation Y (also called the Millennials). Recent research however switches the attention to the children born in the early 2000’s, or maybe earlier, starting 1995, as forming a new generation with slightly different features than the Millennials, called

Generation Z.

However, since the focus of this paper is the audit profession in Romania, in which the auditors mainly pertain to the Generations X and Y, I will only concentrate the discussion on these ones.

Generation X (or Xers), marks the period of birth decline and it is significantly smaller compared

to the other generations. Being the first generation to grow up with computers, these individuals are more technology adept than Baby Boomers, even though it is an incipient phase. Some specific features of Xers presented in the literature are the following: they aspire more than previous generations to a work-life balance (Jenkins, 2007; Karp et al, 2002); they show more autonomy and independence compared to their parents (Jenkins, 2007), they tend to be more result-oriented compared to Baby Boomers (Wieck et al., 2009) and they might enjoy the teamwork, even though they are still, to some extent, individualistic (Karp et al, 2002).

Generation Y (or Millennials) represents a fast growing segment of the workforce. At the

moment, more than half of the individuals in every company over the world belong to this generation (Pînzaru et al., 2016). Research is diverse when it comes to deciding on an interval to define this generation. Some say that the members of Generation Y were born between 1980 and 1999 (Campton & Hodge, 2006); 1978 and 1988 (Martin, 2005) or 1980 and 2002 (Kersten, 2002). These intervals vary from country to country - from USA to Europe and to Romania as well (Vasilescu, 2011).

Even though their childhood was impacted by important technology advances, they still have features similar with the previous generation, the Xers: they have entrepreneurial spirit, but in the

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same time they are more independent, seeking for a work-life balance (Crampton & Hodge, 2006), they are optimistic (Kersten, 2002) and focused on teamwork (Zemke et al., 2000). In addition, Glass (2007) characterizes them as the most confident generation until now.

Called the digital generation (Vasilescu, 2011), the Millennials did grow along with a computer. However, even though having a computer in USA in the beginning of 1990s was pretty common, in Romania only in the early 2000s we can talk about the introduction of “modern technology” (Vasilescu, 2011). However, excluding this detail, research shows that there are no huge differences worldwide when it comes to the Generation Y. Also, a study prepared recently by Romanian researchers show that the young Romanian individuals feel that they share specific things with their coevals from all over the world (Petre & Săvulescu, 2015).

Among these common features, Vasilescu (2011) presents the Generation Y as: familiar with communication technologies, multitaskers, having short attention span and being able to filter and consume the information quickly. When it comes to learning, she also shows that individuals belonging to Generation Y use learning and education as a tool for getting better jobs and for increasing their work opportunities.

The importance of technology for Generation Y is emphasized in the study of Pînzaru et al. (2006), as well: “Millennials find themselves in the middle of a fast-paced information society

and this fact shapes their aspirations, needs and behaviors. [...] In short, youngsters and technology have become inseparable and this fact has deep consequences in every aspect of their existence, including or perhaps starting with their workplace.” (Pînzaru et al., 2006, p. 176).

They have other preferences and different sets of values. They want freedom on the job and

“words like workforce [...] convey a sense of rigidity and power-based hierarchy that is not appealing to the majority of the Gen Y working-age population” (Erickson, 2008, p.60). They

enjoy a collaborative and less hierarchical approach in work, based on clear objectives set from the beginning.

3.3.2 Generations in Romania

By following the study prepared by Pînzaru et al. (2016), we will use the year 1987 in order to delimit the Generations X and Y, so youngsters aged 31 and less will belong to Generation Y (even though is a little different than the intervals used in the previous international research).

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This delimitation was based on “the criteria of ITC development in Romania and the age group

that the European Union uses in its official documents to refer to the Generation Y” (Pînzaru et

al., 2016, p. 176).

However, the study of GfK from 2013 uses the year 1989 instead when talking about Millennials, as they emphasize the relevance of the socio-political factors when separating generations.

Since we show in the previous paragraphs that the differences between Romanians and Millennials from all over the world are not perceived as being very significant, I will use in my case the interval from Pînzaru et al. (2016), which is more realistic and less restrictive.

