The Influence of Motivation on Auditor Performance
Abstract
This thesis has the aim to investigate whether and how motivation will affect auditor performance, and how position tenure will affect this relationship. In this thesis the individual auditor is the focus point of research, because ultimately overall audit quality is driven by the quality of individual auditors’ work. The data is collected through individual surveys among auditors. Not all results are fully in line with my expectations and the literature on this subject. Particularly, with respect to auditor performance, intrinsic motivation is found to significantly increase auditor performance, whereas extrinsic motivation showed no significant impact. Interestingly, while position tenure did not moderate the relationship between intrinsic motivation and auditor performance, it did have a significant negative moderating effect for extrinsic motivation. All in all, I believe this thesis adds to the existing literature by providing further evidence that intrinsic motivation is crucial for an auditor’s performance. Also I proposes that more future research is necessary in the area of individual auditor performance.
Name: Armando van de Griend Student number: S2643626 Master Accountancy Supervisor: Dennis Veltrop Co-assessor: Irene Mostert Date: 24 Juni 2018
1. Introduction
Every year there are many audits that take place and for the most part we do not hear anything about those in the news. Big names like Enron, Ahold and Lehman Brothers we are all familiar with. The auditors performed the audits not with the highest possible quality and this led to cases of fraud being left undiscovered during the audit. In most cases the auditors failed to noticed/or were not given enough information to provide assurance that no material mistakes left in the annual reports. Eventually these cases came to day light and caused bad publicity for the accounting branch. When cases like these reach the media there will always be a discussion about the quality of the audits performed.
Regulators are the first in line to get involved in the discussion about the audit quality, and the trend of their solutions is to come up with new legislation to improve the audit quality (Kleinman et al., 2014). A lot of it is focussed towards the accounting firms and the role of the individual auditor is left untouched. Research also show this, there are many articles about audit quality were the scope has been about the group (Baxter & Cotter, 2009; Knechel, 2016) and few were the individual role of the auditor is researched to see how this affects the audit quality (Gul et al., 2013), because ultimately what research tend to oversee is that the audit quality is determined by the work of the individual auditor.
For the individual auditor there are different factors that can influence their performance. From research in the field of psychology it is clear that motivation plays a role in the individual performance of a person (Irwin, 1961). Thus the assumption can be made that motivation will also play a role in the performance of an auditor. For auditors this is crucial because their performance has an effect on the audit quality (Knechel et al., 2013).
Motivation can be divided into two parts, namely intrinsic motivation and extrinsic motivation. The difference between both is that for a person to be intrinsically motivated he or she derives their motivation from enjoyment of work or accomplishing a task and a person to be extrinsically motivated he or she derives motivation from earning a lot of money or having job security. Both make for a person having different characteristics, and therefore need to be approached differently towards making them feel appreciated and for them getting enjoyment from an activity. An auditor will have a preference of intrinsically or extrinsically being motivated, and it
is crucial to know which they prefer to adapt to this and keep this person highly motivated in order for them to perform at their best.
Following on the research of Irwin (1961) it is clear that motivation affects our performance. High levels of effort are associated with high motivation, and high motivation is linked to high performance levels (Katsva & Condrey, 2005). When a person is more focused and is determined to succeed this person is more likely to actually succeed then a person who has a mindset that they will not make it. The behaviour of an auditor, more specific motivation is linked to the performance of that auditor by Becker (1997), however this was not the main focus of his research and therefore not much attention was given to it. Little further research has been done on this topic. Nevertheless, going on Becker’s conclusion the behaviour of an auditor is likely to affect this auditor’s performance.
A factor that may have a strong influence on the proposed relationship of motivation and auditor performance may very well be an auditors’ position tenure. Phycological research demonstrates that task attribute perceptions are likely to change as a person holds a position longer (Orphen, 1984). This can also affect the persons’ performance. Also, the longer a person holds a position within a firm is often used as a criterion for added benefits (Ng & Feldman, 2010). A person will have a preference towards intrinsic or extrinsic motivation but will overall still be motivated by both. Now when a person holds a position for quite some time their motivation can shift from intrinsic towards extrinsic or vice versa, affecting the relationship between motivation and auditor performance.
This research adds to the existing literature in the field of accounting on the behavioural aspect of it. It will bring a new insight with the help of some psychological theories on what drives an auditor in terms of motivation, and whether this motivation is more intrinsic or extrinsic. Also the role of time position held in this question will be looked at to see if there is a significant difference between a person’s motivation that holds a position for just a few years and a person that holds a position for a quit some while now.
This paper can help management of an accounting firm to better organize their reward structure in order to motivate all their employees in the best possible manner.
