Task Complexity, Goal Orientations and their Effect on Auditor’s Behaviour

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Task Complexity, Goal Orientations and their Effect

on Auditor’s Behaviour

Master thesis University of Groningen Faculty of Economics and Business

MSc Accountancy June 23, 2018 Marco Brus S2160900 M.F.Brus@student.rug.nl Supervisor: Dr. D.B. Veltrop Second assessor: N. J. B. Mangin

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Abstract

In the midst of a rapidly changing and evolving society, auditors are experiencing increased pressure to perform their work to a high standard. They have been scrutinised by the media for not doing their job as well as they should. As a result, there has been a surge in companies wanting to improve their audit quality so that the auditing profession can overcome its tarnished reputation. One of the ways in which this can be achieved is by assessing the behaviour of auditors and looking at different factors that may affect, influence and alter their performance. This research uses a quantitative study to investigate the relationship between task complexity, goal orientation and their effect on behaviour. Further, it looks at the moderation effect of goal orientation (mastery- and performance-orientated individuals) on task complexity and audit behaviour. I expected a positive relationship between task complexity and audit threatening behaviour. However, contrary to my expectations, the results indicated that an increase in task complexity led to a decrease in audit threatening behaviour. Furthermore, mastery goal orientated individuals are negatively related to audit threatening behaviour. However, no evidence was found for the moderating effect of goal orientation on the relation between task complexity and audit threatening behaviour.

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In the early 2000s, there were many scandals which put the auditing profession under spotlight. This began with two high-profile scandals by Enron in 2001 (Dnes, 2005) and WorldCom in 2002 (Dnes, 2005) who used accounting techniques to manipulate figures and project revenues when in actuality there were deficits (Dnes, 2005). The auditors should have prevented management from presenting the shareholders with misleading information however they continued to represent false financial information (Dnes, 2005). More importantly, the financial crisis in 2008 highlighted that many financial institutions unduly received unqualified audit opinions (Sikka, 2009) and in more recent years, there were more occurrences of these incidents. For example, KPMG was fined for a positive unqualified report of Miller Energy Resources, worth 6.2 million dollars (Murphy, 2017) and PwC was fined 6.6 million dollars for misconduct in relation to the audit of Connaught (Cornish & Brown, 2017). Over the past few decades, auditors have made mistakes that have influenced the public’s confidence in them. As a result audit quality has become one of the most important subjects for regulators, standard setters, researchers and practitioners (Deumes et al., 2012).

Regulators and researchers have focused on the task complexity and auditors lack of experience, independence and incentives to perform (Sikka, 2009). Also in the Netherlands measures were taken by the Dutch audit organisations. A report published in 2014 by the Nederlandse Beroepsorganisatie van Accountants (NBA) (a Dutch organisation that improves the quality of auditors in the Netherlands) led to changes in the accountancy sector. They introduced a supervisory board with external members, changed the reward system and introduced new independent supervisory committees: Monitoring Commission Accountancy and The Dutch Foundation for Auditing Research (MCA and FAR) to control and increase the audit quality of the Dutch auditors. A research conducted by the IFIAR (The International Forum of Independent Audit Regulators, 2018) concluded that 40% of the controlled audits had at least one deficiet. A problem mentioned in the research was that auditors did not obtain sufficient data and material to support their findings. This could be the case for highly complex tasks where the auditor is not capable of performing the standard or even the easy tasks where the auditors conclude that routine work does not require the work considered reasonable. In this thesis I argue that two important aspect has been overlooked to date; the complexity of audit work itself and that some auditors’ psychological characteristics make them more suitable to deal with audit complexity compared to other auditors.

Met opmerkingen [DV1]: Onwijs lange 1e_alinea

Met opmerkingen [PV2]: Standard what? Standard task? Met opmerkingen [PV3]: Not sure what you mean here…let’s discuss it.

Met opmerkingen [PV4]: But later you state two aspects… (audit work itself and pyschologiical characteristics) Met opmerkingen [PV5]: We can restructure this together.

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The tasks that the auditors have to carry out differ from very complex tasks to simple routine tasks. It requires different levels of knowledge, ability and experience to complete the tasks successfully. Bonner (1994) and Libby (1985) concluded that complexity in tasks have an enormous impact on audit judgements, especially when the tasks are highly complex. Some studies found a negative effect of the complexity on audit quality (Abdolmohammadi & Wright, 1987; Chung & Monroe, 2001; Mohd-Sanusi & Iskandar, 2007; Moreno & Bhattacharjee, 2003) but it is not yet fully understood why some auditors are able to successfully deal with audit complexity while others are not. Research suggested that the difference in complexity needs different type of training or decision aids (Abdoimohammadi, 1987; Fleishman, 1975; Keen & Scott Morton, 1978). Other research concluded that motivation and skills are related to task complexity and judgement performance (Bonner, 1994). For the purpose of this thesis, I have concluded that more research is needed in order to acquire a better understanding of the relationship between complexity in audit tasks and audit quality behaviour.