Literature on the topic shows that the Romanian Generation Y members tend to have a different attitude on work and have increased self-esteem. According to Pînzaru et al. (2016), the reason for this is the education received from their parents. Part of Generation X and simultaneously shaped by the social conditions of that time, they taught their children to focus on the financial welfare and the social status and recognition. In addition to that, Millennials grew up depending on the help from others, on guidance and positive feedback, aligning with their fragile self-esteem. This applies to their work-related expectations too, since they look for a job that can fit perfectly all their professional and social needs. At work, they want to be listened, their opinions to be taken into account and to have flexibility in the way they perform their tasks.

By using some Romanian managers’ insights, youngsters from the Generation Y also tend to ask for unrealistic rewards, sometimes use the company in which they work as a leverage for better jobs in the future, so they are not necessarily committed. Even if they don’t like the hierarchy and the pressure from superiors, they do enjoy working with experienced colleagues if they perceive them as mentors or leaders. They find motivation in working if they understand the content and the reasons behind the task, while “a remarkable increase in productivity is present

when they are allowed to make their own decisions in their area of expertise” (Pînzaru et al,

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The literature review is graphically described in the conceptual model developed in Figure 2. Based on the research used in the previous sections, I intend to create a link between the process of on-the-job learning, the relevant factors that influence it and the differences between the Generations X and Y regarding their process of learning.

This theoretical framework presents factors, grouped in individual (i.e. interest in the field, motivation, confidence and reaction to challenges) and organizational (i.e. information and communication technologies, task and job content and organizational climate). These 6 factors will be analyzed and will be employed in order to capture the perceptions of the audit professionals. In addition, the conceptual model will be used for explaining and understanding how on-the-job learning is created and developed now, in the case of actual juniors (of Generation Y), in comparison with the juniors working in audit a decade ago (professionals of Generation X).

As suggested by the previous literature, I want to analyze if the individual factors have a positive effect on learning on-the-job, for both generations of auditors. Regarding the other three, the goal is to determine the impact they have on learning on-the-job, for both Generations X and Y, since the literature provides mixed results.

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Further, the research design will be detailed, discussing the research method chosen and a description of the sample.

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4. Research design

4.1. Data collection and analysis

The objective of my research is to come up with additional descriptive and practical knowledge in the field of on-the-job learning for the audit profession and also in the field of generations, since the purpose is to see how the two youngest generations that include most of the employees in companies right now (i.e. Generation X and Generation Y) are creating knowledge on the job and how are they coping with the variety of factors that influence their own process of learning. For the purpose of my study and in order to answer to my research question, I chose to use a qualitative research method. According to Bryman, by using a qualitative approach “the stress is

on the understanding of the social world through an examination of the interpretation of that world by its participants” (Bryman, 2008, p. 366), this being possible by having a direct

interaction with the practitioners (Gibbert, Ruigrok and Wicki, 2008, p. 1465).

As there are different methods of doing qualitative research, I chose the case study, since this is considered the most appropriate method in case that “(a) ‘how’ or ‘why’ questions are being

posed, (b) the investigator has little control over events, and (c) the focus is on a contemporary phenomenon within a real-life context.” (Yin, 2009, p.2). Also, by definition, a case study

represents “the detailed examination of a single example of a class of phenomena, a case study

cannot provide reliable information about the broader class, but it may be useful in the preliminary stages of an investigation since it provides hypotheses, which may be tested systematically with a larger number of cases” (Abercrombie, Hill, & Turner, 1984, p. 34).

In order to prepare the case study, the materials used consisted of semi-structured interviews, conducted with audit professionals from one of the Big Four accounting firms from Romania. The semi-structured interviews will allow a more flexible discussion and collection of data regarding the views of the participants (Bryman, 2008, p. 438) and, also, “although the

interviewer prepares a list of predetermined questions, semi-structured interviews unfold in a conversational manner offering participants the chance to explore issues they feel are important” (Longhurst, 2003, p. 143).

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The interview questions (available in Appendix A) were selected based on the research question and conceptual model that resulted after the literature review. The interview questions were divided in different sections, based on their main theme, as follows: an introduction (with general information about the interviewees), the young auditors and their role in the organization, development of the concept of on-the-job learning, the individual factors affecting on-the-job learning and the organizational factors.

4.2. Description of the sample

As previously mentioned, this case study was built on semi-structured interviews. By obtaining access to this company, I managed to conduct 10 interviews with audit professionals, in order to get insights on their experiences as juniors. Based on the criteria of generations, I divided my sample in two groups: five of them, currently junior auditors, with ages between 21 and 24 years old are members of the Generation Y (or Millennials), while the other five, currently at the level of manager, senior manager or director, with ages between 32 and 36 years old, are part of the Generation X. The table below provides additional details.

