THE DAILY WORK OF AN AUDITOR WHEN INDIAN AND DUTCH AUDITORS WORK TOGETHER

THE DAILY WORK OF AN AUDITOR WHEN INDIAN AND

DUTCH AUDITORS WORK TOGETHER

Master Thesis, MSc. Accountancy

University of Groningen, Faculty of Economics and Business

June 24th, 2019

TJARDA MARIJE VAN DUIJL Student number: S2746778 Eendrachtskade 13-10 9718 BB Groningen tel.: +31 6 34 72 54 09 e-mail: t.m.van.duijl@student.rug.nl Supervisor: dr. S. Girdhar Co-assessor: dr. S. Tillema ABSTRACT

This is the first study to analyze how the daily work of an auditor could be impacted when Indian and Dutch auditors work together in an audit team. The study draws on a qualitative research approach, in which semi-structured interviews are conducted with Indian and Dutch auditors who are working together in the Netherlands. The findings of this study contribute to the audit literature by providing evidence that the daily work of an auditor will be impacted by having frustrations and miscommunications due to the different communication styles of Indian and Dutch auditors. Subsequently, the worse collaboration and discouragement in the daily work of an auditor results in auditors working more hours than required, while the audit is characterized with great time-pressure. On the other hand, the work of an individual auditor is impacted by working more performance-based due to culturally diverse work attitudes, which could enhance the audit. Moreover, the work of an individual auditor is altered by dealing with an enhanced independence risk due to cultural differences, which is especially of importance in the audit setting. The study results have important implications for auditors, large audit firms and educational programs, as the growing cultural diversity continues in the audit.

Keywords: power distance, accounting firms, globalization, multinational audit teams

TABLE OF CONTENTS

1. INTRODUCTION 2

2. THEORETICAL BACKGROUND 5

Hofstede’s Cultural Dimensions 5

Power Distance 6

Indian auditors working with Dutch auditors in a Dutch setting 7 Dutch auditors working with Indian auditors in a Dutch setting 9

3. RESEARCH DESIGN AND METHODOLOGY 11

4. FINDINGS 14

Hierarchy 14

Communication 14

Working attitudes 17

Acculturation 18

5. DISCUSSION AND CONCLUSION 22

REFERENCES 26

APPENDICES 34

Appendix 1: Interview Guides 34

For Indian auditors 34

For Dutch auditors 36

1. INTRODUCTION

Internationalization of auditing becomes more prevalent in a globalized economy. On the one hand, the increasing globalization of businesses, hence the growth of multinational corporations, results in auditing international clients (Tsui and Windsor, 2001). On the other hand, audits of multinational companies are often conducted by firms that are part of global audit firm networks (Sunderland and Trompeter, 2017), for example a large audit firm. Accordingly, globalization in the audit profession results in working in a multinational environment, affecting the daily work of an auditor (Barrett, Cooper and Jamal, 2005).

The most recent impact of globalization results in offshoring services, in search for saving labor costs (Bryson, 2007; Lapid, 2007) and addresses labor shortage in the Netherlands. Accordingly, India is a popular country for offshore accounting, auditing and tax related services (Lyubimov et al., 2013), because of many reasons. These include: (1) telecommunications infrastructure in India that meets universal standards, (2) availability of English-speaking people in India and (3) the ability to offer round-the-clock services (Kesavan et al., 2013). Essentially, large audit firms in the Netherlands are offshoring services to India. However, because of these offshoring services, high skilled Indian auditors are also invited for a job in the Netherlands as a temporarily solution against a shortage on the labor market (Kou et al., 2015). Nonetheless, high skilled migrants are only considered in terms of economic efficiency and social factors are undervalued heavily in the Netherlands (Harvey, 2011). Kou et al. (2015) identify that the Netherlands need to recognize the sociocultural context of Indian migrants, which could mean that working with another culture influences the daily work of an auditor.

Recently, the Public Company Accounting Oversight Board (PCAOB, 2016) expresses concern over audits that are conducted in a multinational setting, since these audits may not be adequate enough to support the audit opinion and may not be adequately supervised. This could be a result of the problems auditors face within a multinational audit, such as cultural differences. Although literature acknowledge the difficulties that come with cultural differences in multinational audit teams, for example social identity issues (Hanes, 2013), effectively managing diversity (Nolder and Riley, 2015) and poor communication (Sunderland and Trompeter, 2017), little or no research explicitly addresses these difficulties in-depth. In short, many studies of internationalization in auditor’s practice had been rather abstract and a call for research in the audit literature is dominant leading to the following research question:

How does the collaboration of Indian and Dutch auditors influence the daily work of an auditor?

This study contributes to the literature in several ways. First, limited research in audit literature is published with respect to different cultures involved in the audit process (Sunderland and Trompeter, 2017). Instead, previous studies on cultural diversity in an audit setting focused on perceptions and behaviors, such as ethical reasoning (Tsui and Windsor, 2001) and auditor’s judgements (Nolder and Riley, 2018; Yamamura et al., 1996), but also perceptions on codes of conduct (Arnold et al., 2001; Cohen et al., 1992) and risk assessments (Chen et al., 2007; Hughes et al., 2009; Sim, 2010). The contribution of this study relative to previous studies is that this study focuses on different cultures working together and how it affects the daily work of an auditor, whereas previous studies focused on cultural differences in perceptions and behaviors.

Second, most of these previous studies particularly made conclusions based on a national level by considering important individual differences between countries (Chen et al., 2007; Gul and Tsui, 1993; Hughes et al., 2009; Sim 2010; Yamamura et al., 1996;). For example, Sim (2010) found that individualist Australian auditors rate control risk higher than collectivist Taiwanese auditors. In this study, a contribution will be made by analyzing the influence of different cultures on the level of an audit team, making it possible to assess in what way the work of an auditor could be impacted when auditors of different cultures have to work together in an audit team.