While a large amount of research has focused on the impact of auditor training, auditor independence, decisions aids and skill, one important aspect of auditor functioning that has not been explored is how they carry out their work. DeShon and Gillespie (2005) and Payne et al. (2007) acknowledged that goal orientation has become a very important subject in the educational, psychological and organisational research literature. Despite the significance of this topic in other domains, research has not been specific on the effect of goal orientation in the audit sector.

Previous studies have used goal orientation in different ways. Dweck & Leggett (1988) divided goal orientation into two different approaches of individuals, a mastery approach, also known as learning goal orientation, and a performance approach, also referred to as ego orientated. Within these approaches, individuals will respond differently to achievement and failure situations. According to meta-analyses, generally, individuals with a learning goal orientation are likely to put in more effort and appear to have an intrinsic interest in a task with high complexity where they have more opportunities to develop their competences comparing tasks with low complexity (Barron & Harackiewicz, 2001; Pintrich, 2000). On the other hand, individuals with performance orientation focus mainly on how well they perform and compare their competence in relation to others (Elliot, 2005). People that are performance goal oriented are likely to prefer tasks where success is guaranteed and will avoid tasks where failure is of higher risk (Bell & Kozlowski, 2002). Therefore, I expect that individuals with a mastery approach will perform better on perceived high complex tasks and that individuals with a performance approach will perform better on a less complex tasks. The results of this research

Met opmerkingen [DV6]: Lange alinea

Met opmerkingen [PV7]: This is convoluted. Try and split this into two sentences and then I can reread it.

Met opmerkingen [PV8]: “low” or “lower” (depends on accountancy jargon)

Met opmerkingen [PV9]: I’m confused. You said there are two different approaches: mastery/ performance. However, you have referred to the previous one as “learning goal orientation”. For logical reasons, should you not have ‘mastery’ approach somewhere in these comparisons?

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could contribute to organisations because it could help to improve the audit quality behaviour by understanding this difference in the effect of learning versus performance orientation of the auditor. It could also lead to a change in culture in which individuals receive different training activities to alter their behaviour within different levels of tasks. Organisations could also improve their audit quality behaviour by increasing their understanding of which auditors should be assigned for each task.

From the above introduction, the following research question is formulated: What is the relationship between task complexity and audit quality behaviour, and what is the effect of goal orientation of individuals on this relationship.

The data used in this study consists of survey responses from 141 auditors working in Big Four and non-Big Four audit firms, with differences in individual auditors’ tenure and work experience. In order to answer the research question, the remainder of this thesis will be structured as follows: The following chapter will provide the theoretical framework and the underlying hypotheses, chapter three will describe the research methods, thereafter, chapter four will present the results of the research and finally, the conclusion, limitations and recommendations will be discussed in chapter five.

Literature Background

In this research, the relationship between task complexity, audit quality behaviour and the effect of goal orientation from individuals will be investigated. Before analysing these subjects, I will expand upon audit quality behaviour to provide the reader with a better understanding of what is meant by this subject. Thereafter, task complexity and goal orientation will be clarified by the use of literature background and theory from which I will formulate the hypothesis.

Kelley & Margheim (1990) define audit behaviour as actions taken by an auditor during an engagement which influence the effectiveness of evidence-gathering. They argue that actions can be different in the execution of audit procedures that influence the falsity and reliability of the evidence. Besides the falsity and reliability of the gathered information, evidence could be inadequate quantitatively or qualitatively. [add sentence to bridge these two sentenced] For example, these actions could be performing work below acceptable standards or accepting weak client explanations. This has still been a main issue according to the result of the IFIAR (2018) report. Concluding the many articles, audit quality behaviour in audit firms has been an important research subject over a long period of time in several countries; the United States, United Kingdom, Ireland, New Zealand and France (Alderman & Deitrick, 1982; Kelley &

Met opmerkingen [PV10]: Could you remove this part ? It’s a little wordy.

Met opmerkingen [DV11]: Niet iedereen is al RA, dus nog niet iedereen is certified

Met opmerkingen [DV12]: I have not looked at the intro

Met opmerkingen [PV13]: Actions or information?

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Margheim, 1990; Malone & Roberts, 1996; Donnelly et al., 2003). The conclusion that high levels of auditor dysfunctional behaviour was reported in all countries. (Willett & Page, 1996; Otley & Pierce, 1996; Pierce & Sweeney, 2004; Cook & Kelley, 1991; Herrbach, 2001). While these articles seemed to be very important before the financial crisis, the issue surrounding dysfunctional behaviour remains prevalent in modern society. (Francis, 2011; Knechel et al., 2013; European Union, 2014; IAASB, 2014). Several researchers have acknowledged that audit quality is a very challenging process to assess because of the difficulty in measuring its outcomes and lack of transparency in the process (Francis, 2011; PCAOB, 2015). Common approaches used to measure the audit quality include the earnings management as indicators, the restatements and auditor’s reporting (Francis, 2011; Knechel et al., 2013).