Interviewee Position Gender Duration of interview

1 Senior manager Male 55 minutes

2 Director Female 45 minutes

3 Manager Male 40 minutes

4 Senior Manager Female 45 minutes

5 Manager Male 40 minutes

6 Audit analyst Female 60 minutes

7 Senior audit analyst Female 25 minutes

8 Senior audit analyst Male 40 minutes

9 Audit analyst Male 75 minutes

10 Audit analyst Female 30 minutes

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Before conducting the interviews, the participants were contacted via email and phone call, providing them with a brief description about the topic of my research, the purpose of the interview and the expected duration of the interview.

In the beginning of each interview, the participants were informed about the need of recording the interview and they were asked for consent in order to do that. I provided them with a short introduction on the topics that would be discussed and it was explained that all the information provided, as well as their names, will be confidential.

The interviews were conducted face to face, during the period April 11 - April 18, in Romanian language. I chose the face to face approach, as in this way I can “observe body language to see

how interviewees respond in a physical sense to questions.” (Bryman, 2008, p. 457).

The average length of the interviews was 45 minutes, with variations from 25 minutes to 75 minutes. The next step was to transcribe the audio files and to translate them in English language.

Further, a broad analysis of the interviews and a discussion on the results will be provided in the next chapter.

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5. Results

After preparing the conceptual model in chapter three and after conducting the interviews, a discussion on the case findings will be provided in this chapter. I will start with a short introduction about the interviewees. The next two sections will provide some insights about the junior auditors and their role in the organization, as well as the concept of on-the-job learning and how does it manifests in the analyzed company. After that, the last part of the narrative will be concentrated on the individual and organizational factors, as determined in the theoretical framework.

The rest of this chapter will also provide tables with summaries of the answers received from the participants, as well as quotes, in order to “allow the reader to hear the interviewees’

voices…[and to]… allow the richness of the data to shine through” (O’ Dwyer, 2004, p. 403).

5.1. Description of the interviewees

First, the table below will provide the summary of the main details regarding the participants.

Introduction Question

number Generation X Generation Y

Can you tell me what your current position in the company is?

2

- Manager (2/5); - Senior manager (2/5); - Director (1/5).

- Audit analyst (3/5); - Senior audit analyst (2/5); Please provide me with a

short description of your work experience.

4

- Started their career in Deloitte (3/5); - Started their career in other firm,

later moved in Deloitte (2/5);

- Started their career in Deloitte; (5/5) Can you briefly tell me

about your educational background?

5

- Bachelor in Accounting (2/5) - Bachelor in Finance (2/5)

- Bachelor in Business Administration (1/5)

- ACCA members (5/5)

- Bachelor in Accounting (5/5);

- ACCA students (5/5).

Table 2. Description of the interviewees

First, five participants of Generation X have been interviewed. All of them have ages between 32 and 36 years and they own management positions in the company, as follows: two of them are managers, two are senior managers and one of them is director in the audit department. Their work experience in BF varies from 8 to 12 years. The two managers, however, have work

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experience prior this company: one of them worked as accountant, the other worked as junior auditor in a mid-size firm. In terms of education, all the participants have a bachelor degree from the University of Economic Studies in Bucharest, in the following areas: two of them in Accounting, two in Finance and Banking and one in Business Administration. They also received the ACCA accreditation while working in BF.

The other five interviews were conducted with young auditors of Generation Y. They have ages between 21 and 24 years and three of them own a position of audit analyst (i.e. first year of experience), while the other two are senior audit analysts (i.e. they are in their second year of experience). The job in this company represents for all of them the beginning of their career in the audit profession, since they got hired immediately after graduating university. All five participants have a bachelor degree in Accounting at the University of Economic studies in Bucharest and they are currently enrolled in master programs in the same field. After starting working here, they also became ACCA students.

5.2. The position of junior auditor

In order to understand how on-the-job learning manifests in the audit profession, I started the discussion with some questions regarding the junior auditors and their place in the organization. First, the table below will show an overview of the answers received from the 10 participants.