There is also little evidence as to whether auditors recognize cultural differences when they have to work together and how they respond to this observed cultural diversity by considering it when doing the audit work. Hanes (2013) investigated how working across cities, countries and continents affects auditors, the audit process, or audit quality. However, this is again on a higher level than the audit team level.

Lastly, it is made clear in the audit literature that more studies about multinational audit teams could be fruitful (Hanes, 2013; Nolder and Riley, 2015; Sunderland and Trompeter, 2017), because of growing cultural diversity in audit firms, increased offshoring services and expressed concerns of the PCAOB (2016) about the multinational audit setting. Especially Sunderland and Trompeter (2017) make clear that a closer link between research and practice is needed to provide a better understanding of how internationalization could influence the work of an auditor, when

one considers critical aspects of the audit environment, such as the hierarchy of an audit firm (Jeppesen, 2007), independence of auditors (Gendron et al., 2006) and time-pressure of auditors (Otley and Pierce, 1996).

More practically, this study can provide guidance for global audit firms to better understand how cultural differences could affect the work of auditors working in a multinational audit team as the need for highly skilled migrants endures to be an important matter of contention (Kou et al., 2015). The recent immigration trend of high-skilled Indian auditors to the Netherlands will stay a solution for labor shortage and the inflow of labor migrants from India to the Netherlands will continue (Nicolaas, 2009). Besides, this study contributes to educational programs. It is important to determine if accounting students are being well qualified for entry into the audit profession, whilst internationalization of auditing becomes more prevalent in a globalized economy (Tsui and Windsor, 2001).

2. THEORETICAL BACKGROUND

Hofstede’s Cultural Dimensions

In Hofstede’s framework, cultural differences are described as work-related values, which contain shared values and norms that act without awareness (Ge and Thomas, 2008). Hofstede defined culture as "the collective programming of the mind that distinguishes the members of one group or category of people from another" (Hofstede, 2001, p. 9). The framework provides five cultural dimensions at the national level: (1) power distance; (2) individualism-collectivism; (3) masculinity-femininity; (4) uncertainty avoidance; and (5) time orientation. Hofstede’s work has been criticized for several reasons, among these are: cultures are not objective and measurable (Geertz, 1973), constant in time (Baskerville, 2003) and homogenous (DiMaggio, 1997). However, Hofstede’s work is the only international framework about cultural values that is supported by empirical research (Grimmelikhuijsen et al., 2013). Therefore, this study will be based upon Hofstede’s theory for the explanation of how the Indian and Dutch culture could influence the work of auditors in a multinational audit team. The aforementioned criticisms will be considered. Respectively, the culture theory of Hofstede has been widely referred to in the audit literature and is often used as a conceptual framework for explaining, presuming, and verifying differences in culture (Arnold et al., 2001; Chow et al., 1999; Tsui and Windsor, 2001). Specifically, power distance, individualism and uncertainty avoidance are identified as dimensions that relate closely to national audit environments. For example, these dimensions can explain differences in auditor’s perspective and behavior (Hughes et al., 2009). In this manner, these three dimensions are essentially used in prior literature to explain different cultures perceive audit risks differently (Chen et al., 2007; Hughes et al., 2009; Sim, 2010) or make auditor’s judgments differently (Nolder and Riley, 2018; Yamamura et al., 1996). Taking only into account the three cultural dimensions relating to audit environments, power distance and individualism are especially reflective for the characteristics of the Indian and Dutch culture, according to the framework of Hofstede (2001), as seen in table 1.

The individualism dimension has a strong relationship with the dimension of power distance (Hofstede 2001; Smith and Dugan, 1996). These two dimensions are closely interrelated. In this way, large power distance countries usually have low individualism, and small power distance countries usually have high individualism (Hofstede, 1980).

TABLE 1

Scores of the Netherlands and India on Hofstede’s dimensions (Hofstede, 2001)

Dimension Netherlands India

Power distance 38 77

Individualism 80 48

Uncertainty avoidance 53 40

Accordingly, India is characterized by large power distance and low individualism and the Netherlands is characterized by small power distance and high individualism. Both countries are more similar on the dimension uncertainty avoidance.

Moreover, the main difference between the two dimensions is that individualism has to do with the nature of one’s accountability to groups and organizations. It does not cover hierarchy and therefore power distance captures this one aspect of assignation and particularism (Smith and Dugan, 1996). Respectively, large-audit firms are relying primarily on hierarchy to control work (Jeppesen, 2007). In this way, the power distance dimension is especially reflective of the culture of an audit firm and could therefore best identify differences in the work of an auditor when (s)he has to work with another culture.

In short, the focus will be on power distance in this study, because this dimension only already explains differences between the Indian and Dutch culture, given the fact that the contrary individualism score is just a logical consequence of the interrelationship between power distance and individualism. Besides, the power distance dimension is particularly reflective of the culture of large audit firms.

Power Distance

The dimension of power distance measures the degree to which the members of a group or society accept the fact "that power in institutions and organizations is distributed unequally" (Hofstede, 2001, p. 98). In high power distance cultures, subordinates expect to be instructed by

superiors, willingly obey instructions, are unwilling to disagree with superiors, aim to follow formal codes of conduct, and believe that superiors have rights to special privileges (Hofstede, 2001).

As demonstrated by Cohen et al. (1992), power distance affects the definition of ethical behavior in different cultures. Differences in scores of power distance results in cultural conflicts due to three out of five fundamental principles of IFAC (2006): (1) integrity; (2) objectivity and (3) confidentiality. As a result, the audit literature indicates that lower ethical reasoning scores of auditors are more likely to occur in high-power distance culture (Tsui and Windsor, 2001). Consequently, subordinates could allow an unauthorized request by a superior for confidential information. Besides, a subordinate would also be more likely to remain loyal to his or her supervisor out of respect for the superior's position, even when the superior acts unethically, or even illegally. More importantly, such behaviors of the subordinate would be seen as acceptable behavior (Cohen et al., 1992).