This research will not focus on the indicators mentioned before but will instead use an alternative approach in which the undertaken actions of the auditors will be discussed to examine the influence on audit quality. This is important because the common approaches tend to focus more on the audit process and the outcomes instead of how the auditors behave in their work. In this research dysfunctional behaviour is captured [through evaluating?] the different actions which reduce the quality; therefore, I have to choose an alternative approach. The indicators chosen to expose were the behaviour differences in certain aspects. One of the aspects investigated was whether auditors performed the amount of work below what is considered reasonable. This behaviour could derive from auditors perceiving these tasks as low in complexity. On the other hand, failure to pursue a questionable item and failure to research an accounting principle could implicate that performed actions are a result of high complexity perceived audit tasks. Therefore, this research will access the audit quality by using audit quality threatening behaviour. In order to gain a better understanding of behaviour and its performances, audit complexity will be explained. The complexity is changing rapidly with the increase in regulations and the technological and societal innovations (Nuijten et al., 2015). And at the end of the day the individual auditors are faced with this complexity in carrying out their work. Consequently, the next section will provide deeper insight in complexity of the audit work as well the expectations related to auditor behaviour.

Task Complexity

Humphrey’s and Morgeson (2006) define task complexity as: “the difficulty and complexity of tasks and decisions at work as well as the cognitive demands placed on the employees by their work. (i.e., making full use of their knowledge and skills, learning new things at work).” Previous research mentioned that audit tasks can vary from simple to complex tasks in which

Met opmerkingen [DV15]: Back this up with references. Or use some of the refs from the next sentence. Met opmerkingen [DV16]: Let op de referentie stijl bijvoorbeeld

(Cook & Kelly, 1991; Herrback, 2001; etc ; etc;) Niet met haakjes er tussen continu.

Met opmerkingen [PV17]: Changed it to this. Just double check it is still what you mean .

Met opmerkingen [DV18]: Te lange alinea, opslitsen

Met opmerkingen [PV19]: Or do you mean ‘act’?

Met opmerkingen [PV20]: If this is accounting jargon then ignore me but are you sure this is what you mean? Met opmerkingen [PV21]: You’re introducing a new point. Should this be a new paragraph?

Met opmerkingen [PV22]: Seems a bit out of place to bring this up here.

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simple tasks are well structured with basic information that is clear for the performer and complex audit tasks are ill-structured with a high amount of information and is perceived as difficult to complete (Bandura, 1986; Chen et al., 2001).

According to Wood (1986), task complexity can be distinguished in three parts. First, the component complexity which includes the number of acts and the information cues. Second, the coordinative complexity that describes the variances in relationships among the acts and cues. Third, the dynamic complexity which includes the changes in the acts and the relationships among the acts. In other words, it is about the amount of processed information cues and the number of steps that is required in order to execute the tasks.Further, the coordination to perform the tasks needs to be taken into consideration; does a step depend on other steps, do several steps need to be done at the same time and is back and forth reasoning needed (or ‘necessary’?).

Libby & Lewis (1977) state that task complexity can be separated in three components of information processing models; namely input, processing and output. Both Libby et al. (1977) and Wood (1986) conclude that the complexity depends on either the amount of information or the clarity of the information. It can be concluded that task complexity depends on the different number of attributes and how the attributes are connected to each other. In more recent times, audit judgements are considered more complex and uncertain than before (Sanusi et al., 2018). This is derived from an increase in regulations for accounting institutions and a higher demand from society. Therefore, a higher capacity from the auditor is needed when gathering auditor evidence to assess risks in possible misstatements that are usually ambiguous (Sansusi et al. 2018). As a consequence, the increased task complexity could lead to differences in judgement and decision-making or other attributes that are important to fulfil the desired activities from auditors.

Other researchers concluded that auditors experience significant difficulties in certain complex estimates, such as impairments and valuations (Griffith et al., 2014 & Bratten et al., 2013). They acknowledge that some of these problems occur from high levels of uncertainty about valuations but they also state that the difficulties arise from problems with auditor judgement (Christensen et al., 2012; Bratten et al., 2013;). Furthermore, in this research, task complexity will be operationalized by constructing the components as one to get a more general outcome.

According to (Bandura, 1986; Chen et al., 2001), each task requires personal resources to perform them. They distinguish the required resources in two parts, the information-processing capacity of the individual and the effort and persistence of the performer. This means

Met opmerkingen [DV24]: If you do not focus on these three different elements don discuss them so extensively. Keep task complexity as one construct.

Met opmerkingen [DV25]: Opsplitsen in verschillende alineas

Met opmerkingen [DV26]: Rather than focusing on the seperate dimension of task complexity (which we do not measure, in the survey only one measure). It would be better if you can explain/refer to research on task complexity in auditing, what has been done on this, why is audit work complex, why is it becoming more complex, what are the consequences of this increased task complexity for auditors.

Met opmerkingen [PV27]: ? This is not a word. What word are you trying to use? ‘intentional’/ ‘attention’?