2. Theory and hypotheses development 2.1 Audit Quality
Audit quality is defined by DeAngelo (1981) as the joint probability that an auditor will discover and report a breach in the client’s accounting system. From this definition it is clear that audit quality consists mainly of two parts: discover a breach in the client’s accounting system and report this breach. The discovery of the breach is related to the education, competence and work of the auditor, the reporting of this breach is related to the independence, professional scepticism and objectivity of the auditor (Knechel et al., 2013). As a result the audit quality very much depends on the individuals characteristics of auditors.
After failures in the audit more attention is drawn towards better the quality for the audits (Arruñada, 2004). Local legislators tend to come up with new rules and regulation (SOX legislation) the audit quality is a topic that receives more attention during times of crises. This audit quality in most research is seen as the joint effort of the whole audit team, or the audit firm (Knechel et al. 2013). Practices show that in an audit firm the standard work style is to be part of a group to audit a client, and that the individual auditor can be part of multiple groups. Hooghiemstra, Rink and Veltrop (2017) discuss that to make every member in the audit firm thrive a possible reorganization of individual work will have to take place to accomplish this. It is possible to infer that individual auditors are differently impacted by different pressures during the audit that this possibly changes the way they conduct the audit.
Dissecting the audit quality it is clear from the definition that the discovery of the breach is vital for the quality, audits are done in teams and therefore ultimately the audit quality is dependent on the work of the individual auditor to discover a potential breach in the accounting system of the client based on the allocated work for this auditor and how he/she performs this work.
Research of Cheng, Liu and Chien (2009) conclude that audit quality is positively related to human capital. This means that it is important to invest as an audit firm in people, because this will help improve the overall audit quality. Hillman & Dalziel (2003) argue that board capital (human capital) is related to performance. And that this relationship is affected by incentives (extrinsic motivation). Overall many researchers have identified important capabilities of auditors such as human capital (Cheng et al. 2009), however the motivation of auditors to do
their work is not extensively researched. Once again it shows that the audit quality is dependent on the individual characteristics of an individual auditor
2.2 Motivation
When it comes to motivation Ryan and Deci (2000) explain that self-determination can be divided into a very basic distinction between intrinsic motivation and extrinsic motivation. The self-determination theory speaks of fulfilment of several needs in order to reach/achieve psychological well-being (Ryan & Deci, 2000). Over the years there has been research done towards motivation and most of the researchers agree that Self-determination theory fits the best to explain a person’s intrinsic and extrinsic motivation (Welters, Mitchell and Muysken, 2014; Flanery, 2017; Taylor et al., 2014; Deci, Olafson & Ryan, 2017).
2.2.1 Intrinsic motivation
From birth any human is basically driven by their intrinsic motivation (Ryan & Deci, 2000). It helps humans develop their social, cognitive and physical skills. As babies we were all very curious about new things and object and had to learn sometimes the hard way that something for example a flame can hurt us. This curiosity is considered to be part of intrinsic motivation. This motivation is crucial for the persons with roles like manager, teacher, parent, health care provider and a religious leader because the motivation is used to move people to act (Ryan & Deci, 2000). In the same paper from Ryan & Deci (2000) they discuss that intrinsic motivation is in humans and needs to be reinforced. In another paper of the same authors they go in deeper on self-determination theory and link this with the concept of psychological needs (Deci & Ryan, 2002). Getting negative performance feedback will diminish the intrinsic motivation of that person, were as if this person was given positive performance feedback their intrinsic motivation will be enhanced (Deci, 1975). Research from Vallerand and Reid (1984) portraits the effect being mediated by perceived competence. This means that when a person believed he is doing a good job and is given positive performance feedback this person actually will be more intrinsically motivated. On the other hand not only does getting a negative performance feedback diminish intrinsic motivation, also deadlines, threats pressured evaluations and directives will diminish a person’s intrinsic motivation (Ryan & Deci, 2000).
Renninger (2000) described that human behaviour is different for in the moment, explained as situational interest, and over time explained as individual interest. The latter can be used as developmental context to help us explain intrinsic motivation. This seems logical when thinking about it, because when a person has a certain individual interest this person will be intrinsically motivated by this activity. More research needs to be done on individual interest and how it can be used to determine a person’s intrinsic motivation to approach intrinsic motivation from a new angle.
Early research looked at intrinsic motivation towards a specific subject. For example Harter’s research in 1981 about intrinsic motivation for schools. Before that there were two possible approaches to measure intrinsic motivation. The first being from Deci (1971) experimental research where the measure for intrinsic motivation was “free choice”, and the second one measures intrinsic motivation by self-reports of enjoyment and interest of the activity.