Indian auditors working with Dutch auditors in a Dutch setting

Being the largest democracy in the world, having six main religious groups, over three thousand castes and seventeen languages, India is absolutely a diverse country (Saini and Budhwar, 2004). India is generally a Hindu country and besides Hindi, English is the official language (Budhwar, 2003). Indian social systems are steeply hierarchical and Indians are highly status conscious. Hierarchical relationships in India are due to the caste system and the importance of family (Gill et al., 2010). Elders have control over the family and younger members are dependent on them for guidance and advice (Kakar et al., 2006). Therefore, in Indian workplaces, subordinates are viewed as “sons” and “nephews” and superiors are nicknamed “father” or “uncle” (Becker-Ritterspach and Raaijman, 2013). In this manner, the high-power distance in India is a prominent cultural value for Indian employees (Kumar and Sankaran, 2007). Baruch and Budhwar (2006) identified that Indian workers are comfortable with a hierarchical organization of the workplace, because it helps showing their respect (Khatri, 2009). Therefore, it is expected that Indian auditors are more comfortable with the hierarchical organization of an audit firm.

Besides, Indian employees seek to maintain a harmonious working relationship with their superiors. Speaking up against one’s superior may damage the relationship between Indian subordinates and their superiors (Mellahi et al., 2010). Therefore, before making a request, Indian

subordinates are more likely to praise a superior first and are less likely to communicate discontent directly (Erdogan and Liden, 2006; Mellahi et al., 2010). In contrast, direct and participative communication will result in a low power distance country (Grimmelikhuijsen et al., 2013). In this manner, individuals of a low power distance culture may not consider status differences when interacting with team members, while Indian people do (Dekker et al., 2008). Therefore, it is expected that miscommunications will exist in a low power distance setting due to the indirect communication style of Indian auditors.

Moreover, Chan et al. (2010) found that individuals of high power distance countries feel powered and secured because of their own territory. However, stress and conflict results when someone interferes in their territory. Likewise, Indian auditors working in a low power distance country could result in territorial ambiguity, because a low power distance culture values participatory practices (Earley, 1999). In this situation, Indian auditors could feel confused about their role obligations, which could result in role conflict and ultimately job stress when they have to work in a low power distance country.

More specifically, Indian subordinates act in a way of dependence and favor close

supervision, resulting in over-reliance on superiors for guidance, instruction and advice (Kunnanatt, 2007). Besides, Earley (1999) argued that subordinates of high power distance cultures are very sensitive to the input from superiors. Subordinates endorse the opinions and accept the influence of superiors to be hopefully favored by them. Varma et al. (2005) even demonstrate that Indian employees are so dependent on their superiors that their degree of independent action is limited. This aspect could especially be important in an audit team, because independence is the core professional value of auditors (Gendron et al., 2006). The essence of auditing is verification, which can be conducted properly when an accountant is independent (Antle, 1984). When there is no independence and thus no proper verification, management has incentives to misrepresent the financial condition of the firm. It is expected that there is an enhanced risk of independence due to over-reliance of Indian auditors on superiors when working in a low power distance country.

Contrarily, in high power distance societies, superiors and subordinates consider each other as unequal (Hofstede, 1980). Therefore, superiors and subordinates of high power distance societies are not interdependent (Yoon, 2009). Interdependence is essential for trust (Yoon, 2009), suggesting a status of distrust for individuals of high power distance cultures. In addition, Hofstede

(1980) indicates that distrust of others is a consequence of a high-power distance value, since power is probably more coercive rather than legitimate. In this manner, it could be expected that Indian auditors have less interpersonal trust than low power distance auditors have. This could result in more formal relationships rather than personal ones in an audit team, which could not only emphasize independence in an audit team operating in a low power distance audit setting, but also resulting in Indian auditors experiencing less territory ambiguity and having confidence to speak up against one’s supervisor.

Dutch auditors working with Indian auditors in a Dutch setting

Located in Western Europe, the Netherlands is a small country in terms of geographic size, but it is among the largest in Europe about population density and wealth (Semetko, 1998). The Netherlands became a culturally more diverse society in the last decade (Arends-Tóth and van de Vijver, 2009). Besides, the Netherlands has one of the most liberal policies on euthanasia, soft drugs, gay and lesbian policies and prostitution (Semetko, 1998). Therefore, the Netherlands is characterized by less traditional family values, less traditional gender-role values, and more liberal views about sexuality and marriage (Leung and Moore, 2003). In this manner, equality is an important value in the Dutch culture (Arends-Tóth and van de Vijver, 2009; Grimmelikhuijsen et al., 2013). Especially this aspect characterizes the low power distance score of the Netherlands, due to the pursuit of wishing the same rights and opportunities for all.

In a low power distance country like the Netherlands, individuals tend to minimize status differences and are more comfortable speaking up against one’s supervisor. They are more likely to express their ideas, because they believe that good ideas can come from all levels in the hierarchy and are less intimidated by the formal authority of the supervisor (Botero and Van Dyne, 2009; Dekker et al., 2008). In this way, many discussions could be held in an audit team in the Netherlands. For high power distance employees, including all team members might not always be seen as something that is necessary (Dekker et al., 2008). It is expected that Indian auditors could reduce team discussions in a Dutch audit team, because they do not feel the need to discuss everything. On the other hand, it is fine to discuss concerns with everyone in a Dutch audit team. It could be the case that Dutch auditors higher in rank feel offended because they are left out when Indian auditors have something to discuss and only express their concerns to the colleagues that are close to them in rank.

Besides, low power distance individuals respect an equal power distribution, so they prefer diverse participation (Nakamura et al., 1997). Additionally, a low power distance culture allows employees to make decisions regardless their hierarchical level (Nakata and Sivakumar, 1996). Accordingly, the judgment of each team member is perceived as important (Earley, 1999). In this way, Dutch auditors expect all team members to participate in the decision-making process. However, Indian auditors could prefer a manager who tells them what to do, as described earlier. In this way, Dutch auditors could think that Indian auditors are not participating enough and only want to do what them is told.