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that variation in tasks requires different knowledge, skills and effort for a successful task performance. Logically, an increase in complexity leads to an increase in input of the indicators. (Scott, 1966; Locke et al., 1981) state that an increase in complexity may lead to higher levels of challenge and activation. They concluded that an increase in complexity could have a positive effect on performance according to the higher level of challenge and activation. However, the knowledge, skill and effort of an individual is limited. If a task exceeds the capacity of the performer, the performances will decrease. Continuing on this logic, we may expect that an increase in task complexity will lead to an increase in demand of the auditor. This demand could exceed their capabilities and create an overload for the auditors (DeShon et al., 1996; Marsh & Ahn, 2006; Simnett, 1996). Consequently, overload is negatively related to the use of knowledge and lower task effectiveness (Bonner, 1994; Devine & Kozlowski, 1995). This leads to lower quality judgements and decision-making which affect the quality of the audit.

Other evidence also state that an increase in complexity leads to a shift from compensatory to non-compensatory decision strategies (Payne et al., 1993; Reyna & Brainerd, 1995); in complex audit tasks a non-compensatory strategy will not lead to the desired outcome and will consequently affect the audit quality. Meyer et al. (1995) and Park et al. (1994) added that there was a correlation between an increase in task complexity and a decrease in readability and interpretability of the documents, as well in a decrease in complete information searches. More evidence is also provided by research on other domains in which task complexity is negatively related to task performance (Barron & Harackiewicz, 2001; Finucane et al., 2005; Mangos & Steele-Johnson, 2001; Maynard & Hakel, 1997). They concluded that a negative relation between task complexity and student performance because the students did not used the expected strategies that was needed to complete certain tasks successfully. According to the theory and conclusions from researchers, I have hypothesized that:

H1) Auditor task complexity is positively related to audit quality threatening behaviour.

Goal Orientation and Task Complexity

In this section goal orientation and the effect on task complexity will be discussed. I will first explain the achievement goal theory to provide a better understanding of goal orientation. The achievement goal theory is a social cognitive theory that focused on the motivation of individuals as it describes the way individuals behave (Pintrich, 2000). The achievement goal approach is important because it provides an understanding of how people respond to certain

Met opmerkingen [DV28]: Stick to the required format for refering to references in text.

Met opmerkingen [PV29]: Check I haven’t changed it something you did not intend.

Met opmerkingen [DV30]: Consistent zijn qua referentie stijl

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situations (van Yperen et al., 2009). Originating from sport psychology, it later gained the attention of organizations in the early 1990s. Organizational psychologists now generally acknowledge the importance of achievement goals for task performance in organisations (Potosky & Ramakrishna, 2002; van de Walle et al., 2001). The theory claims that there are two primary goals individuals have in the way they achieve their goals (Dweck & Legget, 1988;

Farr et al., 1993). First, the mastery goal orientation states that individuals with this goal orientation focus on learning and understanding. They focus on intrapersonal standards, are task-based and self-reflected because they compare their performances to previous performances (Elliot & McGregor, 2001). On the other hand, individuals who are performance goal orientated focus on interpersonal standards and are other-referenced (Elliot & McGregor, 2001). Individuals then compare themselves to the competence of others in order to judge how well they perform.

Previous literature has found that the two orientations differ from each other in their respond to achievement and failure situations (Button & Mathieu, 1996). Mastery goal orientated individuals focus on learning and understanding as they react differently to difficult conditions than performance oriented individuals. The mastery goal orientated individuals seek challenging tasks and try to continually better themselves (Button & Mathieu, 1996). They are problem-solving orientated and when faced with failure behave in a way as if they had received useful feedback (Button & Mathieu, 1996). On the other hand, performance orientated individuals are characterized by avoiding challenges and behave more inappropriate when faced with obstacles. They are more inclined to seek opportunities from which they can withdraw from entirely when the tasks get difficult and will behave differently when the chance of failure increases (Button & Mathieu, 1996). Therefore, I expect a positive relation between performance orientated individuals and quality threatening behaviour and a negative relation between mastery orientated individuals and quality threatening behaviour. This results in the following hypothesis:

H2.1) Auditor performance orientation is positively related to audit quality threatening behaviour.

H2.2) Auditor mastery orientation is negatively related to audit quality threatening behaviour.

Met opmerkingen [PV32]: Still talking about ‘achievement goal theory’? If it comes up more often, why not abbreviate it? E.g. “achievement goal theory (AGT hereafter)”.

Met opmerkingen [mb33]: Double, also in intro

Met opmerkingen [mb34]: Same

Met opmerkingen [PV35]: Should you not be more specific research? Otherwise you should say ‘previous literature has found that the two….”

Met opmerkingen [PV36]: Not sure what you mean by this.