Becker (1997) performed an experiment to see whether having a choice of information would lead to more self-determination which would lead to more intrinsic motivation and therefore better performance. The conclusion of this research is that having a choice does affect the self-determination of an auditor significantly, and it is significantly proven by this experiment that higher self-determination will result in auditors with higher overall intrinsic motivation. What is interesting is that the relationship between overall intrinsic motivation and performance is significant; however it is only significant at the p.010 level. This mainly due to the fact that the questions used in this experiment did not measure the overall intrinsic motivation precisely as is discussed in the limitations of the research. From this result there is a basis that intrinsic motivation will affect the auditor performance, and that the relationship between intrinsic motivation and auditor performance is positive.
Zahmatkesh & Rezazadeh (2017) investigate the influence of auditor features like experience, professional competence, accountability, motivation and objectivity have on the audit quality. The authors used four variables to measure motivation: character type, internal and external control, audit norms and ethical culture. Their findings were that all these measures do not significantly affect the audit quality. Nonetheless this relationship is also a positive one.
Based on Becker (1997) and Zahmatkesh & Rezazadeh (2017) no common ground has been found to whether or not motivation affect auditor performance. Based on both researches it is clear that the relationship between motivation and audit quality is deemed to be positive, so therefore when looking at audit quality as quality threatening behaviour motivation will lead to less audit quality threatening behaviour. Based on this the following hypothesis can be developed:
H1a. Auditor intrinsic motivation is positively associated with auditor performance. 2.2.2 Extrinsic Motivation
To explain extrinsic motivation researchers generally have used different theories to explain this. Some use part of the self-determination theory to explain the effects of extrinsic motivation (Ryan & Deci, 2000). These authors use their figure about taxonomy of human motivation to describe the types of motivation that exist. For the part of extrinsic motivation this is split up into four parts: external regulation, introjections, identification and integration. These are in order of how they are perceived from external to internal. As expected the external regulation is where the extrinsic rewards or punishments come forward and in the integration a goal-congruence is the reward. In between those the extrinsic reward is approval of others or self-endorsement of goals. The motivation of a person will come from an external source.
Another good theory that fits really well with explaining extrinsic motivation is the expectancy theory. The Expectancy theory developed by Vroom in 1964 explains how a person deals with motivation. The expectancy theory is based on three beliefs: Expectancy, Instrumentality and Valance. The expectancy is that individuals will have different expectations on the task they will perform. Instrumentality is the perception of an individual on whether he/she will receive what they deserve for completed tasks. Valance is the value the individual places on the outcome (rewards) and this has to do with the emotional orientation of the individual. The valance can be extrinsic (good salary, promotion or other benefits) or intrinsic (satisfaction). For this research we focus on the extrinsic valance explained in the expectancy theory, since the intrinsic part is being explained and measured via the self-determination theory. Lunenburg (2011) concludes that the expectancy theory that Vroom developed can be helpful for managers to motivate employees by altering the performance-to-reward expectancy, effort-to-performance expectancy
and reward valances. This will help increase not only the motivation of employees but also their productivity.
Lawler & Suttle (1973) discuss in their paper that there are many other authors that research expectancy theory, all in a different way. They have compiled this information and processed it into table 1 of their research. Their research focuses on job behaviour and they find interesting results that are related towards this research. Measuring the valance of 21 items and doing so in reverse the items that have the highest valance are: high pay, pay raise, promotion and respect from boss. These items correspond almost directly with the expected rewards for extrinsic motivation, meaning that employees (in the case of the research of Lawler & Suttle, 1973 managers) expect these kinds of rewards for working hard. What is also interesting is that from the same list of items to measure valance ‘feelings of accomplishment’ also score really high. This item supports the intrinsic motivation of people that having a feeling of accomplishment also motivates these people to keep on working hard. As a conclusion the authors’ mentions that expectancy can predict the behaviour and when it comes to motivation the best would be to measure this with simple expectancy attitude measures. For that reason the used measures in this research will be kept simple as explained in the methods section.
The extrinsic rewards for performing well can be divided into two categories, namely: monetary and non-monetary, as earlier explained by de classification of extrinsic motivation by Ryan & Deci (2000). For most people the first thing they think of with monetary rewards for good performance is the executive compensation. Many discussions about this topic (Jaggia & Thosar, 2017; Frydman & Jenter, 2010; Chan, 2008) were held and book (Mercer, 2009) were written. Employees can likewise receive monetary rewards for their performance (Aguinis, Joo & Gottfredson, 2013). The non-monetary rewards can take the form of verbal and symbolic recognition (Markham, Dow & McKee, 2002). By understanding what a person, in this case an auditor, prefers measures can be taken to ensure that the optimum motivation levels can be reached and therefore a high auditor performance level.
From this theory about people expecting certain rewards, it is clear that money is a big extrinsic motivator for any person. Also auditors are influenced by this type of motivation and the approval of others and/or the symbolic recognition must not be forgotten (Hund & Hein, 2015).