Young auditors Question

What are the most important features of a good auditor? 6 - Technical knowledge (3/5); - Eager to learn (1/5); - Open minded (2/5);

- Motivation and ambition (2/5); - Analytical thinking (1/5); - Communication/Team player

(3/5);

- Calm/able to deal with stress and pressure (2/5);

- Soft skills (2/5).

- Technical knowledge (1/5); - Eager to learn (2/5); - Open minded (2/5);

- Motivation and ambition (1/5); - Analytical thinking (1/5); - Organized and hard worker

(2/5);

- Detail oriented (1/5); - Flexible (1/5). Do you think these

features can be developed in time? How? 7 - By working/gaining experience (2/5);

- By learning on the job (1/5); - By building trust and

confidence in the people you work with (1/5).

- By working (4/5);

- By learning on the job (3/5); - Due to the work environment

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Young auditors Question

What is the contribution of young people? 9

- Juniors perform the easiest and time-consuming tasks (1/5); - Juniors are objective and see

everything with a fresh perspective (1/5);

- Their contribution is the same, because they depend on each other’s work (3/5).

- Juniors perform the easiest tasks (5/5);

- Juniors perform the most time-consuming tasks (4/5).

What is the contribution of the experienced people?

10

- The role model of the experienced auditors in developing the juniors (2/5); - Their contribution is the same,

because they depend on each other’s work (3/5).

- The role model of the experienced auditors (4/5); - The experienced auditors will

deal with the complex parts of the financial statements (3/5); - The experienced auditors are

dealing with the strategy and planning of the audit (1/5); - The experienced auditors are

reviewing juniors’ tasks (4/5). What is, in your

opinion, the role of the young auditors in the organization, as compared to the other generations?

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- Perform the easiest tasks (4/5); - Bring fresh perspective (1/5); - Seen as an investment for the

company (2/5).

- Perform the easiest tasks (5/5); - Bring fresh perspective; (1/5); - The time spent on an

engagement will be reduced (4/5);

- They interact the most with the client/ they represent the image of the company (1/5).

Table 3. The position of junior auditors - overview of answers

5.2.1. The features of a junior auditor

When asked about the most important features that an auditor should own, a variety of answers came up. As a consequence, one of the interviewees makes the following remark:

“I wouldn’t say that there are certain features that an auditor has, because the audit is like any other job - you become good if you work for it.” (Respondent 2, generation X).

First, one of the features that came up was the need for technical knowledge, which is not a mandatory “quality” when one is hired, but it is expected to be fulfilled in the first years of work. Another basic feature is the ability of the auditor to be open minded, issue that can manifest in different forms. Two of the respondents of the Generation Y use this referring to the ability of being open to new ways of thinking and different ways of solving a problem, as well as the need

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of using subjectivity and accepting different approaches for the same task. Two interviewees of the Generation X used “open minded” to underlie the need for understanding the client’s business, in order for the auditor to get how to perform his or her work: “to think out of the box,

to be able to see the big picture.” (Respondent 3, generation X)

The participants also mentioned the analytical thinking (i.e. to be able to see beyond the accuracy of the numbers and rather to understand the logic of transactions), as well as the importance of communication and soft skills. Due to the high workload in the first years of experience, the juniors should also be motivated and ambitious, to show flexibility, to be calm and able to deal with stress and pressure.

All ten participants believe that these features can be developed in time. This happens while working, by being exposed to different environments, by learning on the job, from the co-workers, “through models and examples” (Respondent 7, generation Y).

5.2.2. Contribution and role in the organization

As the audit team can be divided in young and experienced auditors, I asked the participants for their perspective on what would be the contribution of each of the two in the organization and in the audit work.

From the beginning, the importance of each member of the team has been emphasized, since auditors complement each other’s work: “As we have always been told, the contribution is the

same for everyone. In the sense that a partner cannot sign the audit opinion if the junior at the lowest level didn’t do his or her job properly.” (Respondent 5, generation X).

Mostly, the idea is that junior auditors are performing audit tests for the easiest and most time-consuming sections of the financial statements, while the experienced ones deal with the complex sections, while revising juniors work, providing feedback and helping them to learn. Based on these answers, it can be deducted that, in the company, a lot of importance is put on the professional growth of the employees, starting with the lowest levels in the organizational hierarchy, i.e. the juniors.

Challenges and insights on the audit profession – young auditors’ perspective

Amsterdam Business School