However, the Netherlands as a low power distance culture embeds decentralization, which results in empowerment (Naor et al., 2010; Grimmelikhuijsen et al., 2013). Superiors communicate high expectations and have confidence in work teams (Schaubroeck et al., 2007), which signals a trust and belief in the capabilities of individuals (Naor et al., 2010). In this way, a Dutch superior attempt to enhance the performance of subordinates. Indian auditors have greater respect for authority and may be more open to these superiors’ influence attempts (Schaubroeck et al., 2007).

In this manner, Dutch superiors could have greater influence on the audit team when there are also Indian audit team members, which could enhance the audit work.

In summary, given a low power distance setting, it is expected that Indian auditors could depress the daily work of an individual auditor, due to miscommunications, feeling confused about their role obligations and over-rely on their superiors when working in a Dutch audit team. However, it is also expected that Indian auditors have less interpersonal trust, which could not only emphasize independence in a Dutch audit team, but also resulting in Indian auditors experiencing less territory ambiguity and having confidence to speak up against one’s supervisor. For Dutch auditors, it is expected that they could depress the daily work of an auditor by feeling offended because they are left out when Indian auditors have something to discuss and could think that Indian auditors are not participating enough. However, it is also expected that Dutch auditors could have greater influence on the audit team when there are also Indian audit team members, which could enhance the audit work.

3. RESEARCH DESIGN AND METHODOLOGY

This qualitative study analyses how Indian and Dutch auditors working together could affect the daily work of an auditor. Due to a lack of sufficient literature providing a link between research and practice, this study draws on a qualitative research approach. Qualitative research provides an understanding of meanings and processes that make up real-life organizational settings (Gephart, 2004). In this manner, the nature of qualitative research is logically best suited when doing research about how the daily work of an auditor could be impacted when working with another culture in an audit team. Moreover, another benefit of a qualitative study is that it can explain how different actors may perceive or produce different things in different ways (Power and Gendron, 2015). In this way, qualitative research can expand our knowledge of how and why different cultures could influence the daily work of an auditor when working together.

The Indian and Dutch culture are chosen for this study. This is based on the recent immigration trend of high-skilled Indian auditors to the Netherlands as a solution for labor shortage and this inflow will continue (Nicolaas, 2009). Besides, the international contrast between the Indian and Dutch culture in power distance is an important dimension in the national auditing environment, as described earlier. Therefore, the selected cultures should at least be able to show a difference in the work of an individual auditor when working together in an audit team. Moreover, due to having English as one of the official languages in India, it is possible to compare the Dutch and Indian culture more easily without dealing with a language barrier.

To answer the research question, eight face-to-face semi-structured interviews were conducted with Dutch and Indian auditors who work(ed) with the other culture in an audit team in audit firm X in the Netherlands. Audit firm X has the following hierarchy in place (from high to low): partner, senior manager, manager, senior staff and staff. Four of these interviews are conducted with Indian auditors and the other four with Dutch auditors. Most of these auditors do work together with each other. Moreover, interviewee E works a lot in India and interviewee F oversees the offshore services of India and employs high skilled Indian auditors in the Netherlands. The objectives of the interviews were to gain an understanding of the auditor’s perspective on how working with another culture could influence his/her work. To make sure the interviewees had experience in working together with the Dutch/Indian culture, purposeful sampling is applied. See details of the interviewees in table 2.

TABLE 2 Details of interviewees

Interviewee Nationality Function Position Gender

A Indian Senior staff Superior/subordinate Female

B Indian Staff Subordinate Female

C Dutch Manager Superior/subordinate Male

D Dutch Senior staff Superior/subordinate Male

E Dutch Senior

manager

Superior/subordinate Male

F Dutch Partner Superior Male

G Indian Senior staff Superior/subordinate Female

H Indian Senior staff Superior/subordinate Male

A semi-structured approach facilitates flexibility in the interview process. A set of open-ended questions is used that allows for spontaneous and in-depth responses (Frances et al., 2009). Therefore, semi-structured interviews issue an individualistic perspective and reflect the interviewee’s personal experiences (Bridges et al., 2008). Accordingly, the nature of semi-structured interviews was best suited for exploring how auditing for an individual auditor is influenced in a multinational audit team.

All the interviews with Indian auditors were conducted in English and all the interviews with Dutch auditors were conducted in Dutch, during March 2019. The average length of each interview was one hour. Various proceedings were taken to make sure the collected data is reliable. First, an interview guide, added in appendix 1, is used to ensure interviews do not vary significantly from one to another. This interview guide is based on the theory section of the study. Secondly, to

stimulate honest and open answers, confidentiality and anonymity is guaranteed before the interview was taken. Besides this, permission was asked to tape-record the interviews. After an interview was held, a full transcription was typed. Certain individuals were interviewed twice to clarify key issues, which emerges as the study progressed. The interviews were supplemented with observation of Indian and Dutch auditors working together. The use of multiple sources of evidence helps in providing more convincing evidence in the analysis (Yin, 2003).

Transcriptions of the interviews are analyzed manually, so the meaning of the evidence will be interpreted and transformed into findings. First, interview transcripts were analyzed for similarities and differences across interviewees. Second, follow-up interviews were analyzed to highlight key issues for further examination. Analyzing is done by coding the transcripts in a way that the relevant data is divided into categories. These categories will connect to theoretical concepts, because the interview guide was based on the theory section. Therefore, answers to the research question derived from the categories emerged from the data (Girdhar and Jeppesen, 2018).