This leads to the second hypothesis:
H2a. Auditor extrinsic motivation is positively associated with auditor performance. 2.3 Position Tenure
Position tenure is part of job tenure/organizational tenure. Lucifora (1991) concludes that specific human capital decreases the employee’s mobility and therefore stay longer at his/her job (organizational tenure). There are certain costs involved with retaining an employee longer that are being out weighted by the improved performance of this employee (Ng & Feldman, 2010). Thus this would mean that having a higher organization tenure is beneficial for the overall performance, and also for the individual performance.
Diestel et al. (2014) find that on the individual level and on the team level organizational tenure is playing a role in the performance. It is also clear from the research of Ng & Feldman (2008) that tenure plays a moderating role regarding task performance, and counterproductive work behaviour. This is because the longer a person holds their job they become better at their job, however are more likely to exhibit counterproductive work behaviour. Moser & Galais (2007) find that tenure is a moderator to the relationship of self-monitoring and job performance.
From these papers it is clear that tenure, whether it is organizational- or job- or position tenure, affects relationships regarding performance. Thus, the assumption can be made that this will also be the case for the relationship between motivation and auditor performance. The longer an auditor holds a certain position, from being an associate or as a partner within the audit firm, it becomes more likely that this auditor will become more lenient regarding certain procedures (extrinsic) and/or will keep on learning on the job (intrinsic). Hence, this can have a positive or negative influence. Based on this the following assumption can be made regarding the moderating role of position tenure:
H1b. The positive relationship between intrinsic motivation and auditor performance will be negatively moderated by position tenure.
H2b. The positive relationship between extrinsic motivation and auditor performance will be positively moderated by position tenure.
3. Method 3.1 Participants
The total number of participants asked for this study was 178 auditors, and from these 178 auditors the total number that filled out the survey was 142. This gives a response rate of around 80% which is very good taking into consideration that this survey was sent out during the busy season for auditors. From these 142 there was one that was not complete and therefore removed from the sample to end up with a total sample of 141. These participants are all currently working as an auditor at either a big 4 company or at a company that is smaller but still are actively involved during the audits. The criteria used to gather participants were that they are working at a audit firm that performs audits and that they are involved with these audits. In order to get a better view between the difference of intrinsic and extrinsic motivation the effort was made to get participants of every possible level within an audit firm from junior associates to partner. This also meant that there would be some spread in the age of the participants. 3.2 Design
The choice was made to make a survey to collect the data needed for this research. This survey was made with collaboration of other students also looking into the reason why some auditors thrive while others struggle. The questions used in the survey are translated to Dutch from their original language English. This was done because of the majority of the participants speak native Dutch and it would be easier and faster for the respondents to fill in the questions on the survey. The hypotheses will be tested by performing regression analysis with the gathered data. The first model will include the variables for intrinsic motivation, extrinsic motivation and control variables to see what affect these have on the auditor performance. This is to test hypothesis 1a and hypothesis 2a. The second model will include the same variables as the first model and will also have an interaction term for position tenure to see whether this will affect auditor performance differently.
3.3 Measures
Intrinsic motivation. To measure intrinsic motivation I used the measure developed by Tremblay et al. (2009) that is consistent with the Intrinsic Motivation Inventory (IMI)1 was used. As a result, three questions were used in the survey to measure intrinsic motivation. These questions were measures on a 7-point Likert scale, and the higher the respondent’s answer the higher intrinsically motivated they are.
The questions used in this research and explained why they were used are as follows: Because I derive much pleasure from learning new things. The second question is: For the satisfaction I experience from taking on interesting challenges. The last question for intrinsic motivation: For the satisfaction I experience when I am successful at doing difficult tasks.
The combination of these three is found to be a good representation for the variable intrinsic motivation. This is represented by the fact that the Cronbach Alpha for these three questions is .826. This meets the requirement of .7 to be considered to measure the same item, in this case intrinsic motivation, and suffice for further testing.
Extrinsic motivation. To Measure Extrinsic motivation I used the measure developed by Tremblay et al. (2009) that is consistent with the Extrinsic Motivation Index (Berumen et al., 2016). As a result, three questions were used in the survey to measure extrinsic motivation. These questions were measures on a 7-point Likert scale, and the higher the respondent’s answer the higher extrinsically motivated they are.
The questions used in this research and explained why they were used are as follows: For the income it provides me. The second question is: Because it allows me to earn money. The last question for extrinsic motivation is: Because this type of work provides me with security.
Together these questions will form the bases to the variable extrinsic motivation. These three questions have a Cronbach Alpha of .734, and therefore meet the requirement of .7 to be considered to measure the same item, in this case extrinsic motivation, and suffice for further testing.