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The Moderating Role of the Individual’s Achievement Goals

Jackson & Zedeck (1982) state that goals are affected by task complexity and performance. Also according to Bonner (1994), individuals perform differently on tasks with certain strategies that do not match the complexity. According to them, goals affect the performance in high complexity tasks but do not affect performance in simple tasks. However, they mention that a lack of skills need to be taken into consideration because an increase in effort cannot lead to higher performance when the tasks are complex and the skills are not of a certain level. Wood et al. (1987) found different results in his meta-analysis. He claimed that the effects of goals are weaker in complex tasks. According to the previously mentioned theory about the learning goal orientation, individuals focus on the understanding of the task and take an intrinsic interest in the task they perform (Barron & Harackiewicz, 2001; Pintrich, 2000). Consequently, it can be concluded that individuals who have a mastery approach are more engage in the tasks than individuals who do not possess this orientation.

In the task complexity section I discussed that tasks requires skill, knowledge and effort. An increase in complexity requires a higher amount of input of those attributes. Combining the attributes that are needed and the intrinsic interest in tasks where the individual can develop their competence, I assumed that learning orientated individuals will increase their level of devotion when the complexity increases compared to individuals that are performance orientated and more concerned with relating their competence to others. Consequently, a decrease in devotion occurs in simple tasks when individuals with a mastery approach cannot develop themselves (Dweck & Leggett, 1988; Ford et al., 1998).

Furthermore, if we look at simple tasks, the literature show us that individuals who are performance orientated perform better in simple tasks than individuals without these orientation. Those individuals are, according to van de Walle et al. (2001) and Fisher & Ford (1998), mainly concerned with showing their competence by using superficial demonstration rather than substantive competence, which is insufficient for complex tasks. In simple tasks, the use of superficial strategies is normally sufficient to succeed in the tasks on which they perform. However, when tasks become complex, different and comprehensive strategies are needed. In complex tasks individuals with a mastery approach will seek strategies to achieve their goals where performance orientated individuals will use superficial strategies, which will lead to a decrease in audit quality. Another item that is suggested by literature is that performance goal orientated individuals feel the pressure to perform well immediately. This is possible in simple tasks but in complex tasks this require more effort and a higher level of

Met opmerkingen [DV38]: I will not correct/grammar spelling anymore, have someone proofread your work before you submit the final version.

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engagement (Locke et al., 1997; Wood & Locke, 1990). Learning orientated individuals do not feel the same pressure and will behave differently. To summarize this section, I conclude that there is an effect on task complexity by the differences of an individual’s orientation goal. I formulate the following hypothesis:

H3.1) The positive relationship between audit complexity and audit quality threatening behaviour is positively moderated by auditor performance orientation, such that this relationship becomes more positive for performance-oriented auditors.

H3.2) The positive relationship between audit complexity and audit quality threatening behaviour is negatively moderated by auditor mastery orientation, such that this relationship becomes more negative for mastery-oriented auditors.

Method

In this section I will present the sample size and how the data was collected. Thereafter, the dependent and independent variables are discussed and I will explain which questions are used and justify the selection. The paragraph ends with an explanation about the control variables. The study was conducted in the Netherlands with the cooperation of auditors working in several audit companies. The dataset was collected by auditors through an online survey instrument prepared by a team of researches affiliated with the University of Groningen. The questions were gathered from the literature and were translated from English to Dutch. A construct of back and forward translation is used to maintain the validity. The participants are gathered in two different ways. First, a team of 8 researchers each personally invited at least 20 auditors to participate in the survey. After 6 days a reminder was send to increase the responds. The participation was voluntary and each participating individual was guaranteed that the results would be confidential. At the end it was mentioned that each participant could receive their results to benchmark them with other participants. Finally, 141 completed surveys were returned meaning the response rate was 80%. Among the participants, 45 were women and 96 were men. The sample concluded a wide variation in function between assistants and partners. The average age of the participants was 31.

Met opmerkingen [PV39]: Check my edit to see if this is still what you mean.

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Audit Quality Threatening Behaviour

Audit quality threatening behaviour was measured by a set of propositions based on several articles (Herrbach 2001; Pierce & Sweeney, 2004; Otley & Pierce, 1996) and used a seven-item scale, in which 1 refers to never and 7 to very often. This scale was used because the same scale was used by Otley and Pierce (1996) in which they stated that the possibility of social desirability bias could never be completely eliminated; however, with this scale they tried to minimalize it. According to the Cronbach alpha, the scale was highly reliably (α = 0.777). Listed below are behaviours some auditors claim to have experienced in their jobs. The participants were asked if they could indicate how often they acted in the following manner in carrying out an audit:

(1) ‘Reduction of work below what is considered reasonable’ (2) ‘Superficial review of client document’

(3) ‘Acceptance of weak client explanation’ (4) ‘Failure to research an accounting principle’ (5) ‘Failure to pursue a questionable item’

(6) ‘Signed off on an audit program step without completing the work’ (7) ‘Greater than appropriate reliance on client work’

(8) ‘Personally engaged in underreporting of time (i.e., deliberately failing to record the full amount of time spent on a task)’

Task Complexity

The independent variable used is task complexity. This is applied by a measurement of questions according to Semmer (1982) and Zapf (1993). It is a well validated measurement with four items. The contents of these items correspond to Morgeson and Humphrey’s (2006) definition. Some changes were made to operationalize the questions. The last item is left out in the survey because it measures learning opportunity and not the complexity. Therefore, three items were used but were adapted in a way that the original items were rephrased ‘to what extent’. This is done because the answers measure the quantity (e.g. very little and very high). Furthermore, the scales did not match the type of question. Therefore, the scale was changed to a one to seven scale in which 1 is to a very little extent and 7 to a very high extent. The Cronbach alpha was 0.767. The three propositions that were used are as follows:

(1) ‘To what extent does your work consist of tasks that are particularly complex and difficult?’