4. FINDINGS

This section presents the main findings and discusses them considering the previously reviewed literature. The aim of the study was to develop an understanding of how working with another culture could impact the daily work of an auditor. All respondents recognized the differences in power distance in both Indian and Dutch culture. As noted by one of the Indian auditors on being asked what the main difference is between the Indian and Dutch working culture: The biggest difference that I noticed was the hierarchy. In Delhi, you see the differences clear in hierarchy, but here you can talk freely to your partner and that is the same as to your colleague. Everyone is doing lunch at the same table. In India, managers are sitting with managers. There is a clear division of authority (H, Senior Staff, Indian).

All Indian auditors feel the low power distance in the Netherlands as a relief. An illustrative comment about this is as follows:

It is really positive. There is no bossing around thing happening here, which I really appreciate. It also motivates me when I talk to people higher in rank. They are really open to share their knowledge and do not want to keep it for themselves (H, Senior Staff, Indian).

Taken the contrary power distance scores as a reflective characteristic of the Indian and Dutch working culture as a starting point, two main challenges are noticed in the daily work of auditors when they work together. The first one is a different communication style and the second one is a different working attitude.

Communication

As identified by Rudolph and Welker (1998), to be able to transfer individual efforts into integration for the end product, the audit opinion, informative communication among team members is essential. Besides, informative communication within the audit team results in a successful integration of the team members. However, consistent with prior literature (Botero and Van Dyne, 2009; Dekker et al., 2008; Mellahi et al., 2010; Erdogan and Liden, 2006), all auditors mentioned the direct communication style of Dutch auditors and the indirect communication style of Indian auditors as the first matter of contention. An illustrative comment of an Indian auditor was:

Dutch people are more direct in their communication and feedback. The first year in the Netherlands, I found this quite hard. Feedback is always directly in your face. Indian people are not used to that. We try to be polite. When I have something that I want to criticize, then I go to a room and talk nicely. Besides, I will think ten times, before I speak. This takes time and then it is not clear enough for Dutch people. I have actually had feedback about this. (A, Senior Staff, Indian).

A Dutch auditor substantiated the above view:

I am a very direct person. When I do not like something or I do not think it is good than I will not be careful in telling this. For Indian people, this is very different. They do not like it when you are communicating directly. They need to get used to our way of communicating, because it is our way of working (D, Senior Staff, Dutch).

Whereas prior literature indicates that Indian employees seek to maintain a harmonious

working relationship only with their supervisors (Erdogan and Liden, 2006; Mellahi et al., 2010), these findings show that Indian auditors seek to maintain a harmonious working relationship with both their supervisors and subordinates. They avoid speaking up against their colleagues as much as possible. This effect is stronger in the Netherlands, because Indian auditors do not choose to participate in the direct communication style of Dutch auditors, which could result in Indian auditors working more time than required regarding working with Dutch subordinates. A representative comment is illustrated below:

Sometimes, I would not directly give the feedback of finding mistakes. I ended up in doing the staff’s job also, because I did not want that communication. I ended up working longer hours than I was required. In the end, I was really tired (A, Senior Staff, Indian).

Therefore, Indian auditors avoid communicating critical review notes to Dutch

subordinates, because they do not like to give direct feedback in a way in which Dutch subordinates are used to get feedback. Moreover, the indirect communication style of Indian auditors could also result in working more time than required regarding working with Dutch superiors, because Indian auditors do want to make sure that they do not make any mistakes. As stated by an Indian auditor: I try to get things sorted by myself as much as I can, before asking for help. I have to have enough knowledge and confidence that what I am saying is really the case. Otherwise, I will do more research, rather than calling the manager: ‘this is what the situation is, please solve it’. So, in a way it takes more time and more energy. It is not needed, but it is how I manage things (H, Senior Staff, Indian).

In this way, Indian auditors are working more hours than required, which could evolve in audit work that is of less quality, as described by this respondent:

They always say yes when you ask if they want to do something. That is the problem with Indian auditors. Then you get it back and then it is not good enough, you ask how that comes and then it appears that she actually had not enough time for it, but at least wanted to show that she is trying her best, instead of saying in advance that she will not make it in time (D, Senior Staff, Dutch).

According to another Dutch auditor, this situation could result in Indian auditors minimizing audit steps due to working overtime:

The planning is just not realistic. In this way, the Indian auditors are still doing audit work for another client than doing audit work for the client of the current week, what they supposed to have to do. Things are being delayed, actually. At a certain moment, trouble will result. Then, I think, they have to choose to skip the less important audit procedures (C, Manager, Dutch).

Dutch auditors need to create an atmosphere wherein Indian auditors are forced to communicate their audit findings. A more instructed and special guidance for Indian auditors is created. This guidance ensures that Indian auditors do communicate and that all information is transparent and in a timely matter. This is identified by all the Dutch auditors:

When I expect that it is not going well, I will ask some extra questions. When I do not do this, I will hear nothing, because then they are not totally sure or it is not totally clear and then they keep quiet. Besides, I need to review in time, otherwise it could be too late. I always try to follow the entire audit process and sometimes I review twice to make sure that I do not miss anything (E, Senior Manager, Dutch).

In addition, Indian auditors acknowledge this intensive guidance of their Dutch colleagues: She asked me questions about how I did things on a particular account. I think she realized that I needed some push. She did not take me as competition, but as a colleague, who needs some help and she brought out the best in me. I told her all my problems (A, Senior Staff, Indian).

After a while, this special intensive guidance for Indian auditors could create frustration for Dutch superiors in the audit team:

I need to manage things. I can only do this when I get information. I do not have time to constantly check somebody. I just need targeted information, so I just really need team members to communicate clearly (C, Manager, Dutch).

Therefore, Indian auditors could minimize audit steps because of working more hours than scheduled, but also Dutch auditors could choose to do this. They want to compensate the extra work hours of Indian auditors and they also need to guide Indian auditors more intensively. Therefore, the Dutch auditor wants to save time and could prioritize timesavings actions (Svanström, 2016):

I noticed a few Dutch colleagues, they are twisting a few steps, because they know what they are doing and what they are looking for. Whereas with us, we follow it by the book. This is also what happened with my manager. I have spent some time on audit work and in the end, he reviewed the file and he said, 'looks good, but you could eliminate this test, because it is also giving the same results as the other test’ (A, Senior Staff, Indian).