Auditor performance. To measure auditor performance the measure used in this paper is audit quality reduction behaviour (Herrbach, 2001). In this paper Herrbach mentions behaviour aspects that threaten the overall quality of an audit in the form of the correct execution of audit work programmes. The focus is to get to the individual performance of an auditor, and since the individual performance of an auditor determines the overall audit quality the best way to measure the individual auditor performance is to determine this based on the audit quality reduction behaviour. The lower the score on the questions on quality reduction behaviour the higher the performance of this auditor is. A total of eight questions were used in the survey to measure auditor performance. These again were recorded via a Likert scale and for these questions the decision was taken to record these on a 5-point scale, where a lower score represents fewer audit quality reduction behaviour and a higher score more audit quality reduction behaviour.
The questions used to measure this in the survey are as follows: Reduction of work below what is considered reasonable. Superficial review of client document. Acceptance of weak client explanation. Failure to research an accounting principle. Failure to pursue a questionable item. Signed off on an audit program step without completing the work. Greater than appropriate reliance on client work. And the last question Personally engaged in underreporting of time (i.e., deliberately failing to record the full amount of time spent on a task).
For ease of interpretation, given that my conceptual reasoning revolves around auditor performance, I have reversed the quality threatening behaviour score to reflect auditor performance. Whereas a high quality threatening behaviour score would signal low auditor performance, the reversed quality threatening behaviour score now reflects higher auditor performance. This was achieved by taking the original quality threatening behaviour scores and subtracting this score from 8 (e.g., 8-1=7 and 8-7=1).
The Cronbach Alpha for the variable auditor performance is .777, this meets the requirement of .7 to be considered to measure the same item, in this case the auditor performance, and suffice for further testing.
Position Tenure. To measure the current position tenure, we gathered data from all respondents from their LinkedIn profiles. Via an export we were able to get data regarding the respondent’s different positions during their careers. From this export looking at the respondent’s
last position we calculated the years that they are in this position and use this data for the rest of the research.
3.4 Control variables
There are certain variables that are being controlled for in order to test the hypotheses. There are two demographic variables that are being controlled for. The first demographic variable that is being controlled for is gender. Moyes et al. (2006) finds that within audit firms the gender
discrimination gap is shrinking as more females reach the higher levels within an audit firm. This shows that more females will have top position and therefore receive higher pay. Before it was very difficult for a woman to reach into the top of an audit firm and this could possible affect this person’s motivation, and even now this person’s motivation can be biased. So in order to not create bias gender is being controlled for. In the dataset the variable gender was coded to have a 1 for a female participant and a 0 for a male participant. The second demographic variable that is being controlled for is age. Inceoglu et al. (2012) finds evidence that a person’s motivation can change over time. In this paper the purpose is to find out how motivation affects the auditor performance regardless of their age. The last control variable is audit firm. Every audit firm has their own culture within the organization, and every auditor is differently impacted by this. Douglas et al. (2001) shows that organizational culture affects the individual ethical values of an auditor. Making it possible for the auditor to make less ethical correct choices and thereby
possible engage in audit quality threatening behaviour. There are four dummy variables included, one for every big four audit firms. In addition to big four audit firms some respondents are auditors that work at smaller audit firms. These smaller audit firms will be the reference category (five categories, controlled for by four dummy variables).
4. Results
In this section the results from the survey will be discussed. The first step to analyse the data was to perform descriptive statistics on the data and to perform a reliability test to see whether the used question in the survey measure the same variable. The results are shown in table 1.
Table 1
Descriptive statistics and Correlations Mean Std. Deviation Auditor performance Intrinsic motivation Extrinsic motivation Intrinsic*position tenure Extrinsic*position tenure Position tenure Auditor performance 5.418 .801 (0.777) Intrinsic motivation 5.553 .872 .245 ** (0.826) Extrinsic motivation 3.960 1.203 -.023 .078 (0.734) Intrinsic*position tenure .0222 .790 -.030 -.135 .016 Extrinsic*position tenure -.0882 1.057 -.179 * .011 .055 -.021 Position tenure .014 .997 .185* .022 -.089 .140 -.185* Age 30.89 8.103 .238** .076 -.087 .145 -.109 .756** Indicator gender female .319 .468 -.071 .171 * .209* -.158 -.066 -.112 Audit_firm_d1 .03 .167 -.076 .055 -.089 -.100 -.042 .042 Audit_firm_d2 .30 .459 .103 -.141 -.082 .190* -.121 .031 Audit_firm_d3 .29 .456 -.098 .126 .078 -.084 -.001 -.001 Audit_firm_d4 .28 .449 -.113 .008 .060 -.043 .037 -.176* Audit_firm_d5 .11 .309 .197* -.017 -.033 -.072 .103 .255**
Age
Female
gender Audit_firm_d1 Audit_firm_d2 Audit_firm_d3 Audit_firm_d4 Audit_firm_d5 Female Gender -.208 * Audit_firm_d1 -.072 .158 Audit_firm_d2 -.047 -.113 -.111 Audit_firm_d3 -.082 -.036 -.109 -.417** Audit_firm_d4 -.143 .121 -.106 -.403** -.396** Audit_firm_d5 .438** -.039 -.059 -.225** -.221** -.213*
**. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed).
From table 1 there are some conclusions that can be drawn based on the descriptive statistics from the data. The first conclusion is that for the all the auditors within the sample show that they have very high performance. This is based on the fact that the auditor performance scores are very high. The mean for the sample is about 5.4 and the middle of the Likert scale is 4, so the sample scores for auditor performance show that they are dedicated auditors and cut few corners. The second conclusion is that the sample shows that the majority of the auditors are very much intrinsically motivated.