Met opmerkingen [DV41]: Independent? Met opmerkingen [PV42]: Just a thought, should you italicise all your variables to distinguish them from the text? Met opmerkingen [PV43]: Don’t think this needs to be in brackets if you are referring to them in the actual sentence.

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(2) ‘To what extent do you have to make very complicated decisions in your work?’ (3) ‘To what extent do you have to use all your knowledge and skills in your work?’

Goal Orientations

The moderator within this study is the performance and mastery approach of individuals. Six items were adapted from the scale developed by Janssen & Prins (2007). We decided to exclude four items because it would exceed the appropriate length of the survey. Nevertheless, the three items used to measure performances were reliable according to the Cronbach alpha (α = 0.938).

The three items used to measure the mastery approach of individuals were also highly reliable with a Cronbach alpha of 0.924. A seven item-scale was used, in which 1 referred to strongly disagree and 7 to strongly agree. An additional test was performed to check whether the performance items load on a different factor to the mastery items. Several criteria for the factorability were used. Firstly, I observed the correlation between the items. All items were correlated with at least 0.3 with one other item; this suggested that there was a reasonable factorability. Secondly, I performed a Kaiser-Meyer-Olkin test and the outcome was above the recommended outcome of 0.6 with a score of 0.75. Furthermore, the Barlett’s test of sphericity was significant p<.001. Lastly, the pattern matrix showed that items 1 to 3 and items 4 to 6 combine together very tightly with a score above 0.9. Given these indicators, I conclude that the performance items load on a different factor than the mastery items. The sample items of the performance approach include questions about whether the following was important for them in their work:

(1) ‘I perform better than others’

(2) ‘I am more competent compare to others’

(3) ‘I receive better performance appraisals than others’ Sample items that included the mastery approach were:

(4) ‘I perform tasks from which I learn a lot’ (5) ‘I can establish competence’

(6) ‘I can learn as much as possible’

Met opmerkingen [DV44]: Different font

Met opmerkingen [PV45]: ? Do you mean ‘the’?

Met opmerkingen [PV46]: Should it not be ‘0.6’?

Met opmerkingen [PV47]: ?

Met opmerkingen [DV48]: Also if you can do this, might be wise to do a factor analyses to see whether the performance items load on a different factor as the mastery items.

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Control Variables

Several control variables will be included in the research to rule out other explanations that could impact the dependent variable. Prior research already concluded that time-saving and time-budget achievements are key incentives for dysfunctional behaviour (Kelley & Margheim, 1990; Coram et al., 2004; Gundry & Liyanarachchi, 2007). This is supported by other studies that have shown that a time-budget pressure has a negative influence on effectively gathering evidence which consequently leads to a decrease in audit quality (Pierce & Sweeney, 2004; Otley & Pierce, 1996). Therefore, I included time pressure as control variable in this research.

The second variable is experience. According to Abdolmohammadi & Wright (1987) experience can be important in decision-making and thus eventually in the audit behaviour. Experience auditors could be important for complex tasks and less important for unimportant routine tasks. In this research, I measured experience as the age of an auditor.

The third and final control variable in this research is gender. Findings have suggested that there is a difference in audit quality behaviour between men and women (Ittonen et al., 2013; Karjalainen et al., 2013). Moreover, they concluded that in general women tend to be more conservative and risk-tolerant in their work. The behavioural differences may influence the quality of auditing because men and women report things differently and their work ethic differs; therefore, gender is incorporate as a control variable with female as instrument.

Results

In this chapter, the results are presented. In the first part I will provide the descriptive statistics and the correlations of the model. In the second part I will present the results of the regression analysis and make observations about the hypotheses.

Descriptive Statistics

Table 1 presents descriptive statistics on the total sample. The mean, minimum, maximum and standard deviation are presented. Due to the use of the one item as opposed to the seven-item scale, the variance in the outcomes are low. The minimum and maximum age indicates that there is a wide spread in participants in the survey ranging from the age of 23 to the age of 60. It can also be concluded that the amount females participated in survey are lower than males, 45 versus 96.

Met opmerkingen [DV49]: Layout is slordig, goed om nog naar te kijken voordat je het defintief opstuurt.

Met opmerkingen [PV50]: This is still not 100 percent clear. Try and reword it and I can help you fix it after. Met opmerkingen [DV51]: Constant? As a control you mean?