Working attitudes

Besides the different communication styles of auditors, another difference is noticed. Given the high-power distance in the Indian culture, Indian auditors favor to be instructed by their superiors. In the Netherlands, an independent work attitude is preferred and more participatory practices are expected (Dekker et al., 2008). The difference in work attitude is described in the following comment:

I noticed that they have less experience in working independently on the audit. They are more used to be instructed. For example, they are not used to choose themselves which accounting tool they want to use. In the Netherlands, we are more like: ‘search it out yourselves and if you have any questions, you just have to let it know, but I will not tell you exactly how you have to do the box ticking work, because then I just could have done it myself (D, Senior Staff, Dutch).

Another Dutch auditor prefers the working style of Indian auditors, because it creates less time-consuming discussions:

I think Indian people are much more formal. When you ask something, they just do it. They do not question me and will not discuss the instructions I gave. Besides, Indian auditors work really structured and provide clear work papers. In the Netherlands, sometimes you have to ask it three times and then there will be still a discussion (E, Senior Manager, Dutch).

On the one hand, Indian and Dutch auditors working together in one team could enhance the audit. They could balance each other without discussing everything, but questioning decisions of superiors when it is essential. On the other hand, independence is the core professional value of auditors (Gendron et al., 2006). By acting in a way that independent action is limited and superiors are not questioned, the audit could be impacted directly. Prior literature also indicated that Indian subordinates act in a way of dependence (Kunnanatt, 2007; Varma et al., 2005). Dutch auditors are used of having a participatory working style and have to consider the dependency of Indian auditors when they work together:

When you just tell them what to do and how to do it, they just will do it. Therefore, you have to be very critical in what kind of tasks you give them, because they like to do everything for you without a doubt (E, Senior Manager, Dutch).

The Indian auditors also acknowledge that they act in a way of limited independent action: Two years back, I would agree to everything that she said. I was not even questioning her why I am doing it. It is how a robot works but yes that is how I used to do it (G, Senior Staff, Indian).

In this way, Indian auditors need to adapt to the expectations of Dutch auditors of having a participatory working style in de audit team. For Indian auditors, this working style is mostly received as a kind of relieve where their knowledge does matter. An Indian auditor commended:

The kind of work motivated me. Here you are responsible for a particular client even as a staff senior. When a job is assigned to you, you have the core responsibility to finish it. You get to speak to the client. You get to use your knowledge that you have acquired during your bachelors or masters. In India, we also have qualified accountants and seniors, but we cannot use our talent (A, Senior Staff, Indian).

Accordingly, Indian auditors have more trust and belief in their capabilities, due to the participatory working style of Dutch auditors, which is consistent with the findings of Schaubroeck et al. (2007). Another important aspect of being used to get instructions and obey these, is that there could be a lack of experience when Indian auditors are working in the Netherlands. Dutch auditors are used to work participatory and therefore criticize themselves how and why they are doing proceedings, even when they are still staff. Indian auditors are used to obey instructions and when they become a manager in the Netherlands they experience difficulties:

For example, in India I was just handling one era. In the Netherlands, as a senior you also have to be engaged in the engagement as a whole. So, a manager can call you and ask you: what is the status? I was not used to that. Then you are also the contact with the client. In India, I had a few clients where I went on side, but mostly it was work from the office. That exposure was missing for me (H, Senior Staff, Indian).

Another Indian auditor also acknowledge a lack of experience:

Sometimes I feel that I had a lack of experience, in a way it takes more time for me than for a Dutch auditor to get things done. This comes from experience, which I also believe is because we do not get the same opportunities as a staff in India (A, Senior Staff, Indian).

A lack of experience could impact the audit work in a way that it hampers the audit: In the end, the quality of the audit will suffer. I will notice the lack of experience when I review it. Subsequently, I will give feedback that the audit work needs to improve or that the work needs to be redone. However, there is always a risk of me not noticing at all that the audit work is not properly performed (C, Manager, Dutch).

Acculturation

All the above-mentioned difficulties in the audit team are only noticed in the very beginning of the collaboration. After a while, Indian as well as Dutch auditors get to know each other and know how to anticipate on the different communication styles as well as the working attitudes. This process is called acculturation in prior literature (Oerlemans and Peeters, 2008):

On a certain moment you know what the strengths and weaknesses are of Indian auditors. Then you can use them optimally. I know really well in what way I can use an Indian auditor and in what way not, so it cannot go wrong (C, Manager, Dutch).

However, there is a difference in perception of adapting to each other’s culture between both cultures. Indian auditors admit that getting used to each other’s culture will take some time, but believe it is possible:

I think it is getting better over time. People are realizing how the Dutch culture is, whereas Dutch people are also realizing how the Indian culture is and we are both finding the balance. You have to take some time for it (A, Senior Staff, Indian).

As indicated by Oerlemans and Peeters (2010), Indian auditors prefer a dual-orientation in which they both maintain aspects of their own culture and adapt to the host culture at the same time:

I get a lot of feedback that I have to be more outspoken. However, I do not want to change it that much, because then I will lose my identity also (H, Senior Staff, Indian).

However, Dutch auditors do not recognize that they need to adapt to the Indian culture specifically:

I will never adapt to them obviously. For sure not. We are in the Netherlands, so Indian people need to adapt to the Dutch culture (D, Senior Staff, Dutch).