This is shown by the fact that the mean score for all the intrinsic motivation questions is relatively high, since this is measures on a 7-point Likert scale. The conclusion for extrinsic motivation is that the auditors in the sample are not that affected by extrinsic motivation. The mean is pretty much dead centre for the used 7-point Likert scale and shows the most deviation of the variables. The last test conducted with the data was to perform a reliability test to provide internal reliability that the questions used in the survey do all measure the same variable. In order to be correct the Cronbach alpha needs to be .7 or higher. The results for this Cronbach alpha test are also shown in table 1 and can be found in between the brackets.
The conclusion from is that the Cronbach alpha for all variables meets the requirement of .7 to show cohesion between the asked question in the survey. And therefore the questions can be merged into a single variable.
The next step in this research was to perform a Pearson-correlation test to see whether or not the used variables are correlated to each other. The results are also shown in table 1.
For the correlation there are some conclusions that can be drawn. The first conclusion is that there is a significant correlation between intrinsic motivation and auditor performance. This is an indicator that hypothesis 1a might hold up. Another conclusion from the correlations is that extrinsic motivation is not significant with auditor performance, and possible hypothesis 2a might not hold up. The correlation between age and position tenure was to be expected, because when a person holds a certain position for a longer time this person will also age over this same time. So for this research there are some interesting conclusions, the first one is that intrinsic motivation is significantly correlated with auditor performance and that extrinsic motivation is not significantly correlated with auditor performance.
Then the next step was to start running a regression analysis. There are four models used for this regression analysis. The first models includes auditor performance as a dependant variable and has intrinsic motivation and extrinsic motivation as independent variables, next to this the control variables, female dummy, age and audit firm dummies, are also included. The second model contains the exact same variables as model one with the inclusion of the interaction term for position tenure and intrinsic motivation. Model three depicts the same as the first model with the inclusion of the interaction term for position tenure and extrinsic motivation.
Model four includes all the variables as model one and includes both interaction terms for position tenure and intrinsic motivation as well as position tenure and extrinsic motivation. Table 2 gives the overview for the regression models.
From table 2 the following conclusions can be drawn. Intrinsic motivation is a very significant factor influencing the auditor performance. Extrinsic motivation does not hold any significance with auditor performance. Extrinsic motivation when coupled with position tenure the results are significant.
Table 2
Regression
Auditor Performance
Model 1 Model 2 Model 3 Model 4
Variables Pred. Intrinsic motivation (+) 0.286*** 0.281*** 0.291*** 0.286*** (<0.01) (<0.01) (<0.01) (<0.01) Extrinsic motivation (+) 0.010 0.014 0.020 0.024 (0.90) (0.87) (0.80) (0.77) Position tenure 0.039 0.041 0.009 0.011 (0.76) (0.75) (0.94) (0.93)
Intrinsic motivation*Position tenure (-) -0.051 -0.046
(0.55) (0.58)
Extrinsic motivation*Position tenure (+) -0.173** -0.172**
(0.04) (0.04)
Age 0.107 0.116 0.094 0.103
(0.44) (0.41) (0.49) (0.46)
Female Dummy -0.036 -0.041 -0.059 -0.063
(0.69) (0.64) (0.50) (0.47)
Audit Firm dummy 1 -0.144 -0.139 -0.150 -0.147
(0.13) (0.14) (0.11) (0.12)
Audit Firm dummy 2 -0.068 -0.051 -0.124 -0.108
(0.64) (0.73) (0.39) (0.47)
Audit Firm dummy 3 -0.284** -0.275* -0.326** -0.318**
(0.05) (0.06) (0.03) (0.03)
Audit Firm dummy 4 -0.257* -0.247* -0.295** -0.285**
(0.07) (0.09) (0.04) (0.05)
N 139 139 139 139
As expected intrinsic motivation does play a huge role in the auditor performance. As mentioned before in the methods section, the way that auditor performance is measured is by looking at audit quality reduction behaviour. This is then reversed to be a better representation of auditor performance. When looked at the results as shown in table 2 it is clear that intrinsic motivation increases the auditor performance. The coefficient for this interaction is across all models around 0.286 (p<0.01) and this is highly significant. This means that an auditor that is more intrinsically motivated will also show better performance compared to an auditor with little intrinsic motivation.