Met opmerkingen [PV52]: New paragraph?

Met opmerkingen [PV53]: ? I don’t know what you mean here.

Met opmerkingen [PV54]: Descriptions?

Met opmerkingen [PV55]: Not a word. Do you mean ‘descriptions’ again?

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Correlations

Furthermore, the correlations included in Table 2 show that there are several significant relationships between the variables. The first category indicates the highly negatively significant relationships with a p<0.01, wherein task complexity and age are negatively related with quality threatening behaviour (r=-.255 and r=-.238) and time pressure positively related (r=.281). The table also shows that an increase in age is significantly related to an increase in perceived task complexity (r=.221, p<0.01) and a decrease in mastery approach (r=-.296, p<0.01). The other significantly correlated relationship exists between the control variables.

Regression

The results of the regression analysis are presented in Table 3. Model 1 only includes the control variables, whereas the second regression adds the independent variables task complexity and performance and mastery approach. Subsequently, models 3 and 4 represent the moderation effect on the relation between the independent and dependent variable.

The regression table provides information about the correlation and possible multicollinearity issues between the variables. A VIF test is conducted to investigate whether

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there is a multicollinearity issue. According to the test, the highest VIF level of 1.261 was measured. Subsequently, it can be concluded that there is no multicollinearity between the variables because this value is well below 10.

The regression analysis of model 2 in Table 3 shows a significant negative relationship between task complexity and audit quality threatening behaviour, b=-.154, p<0.05. This means that an increase in one’s perceived task complexity will lead to a decrease in audit quality threatening behaviour. This is the opposite relationship to what was expected in the theory section where we would have expected a positive relation between task complexity and audit quality threatening behaviour. Therefore, based on the regression, it can be concluded that hypothesis 1 can be rejected.

Model 2 showcases hypothesis 2.1 and 2.2. The regression show a non-significant relation between performance orientated individuals and audit quality threatening behaviour, b=.058, p>0.1. Therefore, hypothesis 2.1 can be rejected. On the other hand, there is a significant relation between mastery orientated individuals and audit quality threatening behaviour b=-.185, p>0.05. Consequently, hypothesis 2.2 can be accepted.

Model 3 in Table 3 presents hypothesis 3.1 of this research. The regression in model 3 investigates whether the relationship between task complexity and audit quality threatening behaviour is moderated positively by performance-orientated auditors. With these results, it can be concluded that there was no significant interaction between audit complexity and performance-orientated auditors, b=-.042, p>0.1. This means that an increase in one’s perceived audit complexity and increase in audit quality threatening behaviour will not be stronger when a person is performance-orientated; therefore, hypothesis 3.1 can be rejected.

Model 4 in Table 3 describes hypothesis 3.2. In this model the positive relationship between audit complexity and audit quality threatening behaviour is tested with the auditor mastery orientation as a moderator, such that this relationship becomes more negative for mastery-oriented auditors. The results shows no significance interaction between audit complexity and mastery-orientated auditors, b=-.028, p>0.1. Based on this outcome I found evidence to reject hypothesis 3.2.

Met opmerkingen [DV56]: This is part of the regression results, not so much correlation table

Met opmerkingen [DV57]: Audit quality threatening, or reverse the QTB score to make it a quality measure.

Met opmerkingen [PV58]: Or do you mean ‘explains’? same as investigate?

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Conclusion & Discussion

This study examines whether task complexity is positively associated with audit quality threatening behaviour by auditors, the effect of performance and mastery oriented auditors and whether the orientation of auditors moderate the relation between task complexity and audit quality threatening behaviour. The results show a negative relation between task complexity and audit quality threatening behaviour, thus indicating that an increase in task complexity leads to a decrease in threatening behaviour. This was not expected according to previous literature. I expected that an increase in task complexity would lead to an increase in the demand for auditor work, which could further result in auditors exceeding their capability, thus increasing threatening behaviour (DeShon et al., 1996; Marsh & Ahn, 2006; Simnett, 1996). Other research mentioned in section 2, stated that an increase in task complexity may lead to higher levels of challenge and activation (Scott, 1966; Locke et al., 1981). Scott (1996) and Lock et al. (1981) concluded that an increase in complexity could have a positive effect on performance according to a higher level of challenge and activation. Another alternative for this relation

Met opmerkingen [DV60]: ?

Met opmerkingen [PV61]: Not sure what you mean here.

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could be the influence of cognitive ability and motivation of the individuals. Kanfer & Ackerman (1989) state that individuals with a high cognitive ability analyse complex tasks more accurately than simple tasks. Therefore, it may be of influence that in complex tasks auditors put more effort in completing tasks successfully and performing better on the items of threatening behaviour.