This difference in perception of acculturation perfectly describes the findings of

Oerlemans and Peeters (2010), as they found that Dutch workers want immigrants to completely adapt to the Dutch culture. Besides, Lu et al. (2011) point out that immigrant employees are more likely to develop higher levels of acculturation strategies when they receive higher levels of social support from their superiors and peers. Social help from these sources can afford immigrant employees with more information, which helps them in solving problems caused by cultural differences. However, respondents do not recognize this social help provided by audit firm X:

We have many different trainings, where you also will have different role-plays. However, we do not have this kind of trainings especially for Indian auditors who come to the Netherlands. They do not get this kind of trainings when they arrive (C, Manager, Dutch).

More generally, social help about dealing with cultural differences in an audit team is also not provided by audit firm X, acknowledged by another auditor:

Within this audit firm, there is no attention for different cultures and what kind of difficulties this can bring to the table, as well as that you have to adapt to each other’s culture to facilitate a good collaboration (D, Senior Staff, Dutch).

Overall, it takes time for Indian and Dutch auditors to get to know each other. A representative comment is illustrated below:

I think we should work on concrete guidance if we want to have a qualitative audit. We do not have to focus on another template that is required or another guideline that has to be followed. We just have to focus on guidance. We have to take time to really explain things and to make auditors aware of cultural differences. I think we sometimes shut our eyes, because we already know that it will take extra time (C, Manager, Dutch).

Auditors usually experience time pressure (Otley and Pierce, 1996). Audit firms generally operate in a hierarchical structure, in which managers review seniors, who in turn review staff. Besides, promotions are based on performance ratings. To obtain a good rating, time budget achievement is an important criterion, since time budgets are usually closely related to fees (Kelley and Seiler, 1982; Otley and Pierce, 1996). This creates time pressure to meet time budgets, especially at staff and management levels (Otley and Pierce, 1996). In other words, due to the hierarchical setting of audit firms, problems are transferred down to be confronted at the individual auditor level. An Indian auditor responded to this:

It depends on what your target is. For six months, the target for the Netherlands is to get an extra resource. Not for complex areas, but at least for basic areas, in a way that the core team can focus on more complex areas. Indian auditors have good content experience, they make good content. If you are looking for people to work here in the Netherlands like what I am doing as part of the core team, then I would say six months could never be sufficient. When your target is being part of the core team, then I would say come at least two years, not less than that (H, Senior Staff, Indian).

In this way, it takes several months to get used to each other’s culture in a way the audit team benefits from the cultural diversity. One auditor mentioned a practical action to facilitate in the acculturation process for auditors:

It also depends on the client. When an Indian auditor is in an audit team that does the audit for a big client, then you will be with this team for many weeks. For all these weeks, you will have the same auditors that guide you and help you in how you have to do the audit work. When you will work on smaller clients, you will only work for one or two weeks with the same team. I think, working with many different people, could make it really difficult for Indian auditors. We should take this into account (D, Senior Staff, Dutch).

In summary, it is evident that the different communication styles and work attitudes are noticed in the daily work of auditors when they start working together. All auditors mentioned the direct communication style of Dutch auditors and the indirect communication style of Indian auditors as the first matter of contention. Indian auditors avoid speaking up against their colleagues to maintain a harmonious working relationship. This effect is stronger in the Netherlands, because Indian auditors do not choose to participate in the direct communication style of Dutch auditors. This results in Indian auditors working more hours than required. For Dutch auditors, they need to create an atmosphere wherein Indian auditors are forced to communicate their audit findings. A more instructed and special guidance for Indian auditors is created. Overall, Indian auditors could minimize audit steps because of working more hours than scheduled, but also Dutch auditors could choose to do this to compensate the extra work hours of Indian auditors. Besides, Indian auditors favor to be instructed by their superiors. In the Netherlands, an independent work attitude is preferred and more participatory practices are expected. In this way, Indian auditors need to adapt to the expectations of Dutch auditors of having a participatory working style in de audit team. For Indian auditors, this working style is mostly received as a kind of relieve where their knowledge does matter, which could enhance the audit. However, by acting in a way that independent action is limited and superiors are not questioned, the audit could be impacted directly. Dutch auditors are used of having a participatory working style and must consider the dependency of Indian auditors when they work together. Another important aspect of being used to get instructions and obey these is that there could be a lack of experience when Indian auditors are working in the Netherlands. After a while, although there is a difference in perception of adapting to each other’s culture between both cultures, Indian as well as Dutch auditors get to know each other and know how to anticipate on the different communication styles as well as the working attitudes.

5. DISCUSSION AND CONCLUSION

This paper explores how the daily work of an auditor could be impacted when Indian and Dutch auditors work together in an audit team. The findings show that Indian and Dutch auditors can perfectly identify differences between a Dutch and Indian auditor, although they cannot deal with it properly in the daily work-life of an auditor. This study is the first study to provide evidence about how different cultures could influence the daily work of an auditor in an audit team, and therefore answering to the research call of Hanes (2013), Nolder and Riley (2015) and Sunderland and Trompeter (2017).

The findings in this study complement the findings of Botero and van Dyne (2009), Dekker et al. (2008), Erdogan and Liden (2006), Grimmelikhuijsen et al. (2013) and Mellahi et al. (2010), who indicated that Indian employees seek to maintain a harmonious working relationship with their supervisors by communicating discontent in a more indirect way, whereas Dutch individuals of a low power distance culture communicate directly and participatory. The findings of this study contribute to the audit literature by providing evidence that the daily work of an individual auditor will be impacted by having frustrations and miscommunications, due to cultural differences. Whereas previous studies found Indian employees seek to maintain a harmonious working relationship with their supervisors (Erdogan and Liden, 2006; Mellahi et al., 2010), this study finds that Indian auditors also seek to maintain a harmonious relationship with their subordinates. In the Netherlands, they avoid speaking up against their colleagues, because Indian auditors do not favor to participate in the direct communication style of Dutch auditors. In this way, Indian auditors avoid communicating critical review notes to Dutch subordinates. In addition, Indian auditors communicate not only discontent indirectly, but also audit findings, in fear of making mistakes or bothering their superiors. Subsequently, this alters the daily work of an auditor in such a way that there is a worse collaboration and discouragement in the audit process (Rudolph and Welker, 1998), due to less informative communication. Future research is needed to further investigate communication of high and low power distance auditors working together in an audit team.