The expectation for extrinsic motivation was that it would provide the same effect as intrinsic motivation. The results however tell a different story. First of all, from the descriptive statistics it was clear that the mean for extrinsic motivation lies around the middle of the scale used. This meant that the auditors within the sample do not care that much about extrinsic rewards nor do they not want them. The standard deviation tells us that there was more variation between the given answers. Next the correlation matrix showed no significant correlation between extrinsic motivation and auditor performance. So this gave no real evidence that extrinsic motivation would affect the auditor performance. In the model the correlation coefficient is 0.010 (p = 0.90) for model 1, 0.014 (p = 0.87) for model 2, 0.020 (P = 0.80) for model 3 and 0.024 (P = 0.77) for model 4. This tells us that the direction is as expected, that extrinsic motivation would increase the auditor performance, nonetheless this coefficient is so small that is does not hold any significance.
As for the last assumption made regarding the moderating effects of position tenure, the conclusion is that it only moderates the relationship of extrinsic motivation and auditor performance. The expectation was that the longer an auditor holds a certain position within that audit firm their motivation will be affected by this and therefore their performance. In model 2 and model 4 where the interaction between position tenure and intrinsic motivation is shown, the coefficient tells us that the relationship between intrinsic motivation and auditor performance will become less positive. However these results are not significant. In model 3 and model 4 the interaction between position tenure and extrinsic motivation is shown. The coefficients show that the positive relationship between extrinsic motivation and auditor performance will become less positive. The results from the data are that the coefficient on the interaction is -0.173 (p<0.05)
for the interaction between extrinsic motivation and position tenure in model 3 and -0.172 (p<0.05) for the interaction between extrinsic motivation and position tenure in model 4. So the conclusion that can be drawn from these coefficients is that both are statistically significant and that position tenure will moderate the relationship between extrinsic motivation and auditor performance in the way that the performance will become less positive. Meaning that the auditor is more likely to engage in audit quality reduction behaviour in the case that this auditor is more extrinsically motivated and when this auditor holds their position for quite some time. This is also clearly visible in figure 1. As for the intrinsic motivation and auditor performance moderated by position tenure, this again shows that the overall auditor performance will decrease. The same like before with extrinsic motivation the auditor will be more likely to show audit quality reduction behaviour, however this is not significant.
Figure 1: Dawson interaction plot for the moderating effect of position tenure.
The last conclusions that can be drawn from table 2 are related to the control variables. The first is related to the variable age. The older a person is the higher their performance is. However it must be said that in the sample he majority was 30 years or younger and therefore this result seem logical. The variable female dummy shows that there is no significant difference between a male or female when it comes to their performance and their motivation. For the audit firm
2,7 2,75 2,8 2,85 2,9 2,95 3 3,05 3,1 3,15 3,2
Low extrinsic motivation High extrinsic motivation
Aud itor p er for m an ce Low Tenure High Tenure
dummies there are some that show a significant coefficient. This means that between the Big4 audit firms there is a difference, however this is a very simple conclusion and further research is needed to confirm this.
5. Discussion and conclusions
This section discusses the conclusion that can be drawn from the results section. The objective of this study was to assess if motivation will affect auditor performance, and more specifically to see if this motivation would be intrinsic motivation or extrinsic motivation. Next to that the moderation of position tenure would affect this relationship.
From the results section it is clear that motivation does hold a significant relationship with auditor performance. In all models intrinsic motivation is shown to be highly significantly related with auditor performance. From the conclusion drawn in the results section it is clear that when an auditor in more intrinsically motivated, this auditor will show a higher performance by engaging less in audit quality threatening behaviour. This is consistent with the findings of Becker (1997). However this research shows that there is a significant relation between intrinsic motivation and auditor performance, whereas Becker (1997) only showed that there would be a relationship between them. This result is also consistent with the results of the research of Hund & Hein (2015). Where they found that “interesting Tasks” is seen as a key intrinsic motivator for auditors, and this was also included in the survey. This means that we can accept hypothesis 1a. This result backs up the literature on this topic. The Self-determination theory describes that every person is intrinsically motivated and that this need to be reinforced. As an auditor being more intrinsically motivated will help to perform better. This adds to the existing literature on auditor performance by having determined one of the characteristics, intrinsic motivation, of an auditor that will help them perform better. This also adds to the behavioural research in accounting in the way that a personal trait is researched and discovered to be of significant influence on auditor performance.