Secondly, I expected a negative relation between mastery orientated auditors and audit threatening behaviour. This is supported by the results when it becomes more likely that auditors who are mastery-orientated perform less threating behaviour. This is also mentioned by Button et al. (1996) who suggested that the learning goal individuals have a desire to improve themselves and a tendency to evaluate their performance and eventually improve it and their behaviour. With this research it could be implicated that auditors also behave in a certain way when they are mastery-orientated. So, now there is more support in regard to mastery orientation and behaviour by auditors. On the other hand, the performance-orientated auditors are contrary to the expectations not related to audit threatening behaviour. An explanation for this outcome could be that individuals who are performance-orientated compare themselves with others and are driven to outperform other auditors and will not acknowledge that they are part of performing threatening behaviour (Button et al., 1996). Thus, it can be concluded that mastery-orientated individuals perform less threatening behaviour than performance orientated individuals.

Additionally, I investigated the moderation effect of goal orientation on the relation between task complexity and audit quality threatening behaviour. I expected that performance-orientated would moderate the relation positively and mastery-performance-orientated auditors negatively. According to van de Walle et al. (2001), performance-orientated individuals used superficial demonstration of their competence in simple task whereas mastery-orientated individuals were expected to increase their devotion to complex tasks. The findings showed no effect on the relation between the complexity in tasks and the behaviour of auditors. Contrary to the expectations, it can be concluded that a difference in goal orientation by an individual does not influence how auditors behave on certain tasks. An explanation for the contradiction in theory and results could be difficult to measure with a survey that examines the exact behaviour of auditors in simple and complex tasks.

Met opmerkingen [DV64]: ?

Met opmerkingen [PV65]: Check my corrections for meaning.

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Limitations & future research

As with every academic study, this study comes with some limitations. Firstly, the data is gathered by a survey. The questions in surveys may not precisely be answered by the participants because the difficulty to answer the questions truthfully lies in their hands. In this research, audit quality behaviour is investigated where the questions related to their behaviour. It is generally known that auditors are supposed to be integer and professional. If the auditors acknowledge in the survey that they behave in the way that is not considered appropriate as an auditor, it could be difficult answer the questions truthfully. The average score on the behaviour questions of auditors shows a score of 2.58. This means that auditors consider themselves well-behaved. This is the opposite result of what the research about auditors conducted by the IFIAR (2018) found. They stated that a main problem was that auditors do not obtain sufficient data and material, which was also questioned in the survey. Therefore, the reliability of the survey has to be questioned.

The second limitation is the cross sectional nature of the research. The limitation is that in this research the own behaviour of the auditors is analysed at a certain moment, which could differ from any other moment. Combined with the social desirability of the responses, further research could investigate whether a response bias occurs.

The third limitation is the two-dimensional model of goal orientation that is used. In this research, I used the goal achievement theory which included the mastery and performance approach of individuals. Other researchers (Elliot & McGregor, 2001) used the comprehensive four-dimensional model. They suggested that the learning goal orientation and the performance goal orientation could be divided into an approach dimension and an avoidance dimension. Consequently, future research could expand on this research by including the other dimensions. In addition, because of the significant relation between mastery orientated individuals and quality threatening behaviour, further research can study the effect of the mastery-approach goal and mastery-avoidance goal on threatening behaviour to obtain better insights.

In this research, the moderation of the goal orientation of individuals is measured by the relationship between the task complexity and audit behaviour. The method used measured the variables at a certain moment with the survey. The results show that when task complexity increases auditors perform less threatening behaviour. Further research could use an experimental study by following auditors to investigate when and on which level certain auditors change their behaviour when the task complexity increases. With the results of this study, firms could get better insights and could pay more attention to the certain tasks where

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the threatening behaviour problems arise.

Secondly, further research could gain more insight in alternative explanations that will clarify the change in audit threatening behaviour. Mentioned in the conclusion, motivation and challenge in audit tasks could have an impact on the perceived complexity in tasks and the change in behaviour (Scott, 1966; Locke et al., 1981). The results have shown that there is a significant relation between task complexity and threatening behaviour but it also shows that goal orientation does not moderate this relationship. Therefore, other variables, such as time pressure, could be investigated and look at whether it will moderate task complexity and audit quality threatening behaviour (Durham et al., 2000). It is important to note that the significant relation between mastery-orientated individuals and threatening behaviour. Future research could expand the study with more aspects of the mastery approach and the consequences for practical implications.

One practical implication of the findings is that employers can focus on the aspects of mastery goals. If employers can support and motivate employees in the learning aspect of the auditor profession by changing the culture where it becomes more important that auditors increase their capability by learning from tasks instead of comparing their competence with others. Moreover, firms can take into consideration when setting up teams for specific tasks that there is a combination of performance-orientated individuals with mastery-orientated individuals.

The second practical implication that can be taken into account in regard to threatening behaviour and task complexity is the task assignments among employees and client acceptance. It is obvious that it is impossible that firms only assign complex tasks to their employees, but there could be a combination in simple and complex tasks to optimize the reduction in threatening behaviour. As well accepting client work that requires more effort from auditors.

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Task Complexity, Goal Orientations and their Effect on Auditor’s Behaviour

Task Complexity, Goal Orientations and their Effect

on Auditor’s Behaviour

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