Subsequently, the worse collaboration and discouragement in the audit process results in Indian auditors working more hours than required and Dutch auditors creating a special guidance for Indian auditors to ensure information is transparent and in a timely manner. Overall, Indian auditors could minimize audit steps because of working more hours than scheduled, but also Dutch auditors could choose to do this to compensate for the extra work hours of Indian auditors. Future

research might further develop our understanding of how auditors deal with disadvantages of working in a multinational setting, before conclusions can be drawn from this finding.

No findings are found regarding the study of Chan et al. (2010), who found that people of high power distance countries feel powered and secured because of their own territory, but when low power distance individuals interfere on their territory conflict and stress results. An explanation for this could be that this study focuses on auditors specifically. Large audit firms are relying primarily on hierarchy to control work (Jeppesen, 2007). In this way, auditors have their own territory despite their cultural background. Therefore, the findings of this study also contribute to the anthropology literature. However, the findings in this study complement the findings of Earley (1999), Nakamura et al. (1997) and Nakata and Sivakumar (1996), that judgment of each team member is perceived as important in a low power distance country, because participatory practices are valued. Instead of feeling stressed to work in a participatory working setting, this study finds that Indian auditors feel relieved that their knowledge do matter. Another explanation could be that superiors in the Netherlands communicate high expectations and have confidence in individual’s potentials as indicated by Schaubroeck et al. (2007). In this way, a Dutch superior attempt to enhance the performance of subordinates. Indian auditors have greater respect for authority and may therefore be more open to these superiors’ influence attempts. In this way, the work of an individual auditor is impacted by working more participatory and performance-based due to culturally diverse attitudes, which could enhance the audit. Future research is needed to further investigate the feeling of relief for high power distant auditors in low power distant audit firms, which seems inconsistent.

Moreover, the findings in this study are consistent with the findings of Earley (1999), Kunnanatt (2007), and Varma et al (2005), that subordinates of high power distance cultures are highly sensitive to the input from superiors. The findings of this study contribute to the audit literature by providing evidence that Indian auditors endorse the opinions and accept the influence of superiors, in a way that their degree of independent action is limited. Findings regarding this aspect are especially important in the audit literature, because independence is the core professional value of auditors (Gendron et al. 2006). In this way, the work of an individual auditor is altered by dealing with an enhanced independence risk due to cultural differences. Future research might further develop our understanding of the impact on dependence when auditors of high and low power distance countries work together. Another aspect is that Indian auditors are

used to obey instructions and when they become a manager in the Netherlands, Indian and Dutch auditors feel that Indian auditors have a lack of experience. The audit work could suffer directly of this lack of experience. Future research about the lack of experience of high power distance auditors is needed.

Finally, this study finds that acculturation is needed to adapt to both cultures in an audit team in order to work together. However, there is a difference in perception of adapting to each other’s culture between both cultures. Indian auditors admit that getting used to each other’s culture will take some time, but believe it is possible, whereas Dutch auditors do not recognize that they need to adapt to the Indian culture. This finding complements the findings of Oerlemans and Peeters (2008). Besides, this study found that social help is not provided by the audit firm used for this study, while literature indicates that employees who receive higher levels of social support from their supervisors and peers are more likely to develop higher levels of acculturation strategies. Future research is needed to further investigate how audit firms could provide social help in the acculturation process and how this social help could help the daily work of an individual auditor when working in a multinational audit setting. Overall, this study found that it takes several months for Indian and Dutch auditors to acculturate. Future research can further develop our understanding about the time-pressured auditor that also needs to acculturate because of working in a multinational auditing setting.

Overall, these findings have implications for auditors in providing insight into how working with different cultures in an audit team can impact the daily work of an auditor. These findings also have implications for large audit firms, since auditors apparently do recognize that social help of the audit firm is needed, but do not provide this. Besides, there are immediate difficulties when working in a multinational audit team, due to cultural differences. These difficulties, such as a worse collaboration, discouragement in the audit process, minimizing audit steps, and an enhanced risk of independency, seem to be ignored by the audit firm, probably because the difficulties associated with working with different cultures in one team are not recognized and high skilled migrants are only considered in terms of economic efficiency (Harvey, 2011). Large audit firms could therefore use these findings to make auditors aware of how the daily work of an auditor could be impacted when there are different cultures in an audit team, as the need for highly skilled migrants endures to be an important matter of contention (Kou et al., 2015). Moreover, these findings also have implications for educational programs as it gives

insights in how accounting students should be prepared when working in a multinational audit team. Big accounting firms as well as educational programs could, for example, develop trainings that can help auditors or accounting students in developing acculturation strategies. Without these trainings, auditors and/or accounting students need to develop their own acculturation strategies, which are probably not the best and/or efficient strategies. Therefore, there is room for improvement in how to deal with cultural differences in an audit team. Improvement is especially important in the audit scene, because auditors are time pressured due to the hierarchical system of audit firms. In this way, acculturation could hopefully go faster and/or easier.

This study has several limitations. First, India is a really diverse country, so the high-power distance score is not applicable to whole India. Second, it is hard to notice differences between cultures when someone is still the acculturation process. At the same time, auditors who are working longer with another culture can analyze cultural differences better, however they are already acculturated and could therefore be biased. Third, I could not totally distance myself of the research setting, because I did my internship in the same setting. Therefore, I could be biased and could not analyze objectively. Besides, it could be possible that I have affected the respondents, because I am a colleague for them as well. Fourth, this study analyzes a small set of interviews conducted in one large audit firm in the Netherlands. This limits the generalizability of the findings to other smaller audit firms, in the Netherlands and to other parts of the world, for example other countries in Europe and Asia.

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