For the extrinsic motivation part the results differ. Across all models the coefficients show that this would lead to a higher auditor performance. However extrinsic motivation holds no significant relationship with auditor performance. And therefore we reject hypothesis 2a. Contrary to Lunenburg (2011) conclusion that expectancy theory can be used to alter the
expectancy regarding rewards and therefore motivating a person, this is not the case for an auditor. Overall this results in contrary to what the literature expects us to find. A reward, whether it being monetary or non-monetary, at the end of a task well done will motivate a person to perform better. Auditors seems to attach less value to a reward at the end of a task well done and will still execute this task in a correct manner. Thus this result adds to the behavioural research in accounting that extrinsic motivation is not a characteristic that will help auditors to perform better. This also adds to the auditor performance literature, that auditors will put more emphasize on intrinsic motivation over extrinsic motivation.
The moderating effect of position tenure on the relationship of motivation and auditor performance show the same direction, both will negatively affect this relationship. When it comes to intrinsic motivation and position tenure there was no statistical significant evidence, hence we reject hypothesis 1b. Position tenure does show to affect the relationship between extrinsic motivation and auditor performance in a statistically significant way. It was expected have a positive effect on the relationship and the results show that it is in fact a negative effect, therefore we reject hypothesis 2b. These results are as predicted from the literature. From previous research (Diestel et al. 2014; Ng & Feldman, 2008; Moser & Galais, 2007; Norris & Niebuhr, 1984) the moderating effect of organization-, job- or position tenure does moderate the relationships where performance is the dependant variable.
So, also in this case where the longer an auditor holds a certain position, being it as an associate or as a partner within the audit firm, will negatively affect the relationship of motivation and auditor performance. This adds to the literature in the way that tenure does moderate relationships, especially ones regarding performance. By recognizing position tenure as a moderator this could be used as a moderator in other relationships.
Overall, this research shows that intrinsic motivation is related to auditor performance, and that more intrinsically motivated auditors will perform better than less intrinsically motivated auditors. Also position tenure will negatively moderate the relationship of motivation and auditor performance, and for extrinsic motivation this moderation is found to be significant. Some steps have been taken towards a look at individual audit quality and personal characteristics that affect this individual audit quality.
6. Limitation and Future Research
As with any research there are some limitations. The first limitation is that the survey questions used were translated from English to Dutch, this to accommodate the respondents who are all mainly Dutch citizens. There is a possibility that some essence of the question was lost when translated. Another limitation is the fact that there were not that many respondents for the survey. The total number of surveys filled in for this research is small in comparison to the total number of auditors working. The sample size is large enough in order to run statistical tests, however more respondents would create a better basis for the conclusions. A possible reason for the low number of survey is the fact that this research was conducted during the busy season for auditors. The third limitation is that most of the respondents (>95%) are auditors in the Netherlands and it could be argued that the results may not hold up in other countries. One more limitation is the fact that this research was conducted within a group and therefore not much room was available to include more questions on motivation and the different types of motivation.
The results and conclusion from this research provide further evidence that more research is needed in the area of individual auditor performance. There are different possibilities and directions for future research. The first possible direction is to look at the differences between audit firms. From previous research of Hund & Hein (2015) there is a basis that non-Big 4 auditors are more motivated than Big 4 auditors. Adding this with what is discovered in this research, it does show that between the big four audit firms and smaller audit firms a difference in performance can be measured, and that possibly the relationship between motivation and auditor performance is also different among the audit firms.
Another direction for future research is to enhance the survey to include de different types of motivation and have a more extended survey on motivation to be able to enhance the results of this study. The survey used does meet the requirements needed for this research, however a more extended survey on motivation could lead to possible other results or will confirm the results of this paper. Furthermore a possibility is to research how time pressure and/or working overtime moderate the relationship between motivation and auditor performance. Having defined motivation as one of the auditor characteristics that will help the auditor perform better, one more possibility is to look into what other characteristics will influence individual auditor performance.
7. Practical Implications
Based on the results of this research there are some practical implications. Auditors who are more intrinsically motivated tend to performance better. Based on this conclusion it will become more important for audit firms to keep this into consideration. To make sure that these auditors will perform at their very best the audit firms can take a look into maintaining these auditors highly intrinsically motivated. This could be done by giving challenging tasks to the auditor so he/she can feel accomplished after successfully completing this task. The other big conclusion from this research is that the longer an auditor holds their respective position they become less sensitive towards extrinsic motivation. Thus the audit firms, in order to maintain the auditors high performance, need to balance the extrinsic motivation in such a way that this will still be effective. It is important to keep the auditors’ intrinsic motivation high because the position tenure will not affect the auditor performance in a significant way.
The last practical implication coming forth from this research is that it is important to pay attention to characteristics of a person, in this case the auditor. This research has found some evidence that the individual auditor is ultimately responsible for the overall audit quality, and this means that audit firms will need to be aware of this to safeguard the audit quality. Making sure that the auditor will perform at their best will safeguard the audit quality.
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